(C4.5) Do you classify any of your existing goods and/or services as low-carbon products?
Change from last year
Modified question
Rationale
This question provides valuable information to investors who are seeking to increase their investment in companies providing low-carbon goods and services.
Connection to other frameworks
SDG
Goal 13: Climate action
Response options
Select one of the following options:
- Yes
- No
Requested content
General
- Low-carbon products and/or services are important to aid the transition to a net-zero carbon economy and to ensure that global average temperature increase above pre-industrial level stays below 1.5°C.
- While there are various low-carbon product/service taxonomies and definitions, CDP broadly defines them as products or services which have comparatively lower emissions across their entire life cycle (i.e. from material acquisition through to product end-of-life) when compared to a baseline (business-as-usual) scenario or reference product of a similar function. Note that a product can only be considered low-carbon if its production and use does not prevent and/or contributes to reaching net-zero by 2050 or sooner. In that respect, any fossil fuel (including natural gas) energy generation not fitted with carbon capture and storage should not be considered as low-carbon. See “Additional information” for more guidance on how to define a low-carbon product or service.
- The reduction in life cycle emissions between the baseline scenario or reference product and the low-carbon product or service is commonly referred to as the “avoided emissions”.
- There are various circumstances in which a company might consider that the use of its goods and services by others has the potential to reduce GHG emissions.
- For example, an insulation company might consider that the installation of its insulation in another organization’s premises might reduce the consumption of gas to heat the building, with the consequent reduction of GHG emissions from the property. Similarly, a consultancy providing advice services on energy efficiency/emissions reductions or a manufacturer producing a product with lower energy use requirements compared with equivalent products on the market could also consider themselves to reduce the GHG emissions of others.
- Note that a company generating renewable electricity and selling it to a third party would be an example of this. In this case, the third party would calculate their Scope 2 market-based emissions with a zero emissions factor and, providing that the grid average factor is not zero, this would enable that third party to avoid emissions.
Explanation of terms
- Baseline scenario: A reference case that represents the events or conditions most likely to occur in the absence of the low-carbon product in the consequential approach to estimating avoided emissions.
- Reference product: The product against which the low-carbon product is compared in the attributional approach to estimating avoided emissions.
- Attributional approach: The most commonly used approach at present to estimate avoided emissions - measures the difference in total life-cycle GHG emissions between the low-carbon product(s) or service(s) and a reference product or service that provides an equivalent function.
- Consequential approach: Measures the sum of total, system-wide changes in emissions or removals occurring because of the low-carbon product(s) or service(s) when compared to a baseline (business-as-usual) scenario without the low-carbon product. This approach helps to answer the question “What are the GHG impacts related to the full share of the activities that are expected to change when producing, consuming, and disposing of the product?”.
Additional information
How do you define a low-carbon product?
- Despite the increasing focus from investors on low-carbon products, there remains a level of ambiguity over the definition of what constitutes a ‘low-carbon product’. Instead, there has been a greater focus on the benefits of their creation and use, one of which is aiding in the transition towards a net-zero carbon economy operating within the limits set out by leading climate scientists to ensure that global average temperature increase above pre-industrial level stays below 1.5°C.
- Taxonomies, such as the Climate Bonds Taxonomy, are similarly based on this scientific criterion. At this stage, CDP encourages companies to use this criterion when evaluating whether a product is low carbon or not (i.e., companies should evaluate a product or service as low carbon if it is compatible with the level of decarbonization required to keep global temperature increase to 1.5°C compared to pre-industrial temperatures).
- Therefore, while CDP encourages the development of common definitions across global markets about what constitutes a ‘low-carbon product’, companies should evaluate their low-carbon products in relation to their contribution to a net-zero carbon economy. Different goods and services will have pertinent characteristics in which they can do this. This can include improving the energy efficiency of certain technologies so that they are consistent with avoiding dangerous climate change or contributing to the decarbonization of high-emitting industries.
