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Instructions: Reviewing the ACT Generic Methodology

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ACT GENERIC

acknowledgments

 

 

authors:

 

funders:

The update of the ACT Generic sector methodology was supported by the Climate-KIC.

 

../../Logos-EIT-Climate-KIC/Logos%20Online/Climate-KIC.png

 

The technical assistance for the current version of ACT was provided by:

I CARE & CONSULT

EKODEV.

 

0.1 ACT Generic Consultation Questions

 

Please take a few minutes to answer the following 10 questions about the ACT Generic Methodology. Please provide your answers by clicking on the  (+)  beside each question. 

 

 

1. What are the two main benefits of assessing the low-carbon transition in a standardized way according to you?

 

  • Assessing the credibility and consistency of corporate climate strategies.
  • Holding companies accountable to their commitments.
  • All companies being assessed against a single global standard.
  • Using a holistic assessment taking into account quantitative and qualitative metrics.
  • Providing a clear picture of which companies are contributing to the low-carbon transition.
  • Other.

 

2. Which existing methodologies are you aware of to assess progress towards a low-carbon transition?

 

 

3. Please review the sectors that the Generic methodology covers (see section 3.1 of the document Figure 1: Mapping of the Sectors covered by ACT Generic).

 

Keeping in mind that ACT develops separate methodologies for high-impact sectors, are any sectors missing that should be included in the Generic methodology?

 

 

4. How do you define a ‘low-carbon product’? Please share a link to any taxonomy or document you use as a reference to support your answer.

 

 

5. Please review the data points required to conduct an ACT assessment. Are there any data points that are not publicly available or that you would struggle to provide?

 

 

6. Do you have data publicly available on your share of low-carbon products?

 

 

7. Please review the weighting attributed to the 9 performance modules. Do you have any comments on the weighting attributed to the different modules, whether it is fixed or variable?

 

 

8. If your company covers activities across multiple sectors, do you have:

  • One combined low-carbon strategy for all activities.
  • Multiple low-carbon strategies (one strategy per sector of activity).
  • Both (one combined strategy and multiple sector-specific strategies).
  • Not applicable.

 

 

9. What do you think of the overall relevance of the methodology presented?

 

 

10. Are there any other questions or issues that you want to share regarding this methodology?

 

 

 

1. Introduction

The 2015 United Nations Climate Change Conference (COP21) in Paris further strengthened the global recognition of limiting dangerous climate change. Political agreement was reached on limiting warming to 2 degrees above pre-industrial levels. The project ‘Assessing low Carbon Transition’ (ACT) measures a company's alignment with a future low-carbon world. The goal is to drive action by companies and encourage businesses to move to a 2-degrees compatible pathway in terms of their climate strategy, business model, investments, operations and GHG emissions management. The general approach of ACT is based on the Sectoral Decarbonization Approach (SDA) developed by the Science Base Target initiative (SBTi) in order to compare company’s alignment with a 2-degrees world, the application of which is described in the ACT Methodological Framework document (Sectoral Decarbonization Approach (SDA): A method for setting corporate emission reduction targets in line with climate science, 2015).

Urgent actions are required to tackle climate change from companies and a whole of the economy to close the emissions gap. ACT initiative aims to determine if companies are ready for a low carbon economy.

This ACT Generic methodology is unique in the context of ACT initiative. Indeed, previously, the focus has been brought on developing methodologies for specific sectors for the following reasons: certain sectors have more actions to do and a more direct role to play in reducing emissions to close the emissions gap. Thus, the sectoral approach enables us to make sure that relevant and appropriate actions are assessed according to the company’s activity. However, a large number of companies also have a significant impact on emissions and do not necessarily operate within one of the high emitting sectors covered by a specific ACT Framework. Therefore, an ACT approach needed to be developed and would be covering the rest of the sectors which are not intended to be developed with a specific ACT Framework.

 

 

2. Principles

The selection of principles to be used for the methodology development and implementation is explained in the general Framework. Table 1 recaps the adopted principles that were adhered to when developing the methodology.

Table 1: Principles for implementation

Relevance - Select the most relevant information (core business and stakeholders) to assess low-carbon transition.
Verifiability - The data required for the assessment shall be verified or verifiable.
Conservativeness - Whenever the use of assumptions is required, the assumption shall err on the side of achieving a 2° maximum global warming.
Consistency - Whenever time series data is used, it should be comparable over time.
Long-term orientation - Enables the evaluation of the long-term performance of a company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.

 

 

3. Scope

 

3.1. Scope of the Document

This document presents the ACT Generic methodology for the companies operating in sectors not covered by other specific ACT methodologies. It includes rationales, definitions, indicators and guidance for performance assessment.

The framework of performance indicators is similar for all the companies assessed by this ACT Generic methodology but the weightings may differ to reflect the specific levers of each type of company depending on their hotspots in terms of GHG emissions.

 

3.2. Scope of the ACT Generic Methodology

As all the companies have their role to play in the low carbon transition, ACT initiative developed ACT Generic methodology so that companies not included in a specific sector or multi-activity methodology can assess their climate strategy in relation to the requirements of a low carbon economy. Therefore, the present ACT Generic methodology refers to all sectors not covered by other ACT methodologies (existing or future).

Table 2: Existing and Future ACT Frameworks

Existing ACT Frameworks

Future ACT Frameworks

Auto

Building Construction

Real Estate

Property Development

Retail

Elec Utilities

Oil & Gas

Transport

Cement

Iron & Steel

Food

Agriculture

Glass

Chemicals

Pulp & Paper

Aluminium

This ACT Generic methodology should be used to assess companies operating in a large and various range of activities all along the value chain such as the following categories [1]:

  • Extraction activities: Mining & Quarrying
  • Industry: Specific methodologies have been developed for some industries [2]. Therefore, ACT Generic methodology needs to focus on other types of industries such as manufacturing, wholesale and repair of vehicles and infrastructure construction,
  • Waste and water management: water transportation and utilities as well as solid waste management [3].
  • Services with high GHG impact [4]: Financial and insurance activities, accommodation and food service activities, information and communication, human health & social work activities, arts, entertainment and recreation.
  • Services with low impact: Education, professional, scientific and technical activities, administrative and support activities, public administration and defence, compulsory social security, activities of households as employers, extraterritorial and other services.

[1] It should be noted that this list is not intended to be exhaustive. Also, some sectors might be partly covered by existing or future ACT frameworks that have been excluded of the scope of ACT Generic.

[2] Please refer to “Table 2: Existing and future ACT frameworks” to check the industries covered by specific ACT methodologies.

[3] This taxonomy is based on “Sector codes - CDP” available in the appendix

[4] Financial insurance and IT sectors are under discussion and specific ACT methodologies might be developed for these two sectors in the future.

 

The figure below suggests a mapping of the sectors covered by the ACT generic methodology.

 

3.3 Mapping of Sectors Covered by ACT Generic

 

Figure 1: Mapping of the Sectors covered by ACT Generic

 

.

4. Boundaries

 

→ NOTA BENE

Hereafter, the term “emissions” will refer to all GHG emissions (not only CO2) which shall be measured in CO2 equivalent.

ACT provides guidelines concerning the scope and boundaries of the sector covered by this methodology to determine which type of GHG emissions are included or excluded. However, it does not provide tools and databases to measure and compute these emissions. In particular, the choice of emission factors does not fall under the responsibility of the ACT methodology. ACT recommends using company-specific emission factors, or if unavailable, standard emission factors recognized in the sector. As such, some recommendations but not prescriptions may appear in this document.

The scope of ACT Generic is very broad and heterogeneous. Based on the principle of relevance, ACT methodology focuses on the main sources of emissions throughout the value chain. Thus, depending on the company’s activity, the main sources emissions can be upstream, direct or downstream. That is the reason why all emissions (direct and significant indirect) need to be considered in ACT Generic in order to cover the impact of all the companies included in the previous section.

 

4.1. Reporting Boundaries

 

For most of the companies, a low-carbon transition will lead to a transformation of the company’s direct activities and assets as well as the entire value chain, from upstream activities to downstream activities.

 

Sources of Emissions Analysed

 

Initially, the objective of the ACT Generic methodology is to consider all the emissions sources due to the heterogeneity of activities. Therefore, both direct and significant indirect emissions are included in the methodology.

Direct emissions: In most of cases, the company has levers in order to act on reducing these emissions, especially through the following sources analysed in ACT Generic:

  • Building (energy consumption of the buildings used by the company)
  • Transport (emissions of the company’s fleet)
  • Industry energy consumption (energy consumptions of the plants operated by the company)
  • Industry direct process (emissions directly linked to the industrial process (e.g.: refrigerant leakage))
  • Waste (emissions related to waste sector)

Emissions from agriculture / land use are excluded from the scope. These emissions are covered by ACT Agriculture methodology and concern very few companies operating in sectors covered by ACT Generic.

Significant indirect emissions are also to be taken into account:

  • Upstream activities through emissions due to products and raw material purchased by the company
  • Downstream activities through the emissions due to the sold products / services performance
  • Emissions due to subcontracted transportation activities (upstream or downstream)

Figure 2 illustrates all the GHG emissions considered in ACT Generic:

 

FIGURE 2: GHG Emissions Considered in ACT Generic

 

 

Assessment Adapted to the Company Emissions’ Profile

 

Considering the magnitude of the total direct, upstream and downstream emissions for the entire value chain, the analysis will necessarily have to focus on the most relevant aspects based on the company’s main sources of emissions. Thus, a focus will be brought regarding the company’s specific challenges. The assessment will be adapted to each company depending on its activities and on its main sources of emissions. The flexibility of this method enables the analyst to keep the initial objective of ACT initiative by assessing companies with sectoral specificities.

In a nutshell, the ACT Generic methodology will not explicitly define boundaries but propose an assessment methodology tailored to each company regarding its hotspots in order to capture the most significant emissions sources (direct and significant indirect) or substantial emissions occurring all along the value chain. Accordingly, the weighting of modules and choice of indicators will be adapted based on the company's profile. [4]

[4] Please, refer to the “Weightings section” for more information

 

Here are some examples to illustrate the assessment principle:

FIGURE 3: Example of Company A

 

The main challenge for this company is the products and raw materials procurement. Therefore, the assessment will focus mainly on the sources of emissions related to the upstream activities.

FIGURE 4: Example of Company B

This company has more challenges to face from its purchased products to the use of the products as well as the transportation. The analysis will mainly focus on all significant indirect emissions included in ACT Generic boundaries.

 

Connection with other ACT Frameworks

 

Some sectors covered by ACT Generic operate in a value chain where there is an existing / upcoming ACT sectoral methodology. For example:

  • Infrastructures and road construction activities are based on cement procurement (ACT Cement)
  • Plane manufacturers are upstream the transport operators (ACT Transport)

In order to use the most relevant pathways for each company, ACT Generic is using existing low-carbon benchmarks identified in these sectoral ACT.

For direct emissions, most of the material emissions have a link with another existing framework:

 

 

For significant indirect emissions [5], two distinctive cases are considered:

 

 

[5] Please, for more information, refer to the section “Sector Benchmark” where the links between existing and upcoming framework with ACT Generic are presented.

 

4.2. Rationale

ACT boundaries refer to which aspects of the organizational scope are included in the analysis.

ACT aims to engage companies in a low carbon transition and can be considered as a useful tool to structure and evaluate the company’s strategy. ACT Generic is therefore very flexible in order to be adapted to the company's challenge and reality. It also makes comparison between companies irrelevant as weighting schemes might differ from a company to another.

Because of the heterogeneity of ACT Generic and the need to cover all the sectors described in the chapter “scope”, it has been proposed to include almost all GHG sources in the reporting boundaries:

  • Scope 1 and 2 GHG emissions are relevant at every step of the value chain, and are mostly under the control of the companies,
  • Scope 3 upstream GHG emissions are key in order to integrate efforts of companies to source low carbon solutions and products,
  • Scope 3 downstream GHG emissions can also be a major stake in the climate transition regarding the use of the products.

By the principle of relevance, it is important to note that ACT Generic focuses on main material sources of emissions. Indeed, ACT aims to select the most relevant information (core business and stakeholders) to assess low-carbon transition. Therefore, some sources of emissions have been excluded from the boundaries of ACT Generic.

 

 

THE SPECIFIC CASE OF CARBON OFFSETTING

 

Carbon offsets are avoidance or reductions in emissions of carbon dioxide or greenhouse gases made by a company, sector or economy to compensate for emissions made elsewhere in the economy, where the marginal cost of decarbonisation proves to be lower.

In the ACT Generic methodology detailed in this document, the proposed low-carbon pathways are largely based on the IEA modelling (see section 5.3). Practically, the IEA calculates carbon budgets for the different sectors of the economy excluding the use of offsets. This is based on the rationale that the IEA’s economy-wide carbon budget is allocated between sectors in a cost-effective way and that emissions reductions in other sectors are already taken into account in the overall carbon budget including effects of land use, land-use change and forestry (LULUCF), which eliminates the possibility of using offsets.

Thus, all these elements pledge for a methodology where emissions reductions are assumed to be achieved directly by the company. Therefore, as the emissions intensity benchmark pathways derived mostly from the IEA model do not allow for offsets, the ACT Generic methodology does not account for offsets when defining absolute emissions reductions. This is in line with the general ACT philosophy which aims at assessing the low-carbon transition through real emissions reductions. It is also in line with SBTi, that does not allow offsetting as a means toward meeting an SBT.

 

 

5. Construction of the Data Infrastructure

 

5.1. Data Sources

In order to carry out a company level assessment, many data points need to be gathered which can be sourced from various locations. Principally, ACT relies on the voluntary provision of data by the participating companies.

Next to this however, external data sources might be consulted where this would streamline the process, ensure fairness, and provide additional value for verification and validation.

 

5.2. Company Data Request

The data request will be presented to companies in a comprehensive data collection format. The following data will be requested:

 

 

5.3. Performance Indicators

The performance indicators have been conceived following the main principles described in 2.

Table 3: Indicators and Scope of GHG Emissions

 

 

5.3.1. Targets (Weighting: 15%)

 

5.3.1.1:GE 1.1 Alignment of Direct Emissions Reduction Targets (Weighting: 0-12%)

Description & Requirements GE 1.1 Alignment of Direct Emissions Reduction Targets
Short Description of Indicator A measure of the alignment of the company’s direct emissions reduction targets with their decarbonization pathway. The indicator will identify the gap between the company’s targets and the decarbonization pathway as a percentage, which is expressed as the company’s commitment gap.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Reduction targets in carbon intensity, carbon intensity at reporting year, and other information if necessary (geography, …)

OR

  • Reduction targets in absolute contraction

The benchmark indicators involved are:

 The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process:

  • If a specific pathway based on carbon intensity from an ETP scenario is available, a target in carbon intensity will be asked and analysed,
  • If such a pathway does not exist to date, a default pathway in absolute contraction is applied.

Also, if needed and justified, the analyst can propose a reference pathway meeting ACT requirement (data sourcing, assumptions robustness …).

   
How the Assessment will be done

The analysis is based on the ratio between the company’s direct emissions target and the company benchmark.

The company’s target pathway is the decarbonization over time, defined by the company’s direct emissions reduction target. To compute it, a straight line is drawn between the starting point of the analysis and the company’s target endpoint.

The company benchmark pathway is the ‘company specific direct emissions decarbonization pathway.

The company achieves the maximum score if the company’s target pathway and the company benchmark pathway are aligned and also if the targets are covering most of the company’s direct emissions at reporting year.

Calculation of score:

1) Commitment Gap

The score is calculated by dividing the company intensity reduction engagement by the specific benchmark emission intensity reduction between the reporting year and the target year through the commitment gap:

 

where EIc(Yt) is the company direct emissions intensity at target year, EIc (Yr) is the company direct emissions intensity at reporting year, EIb(Yt) is the benchmark direct emission intensity at target year and EIb(Yr) is the benchmark direct emission intensity at reporting year.

The target intermediate score (Ts) is equal to 0 if the commitment gap is inferior to 0

The target intermediate score receives the maximum score if the commitment gap is superior to 1

Otherwise, the target intermediate score (Ts) is equal to the commitment gap

 

2) Final Score

The final score assigned to the indicator is calculated as follows:

If the target coverage of total company emissions at reporting year (Cyr) represents less than 95%, the final score is equal to Target intermediate score (Ts) x Target coverage of total company emissions (CYr).

Otherwise final score of the indicator is equal to target intermediate score (Ts)

If the company has set several targets, the consolidation of the scores assigned to each target will be based on the share of emissions covered by the targets.

Rationale GE 1.1 Alignment of Direct Emissions Reduction Targets
Rationale of the Indicator

Relevance of the Indicator:

Direct emissions reduction targets are included in the ACT Generic assessment for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plans beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. For some sectors covered by ACT Generic, direct emissions might represent a high source of emissions. A GHG emissions reduction target should be assigned to them.

Scoring Rationale:

Targets are quantitatively interpreted and directly compared to the low-carbon benchmarks.

NB: In previous ACT methodologies, the commitment gap calculation was based on the difference between the company’s target and the company benchmark 5 years after the reporting year. A change has appeared in the ACT Generic for the calculation of the commitment gap: the analysis is now based on the difference between the company’s target and the company benchmark at the target year. This calculation appeared to be more relevant for this indicator. This change will be taken into account for upcoming methodologies as well as for existing methodologies when updated.

 

 

5.3.1.2: GE 1.2 Alignment of Upstream Emissions Reduction Targets (Weighting: 0-12%)

Description & Requirements GE 1.2 Alignment of Upstream Emissions Reduction Targets
Short Description of Indicator A measure of the alignment of the company’s upstream emissions reduction targets with their decarbonization pathway. The indicator will identify the gap between the company’s targets and the decarbonization pathway as a percentage, which is expressed as the company’s commitment gap.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Reduction targets in absolute contraction for each GHG emissions item or in carbon intensity
  • % of Upstream emissions covered by the targets

The benchmark indicators involved are:

 

The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process: 

  • If a specific pathway based on carbon intensity from a ETP scenario is available for products and materials purchased, and if the emissions related to these purchases represent a high source of emissions for the company upstream scope, a target in carbon intensity will be asked and analysed, (E.g.: cement, steel.)
  • Otherwise, a default pathway in absolute contraction is applied.
   
How the Assessment will be done

The analysis is based on the ratio between the company’s Scope 3 upstream targets and the company benchmark.

The company’s target pathway is the decarbonization over time, defined by the company’s upstream emissions reduction target. To compute it, a straight line is drawn between the starting point of the analysis and the company’s target endpoint.

The company benchmark pathway is the ‘company specific upstream emissions decarbonization pathway.

The company achieves the maximum score if the company’s target pathway and the company benchmark pathway are aligned and also if the targets are covering most of the company’s upstream emissions at reporting year.

Calculation of Score:

To calculate this indicator, the company needs to enter its targets on Scope 3 upstream and the share of the scope covered.

1) Commitment Gap

The score is calculated by dividing the company intensity reduction engagement by the specific benchmark upstream emission intensity reduction between the reporting year and the target year through the commitment gap:

 

where EIc(Yt) is the company upstream emissions intensity at target year, EIc (Yr) is the company upstream emissions intensity at reporting year, EIb(Yt) is the benchmark upstream emission intensity at target year and EIb(Yr) is the benchmark upstream emission intensity at reporting year.

The target intermediate score (Ts) is equal to 0 if the commitment gap is inferior to 0

The target intermediate score receives the maximum score if the commitment gap is superior to 1

Otherwise, the target intermediate score (Ts) is equal to the commitment gap

 

2) Final Score

The final score assigned to the indicator is calculated as follows:

  • If the target coverage of total company emissions at reporting year (Cyr) represents less than 95%, the final score is equal to Target intermediate score (Ts) x Target coverage of total company emissions (CYr).
  • Otherwise final score of the indicator is equal to target intermediate score (Ts)

If the company has set several targets, the consolidation of the scores assigned to each target will be based on the share of emissions covered by the targets.

Rationale GE 1.2 Alignment of Upstream Emissions Reduction Targets
Rationale of the Indicator

Relevance of the Indicator:

Upstream reduction targets are included in the ACT Generic assessment for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plans beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. For some sectors covered by ACT Generic, upstream emissions might represent a high source of emissions. A GHG emissions reduction target should be assigned to them.

Scoring Rationale:

Targets are quantitatively interpreted and directly compared to the low-carbon benchmarks.

NB: In previous ACT methodologies, the commitment gap calculation was based on the difference between the company’s target and the company benchmark 5 years after the reporting year. A change has appeared in the ACT Generic for the calculation of the commitment gap: the analysis is now based on the difference between the company’s target and the company benchmark at the target year. This calculation appeared to be more relevant for this indicator. This change will be taken into account for upcoming methodologies as well as for existing methodologies when updated.

 

 

5.3.1.3: GE 1.3 Alignment of Downstream Emissions Reduction Targets (Weighting: 0-12%)

Description & Requirements GE 1.3 Alignment of Downstream Emissions Reduction Targets
Short Description of Indicator A measure of the alignment of the company’s downstream emissions reduction targets with their decarbonization pathway. The indicator will identify the gap between the company’s targets and the decarbonization pathway as a percentage, which is expressed as the company’s commitment gap.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Reduction targets in absolute contraction for each GHG emissions item or in carbon intensity
  • % of Downstream emissions covered by the targets

The benchmark indicators involved are:

  

The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process: 

  • A benchmark in carbon intensity is applied If the company meets the following requirements:
    • The use of sold products represents a high source of downstream emissions,
    • The company produces ready-to-use products and is able to measure their carbon intensity,
    • A specific pathway based on carbon intensity from an ETP scenario is available. Eg: ACT transport for transport vehicles manufacturers.
  • Otherwise, a default pathway in absolute contraction is applied.
   
How the Assessment will be done

The analysis is based on the ratio between the company’s Scope 3 downstream targets and the company benchmark.

The company’s target pathway is the decarbonization over time, defined by the company’s downstream emissions reduction target. To compute it, a straight line is drawn between the starting point of the analysis and the company’s target endpoint.

The company benchmark pathway is the ‘company specific downstream emissions decarbonization pathway.

The company achieves the maximum score if the company’s target pathway and the company benchmark pathway are aligned and also if the targets are covering most of the company’s downstream emissions at reporting year.

Calculation of Score:

To calculate this indicator, the company needs to enter its targets on Scope 3 downstream and the share of the scope covered.

1) Commitment Gap

The score is calculated by dividing the company intensity reduction engagement by the specific benchmark downstream emission intensity reduction between the reporting year and the target year through the commitment gap:

where EIc(Yt) is the company downstream emissions intensity at target year, EIc (Yr) is the company downstream emissions intensity at reporting year, EIb(Yt) is the benchmark downstream emissions intensity at target year and EIb(Yr) is the benchmark downstream emissions intensity at reporting year.

The target intermediate score (Ts) is equal to 0 if the commitment gap is inferior to 0

The target intermediate score receives the maximum score if the commitment gap is superior to 1

Otherwise, the target intermediate score (Ts) is equal to the commitment gap

2) Final Score

The final score assigned to the indicator is calculated as follows:

If the target coverage of total company emissions at reporting year (Cyr) represents less than 95%, the final score is equal to Target intermediate score (Ts) x Target coverage of total company emissions (CYr).

Otherwise final score of the indicator is equal to target intermediate score (Ts)

If the company has set several targets, the consolidation of the scores assigned to each target will be based on the share of emissions covered by the targets.

Rationale GE 1.3 Alignment of Downstream Emissions Reduction Targets
Rationale of the Indicator

Relevance of the indicator:

Downstream emissions reduction targets are included in the ACT Generic assessment for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plans beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. For some sectors covered by ACT Generic, downstream emissions might represent a high source of emissions. A GHG emissions reduction target should be assigned to them.

Scoring Rationale:

Targets are quantitatively interpreted and directly compared to the low-carbon benchmarks.

NB: In previous ACT methodologies, the commitment gap calculation was based on the difference between the company’s target and the company benchmark 5 years after the reporting year. A change has appeared in the ACT Generic for the calculation of the commitment gap: the analysis is now based on the difference between the company’s target and the company benchmark at the target year. This calculation appeared to be more relevant for this indicator. This change will be taken into account for upcoming methodologies as well as for existing methodologies when updated.

 

 

5.3.1.4: GE 1.4 Time Horizon of Targets (Weighting: 2%)

Description & Requirements GE 1.4 Time Horizon of Targets
Short Description of Indicator A measure of the time horizons of company targets. The ideal set of targets is forward looking enough to include a long-time horizon that includes the majority of a company’s asset lifetimes, but also includes short-term targets that incentivize action in the present.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • All targets available
   
How the Assessment will be done

The analysis has two dimensions:

  • A comparison of: (a) the longest time horizon of the company’s targets, and (b) the long-term point fixed by ACT assessment methodology.
  • The company has interval targets that ensure both short and long-term targets are in place to incentivize short-term action and communicate long-term commitments.

Aggregate Score: Dimension 1: 50%, Dimension 2: 50%

 

Dimension 1 - Target endpoint: The company’s target endpoint (Te) is compared to the long-term point (LT), which is fixed at 2050 minus the reporting year, aligned with low-carbon scenario.

The company’s target endpoint (Te) is equal to the longest time horizon among the company’s targets, minus the reporting year:

The analysis compares Te to LT. This analysis measures the horizon gap:

The company’s target endpoint is compared according the following scoring table:

 

 

Dimension 2 - Intermediate horizons: All company targets and their endpoints are calculated and plotted. The ideal scoring company does not have intervals between target endpoints larger than 5 years from the reporting year.

Measurements are done in five-year intervals between the reporting year and LT.

The company’s targets are compared according the following scoring table:

 

For all Calculations:

  • The company is asked to report the ‘base year’ of the targets. The ‘base year’ will be used for calculations if the company does not report ‘year of target establishment’.
  • If the company reports ‘year of target establishment’ in the data request, then the calculations may be redone using this as the baseline instead of the reporting year. The company can attain up to 80% of the maximum score with this alternate calculation. The baseline that results in the higher score will be used for the final score.
  • Targets that do not cover > 95%1 of generation emissions are not preferred in the calculations. If only such targets are available, then the score will be adjusted downwards equal to the % coverage that is missing.
Rationale GE 1.4 Time Horizon of Targets 
Rationale of the Indicator

Relevance of the Indicator:

The time horizon of targets is included in the ACT Generic assessment for the following reasons:

  • The target endpoint is an indicator of how forward looking the company’s transition strategy is.
  • Aside from communicating long-term commitments, short-term action needs to be incentivized. This is why short time intervals between targets are needed

 

 

5.3.1.5: GE 1.5 Achievement of Previous and Current Targets (Weighting: 1%)

Description & Requirements GE 1.5. Achievement of Previous and Current Targets
Short Description of Indicator A measure of the company’s historic target achievements and current progress towards active emission reduction targets. All the scopes of the company are considered. The ambition of the target is qualitatively assessed and is not included in the performance indicators.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

For each target set in the past 5-10 years:

  • Base year
  • Start year
  • Target year
  • Percentage of reduction target from base year in absolute emissions
  • Percentage of reduction target achieved in absolute emissions
  • Percentage of reduction target from base year in emissions intensity
  • Percentage of reduction target achieved in absolute emissions intensity
   
How the Assessment will be done

For the performance score, this indicator is assessed on two dimensions, whereby companies achieve the maximum score if:

Dimension 1: The company achieved all previous emission reduction targets with a target year in the past 10 years. If all past targets are indeed achieved, the highest score is obtained. If not, the indicator receives a score of 0.

Dimension 2: The company is currently on track to meet all its existing emission reduction targets.

Scoring:

For each target with target year after reporting year on any GHG emissions categories, the scoring will be executed as follows:

A- Progress at reporting year (Pyr):

Remaining time period (Rt):

  • where Yr is the reporting year, Yb is the Base year of targets and Yt is the target year

 

Remaining progress ratio (Pyr):

  • where Ayr is the achievement of the target at reporting year

 

Therefore, the intermediate score (Is): Is = 2 - Pyr

B- Target Intermediate score (Ti)

If the intermediate score (Is) is superior to 1, the target intermediate score (Ti) is equal to 1

If the intermediate score (Is) is inferior to 0, the target intermediate score (Ti) is equal to 1

Otherwise, the target intermediate score (Ti) is equal to the intermediate score (Is)

C - Final Score

The final score represents the average of all the Target Intermediate Score.

Aggregate Score: Dimension 1: 25%, Dimension 2: 75%

For all calculations:

  • Companies that do not have targets with target years in the past but only with target years in the future are not assessed on dimension 1, but only on dimension 2.

The performance score does not assess the ambition level of previous targets, and therefore dimension 1 only has a low weight in the final performance score. This information is also qualitatively assessed in the assessment narrative, which will have another look at the following dimensions:

  1. Achievement level: To what degree has the company achieved its previously set emission reduction targets.
  2. Progress level: To what degree is the company on track to meet its currently active emission reduction targets?

Ambition level: What level of ambition do the previously achieved emission reduction targets represent?

Rationale GE 1.5 ACHIEVEMENT OF PREVIOUS AND CURRENT TARGETS
Rationale of the Indicator

Relevance of the Indicator:

The historic target ambition and company performance is included in the ACT Generic for the following reasons:

  • The ACT assessment looks only to the past to the extent where it can inform on the future. This indicator is future-relevant by providing information on the organizational capability to set and meet emission reduction targets. Dimension 1 of this indicator adds credibility to any company claim to commit to a science-based reduction pathway.
  • Dimension 2 of this indicator adds value to the assessment of comparison to the company’s performance with respect to their targets in the reporting year.

Scoring Rationale:

Previous target achievement is not straightforward to interpret quantitatively. Therefore, the performance score makes no judgement of previous target ambition, and leaves it to the assessment narrative for a meaningful judgement on the ambition level of past targets. Thus, Dimension 1 of the performance score will penalize companies who have not met previous targets in the past 10 years, as this means the company has lower credibility when setting ambitious science-based targets

 

5.3.2. Material Investment (Weighting: 0-35%)

 

5.3.2.1: GE 2.1 Trend in Emissions Intensity from Material Investment (Weighting: 0-8.75%)

Description & Requirements GE 2.1 Trend in Emissions Intensity from Material Investment
Short Description of Indicator Measure of the alignment of a company's past and future emissions intensity of assets with its decarbonization pathway.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Carbon intensity at reporting year, Y-5 and Y+5, other information if necessary (geography, …) OR
  • Total emissions at reporting year, Y-5 and Y+5.

The benchmark indicators involved are:

 

As for alignment of the targets, the choice of the benchmark depends on the scenario availability. The selection will be made according to the following process:

  • Option A: If a specific pathway based on carbon intensity from a ETP scenario is available, the trend in carbon intensity will be asked and analysed,
  • Option B: If such a pathway does not exist to date, a default pathway in absolute contraction is applied.
  • Option C: If needed and justified, the analyst can propose a reference pathway meeting ACT requirement (data sourcing, assumptions robustness, …).

Other assumptions:

Future emission intensity should be estimated from company assets and their expected produced activity. If future emissions intensity can’t be estimated from company assets, expected trend in future emissions intensity should be estimated by extrapolating the trend from the last 5 years before the reporting year.

   
How the Assessment will be done

Dimension 1: Trend in past direct emissions intensity from material investment

The analysis is based on the Past Action ratio (Apast) which represents the ratio between the company’s recent (reporting year minus 5 years) emissions intensity from material investment trend gradient and the company’s benchmark recent (reporting year minus 5 years) emission intensity trend gradient.

 

COMPARISON OF TREND IN PAST EMISSIONS AND TREND IN COMPANY'S BENCHMARK

 

 

Calculation of Score:

Past Action ratio is calculated by dividing the company’s emission intensity from material investment trend (between reporting year and reporting year minus 5 years) and the historic benchmark emission intensity (between reporting year and reporting year minus 5 years):

 

 

where EIc(Yr) is the company emission intensity at reporting year, EIc (Yr-5) is the company emission intensity at reporting year minus 5, EIb(Yr) is the benchmark emission intensity at reporting year and EIb(Yr-5) is the benchmark emission intensity at reporting year minus 5.

If the past action ratio (Apast) is a negative number, a zero score is assigned by default.

If the past action ratio (Apast) is above 1, the maximum score is obtained.

Otherwise, the final score is equal to the value of the past action ratio (Apast).

 

Dimension 2: Trend in future direct emissions intensity from material investment

The analysis is based on the Future Action ratio (Afuture) which represents the ratio between the company’s future (reporting year plus 5 years) emissions intensity from material investment trend gradient and the company’s benchmark recent (reporting year minus 5 year) emission intensity trend gradient.

 

COMPARISON OF TREND IN FUTURE EMISSIONS AND TREND IN COMPANY'S BENCHMARK

 

 

Calculation of Score:

Future Action ratio (Afuture) is calculated by dividing the company’s future emission intensity from material investment trend (between reporting year and reporting year plus 5 years) and the future benchmark emission intensity (between reporting year and reporting year plus 5 years):

 

 

where EIc(Yr) is the company emission intensity at reporting year, EIc (Yr-5) is the company emission intensity at reporting year plus 5 years, EIb(Yr) is the benchmark emission intensity at reporting year and EIb(Yr-5) is the benchmark emission intensity at reporting year plus 5 years.

If the future action ratio (Afuture) is a negative number, a zero score is assigned by default.

If the future action ratio (Afuture) is above 1, the maximum score is obtained.

Otherwise, the final score is equal to the value of the future action ratio (Afuture).

Aggregate Score: Dimension 1: 25%, Dimension 2: 75%

Rationale GE 2.1 TREND IN EMISSIONS INTENSITY FROM MATERIAL INVESTMENT
Rationale of the Indicator

Relevance of the Indicator:

Trends in past and future emissions intensity from material investment are included in the ACT Generic assessment for the following reasons:

  • The trend shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the decarbonization pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low carbon pathway.
  • While ACT aims to be future-oriented, ACT does not want to solely rely on projections in a way that would make the analysis too vulnerable to uncertainty. Therefore, this particular indicator, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.
  • The analysis is on the emissions that come from the entire value chain of the company. Therefore, the company’s own emissions might be impactful.
  • As this is also the emissions source that the company has the most control over, the analysis can expect efforts in decarbonization here.
  • Recent emissions intensity performance indicates the company’s progression towards, or away from, the future emissions intensity necessary to decarbonize in-line with a low-carbon scenario.

Relevance of the Aggregate Score:

Even though it is relevant to assess both trends of past and future emissions intensity, the nature of ACT is to assess whether company’s activities are consistent with a low carbon transition. The global evaluation is therefore mostly future-oriented, what justifies a higher weight for the sub-indicator “Trend in future emissions intensity” than for the sub-indicator “Trend in past emissions intensity” (75%/25%).

 

 

5.3.2.2: GE 2.2 Share of low Carbon CAPEX (Weighting: 0-8.75%)

Description & Requirements GE 2.2. Share of Low Carbon CAPEX
Short Description of Indicator A measure of the alignment of the company’s planned CAPEX for the next five years with their pathway required in the low-carbon scenario. The indicator will identify the gap between the company’s planned low carbon CAPEX share and the decarbonization pathway as a percentage, which is expressed as the company’s commitment gap.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

Share of low-carbon CAPEX (out of total asset) at Y-5, Y and Y+5

The benchmark indicators involved are:

The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process:

  • Option A: If a specific benchmark on low carbon CAPEX is available, the share of low carbon activity is compared to the low carbon scenario.
  • Option B: If such scenario does not exist to date, maturity matrix if benchmark not available
   
How the Assessment will be done

The assessment is based on the difference between the company’s planned low carbon CAPEX (TLCC) share and the company benchmark for CAPEX (CBLCC) 5 years from the reporting year.

The company target pathway (TLCC) is the share of low carbon CAPEX over time, defined by the company’s planned CAPEX. To compute T, a linear line is drawn between the starting point of the assessment and the company’s target endpoint.

The company benchmark (CBLCC) pathway is the ‘company low carbon CAPEX share pathway’.

The assessment will compare TLCC to CBLCC, by assessing the difference between these pathways 5 years after the reporting year. The pathways are expressed in percentage of CAPEX allocated to investments in low carbon CAPEX (intensity measure). Where necessary, targets will be normalized to this unit to enable the comparison. The result of the comparison is the commitment gap.

To assign a score to this indicator, the size of the commitment gap will be compared to the maximum commitment gap, which is defined by the business as usual pathway (BAULCC). BAULCC is defined as an unchanging (horizontal) intensity pathway, whereby the share of CAPEX remains stable 5 years after the reporting year.

Calculation of Score:

The score is a percentage of the maximum commitment gap. It is calculated by dividing the company’s commitment gap by the maximum commitment gap (taking all values 5 years after the reporting year):

 

 

The score assigned to the indicator is equal to 1 minus the commitment gap and is expressed as a percentage (1 = 100%). Therefore, if TRT – CBRT is equal to zero, so the company’s target is aligned with the sectoral benchmark, the maximum score is achieved.

Rationale GE 2.2 SHARE OF LOW CARBON CAPEX
Rationale of the Indicator

Relevance of the Indicator:

Investments planning related to the company’s low carbon capex are included in the ACT Generic assessment for the following reasons:

  • CAPEX planification is an indicator of corporate commitment to a low carbon transition, and are a meaningful metric of the company’s internal planning towards the transition.

Scoring Rationale:

Planned CAPEX share are quantitatively interpreted and directly compared to the low-carbon benchmarks

  • Targets are compared to the benchmark directly, and the relative gap is calculated compared to the business as usual pathway. The gap method was chosen for its relative simplicity in interpretation and powerful message, which aligns with the UNEP’s narrative of the global commitment gap of the UNFCCC Climate Agreements [7]. The simple percentage score also needs no further computation to become meaningful on its own, as well as be usable for aggregation in the performance score.
  • To ensure comparability of the scores and replicability of the measurement, targets are compared to the benchmark at a fixed point in time, similar to all companies. This is necessary, because the method interprets linear decarbonization pathways from the targets, while the decarbonization pathways are nonlinear. Therefore, the measurement gaps would vary over time if the time of measurement was not constant, and undesired precedent is set for reporting only targets with short-time horizons.
  • 5 years after the reporting year was chosen as the reference for this measurement, as it is far enough in time to make a meaningful measurement of the company’s future pathway, while close enough to be able to include the typical short to medium time scale of present-day company targets.

 

 

5.3.2.3: GE 2.3 Locked-in Emissions (Weighting: 0-17.5%)

Description & Requirements GE 2.3 Locked-in Emissions from Material Investment
Short Description of Indicator Measure of the emissions implied by the company assets portfolio. Locked-in emissions are compared to a theoretical portfolio with a similar locked activity per year and benchmark emission intensity.
Prerequisite

The types of assets covered by this indicator are the following:

  • buildings,
  • transport fleet.
Data Requirements

Building portfolio: average carbon intensity of building owned, in the past 5 years and renovation planned.

  • Transport fleet:
  • Year described
  • Number of units deployed / planned to be deployed in the year [Present and future]
  • Number of units decommissioned/planned to be decommissioned in the year [Present and future]
  • Number of net total units in operation in the year [Present and future]
  • Annual secured/planned activity [Future]
  • Planned activity [Future]
  • Emissions from present and planned assets [Present and future]

External sources of data used for the analysis of this indicator are:

  • ACT Transport methodology
  • ACT Real Estate methodology
  • SDA – sectoral benchmark pathway definition for service building

The benchmark indicators involved are:

This metric needs to rely on a physical unit for assets. Therefore, this indicator is only applied for buildings and vehicles in order to be compliant with the principle of relevancy described earlier in this document and part of the Act Framework. Also, this indicator requires a high level of details in terms of data collection.

Assumptions:

Locked-in emission should be computed from company’s assets, if the company hasn’t published any plan, assets activity and GHG intensity should be considered constant from reporting year until expected decommissioning year of the asset. Decommissioning are estimated by using assumptions on average sectoral asset life time if not scheduled by the company.

   
How the Assessment will be done

The analysis is based on the ratio between the company’s existing and planned assets’ emissions from the reporting year [LG (t)] to 2050, and the emissions budget entailed by the company’s carbon budget [BG (t)] over the same period of time.

Calculation of Score:

In order to discover the calculation methodology, please refer to the detailed explanation presented in ACT Transport and ACT Real Estate methodologies.

Rationale ge 2.3 Locked-in emissions from material investment
Rationale of the Indicator

Relevance of the Indicator:

Locked-in emissions are included in the ACT Generic assessment for the following reasons:

  • Absolute GHG emissions over time are the most relevant measure of emissions performance for assessing a company’s contribution to global warming. Furthermore, the concept of Locked-in emissions allows a judgement to be made about the company’s outlook in more distant time periods than ones of the investment plans.
  • Analysing a company’s locked-in emissions alongside science-based budgets also introduces the means to scrutinise the potential cost of inaction, including the possibility of stranded assets.
  • Examining absolute emissions, along with recent and short-term emissions intensity trends, forms part of a holistic view of a company’s emissions performance in the past, present, and future.

 

5.3.3. Intangible Investment (Weighting: 0-5%)

 

5.3.3.1: GE 3.1 R&D in Climate Change Mitigation Technologies (Weighting: 0-2.5%)

Description & Requirements GE 3.1 R&D spending in low-carbon technologies
Short Description of Indicator A measure of the ratio of R&D costs/investments in technologies for low-carbon transition. The indicator identifies the ratio between the company’s R&D investment in low-carbon technologies and total R&D investments.
Prerequisite The company operates in a sector where there are technological stakes regarding low-carbon transition (cf. ‘0. General Information’ sheet)
Data Requirements

Relevant and external sources of data used for the assessment of this indicator:

  • R&D costs/investments in climate change mitigation technologies of the company.
  • Total R&D costs/investments of the company
   
How the Assessment will be done

1) R&D Investment Share

The assessment is based on the ratio of the company’s ‘annual R&D expenditure on technologies for low carbon transition’ to the company’s ‘total annual capital expenditure in R&D’.

2) Final Score

The ratio will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for companies indicating a higher level of maturity, which means a higher share in R&D costs/investments in these technologies.

The matrix is provided below:

 

Rationale GE 3.1 R&D Spending in low-carbon Technologies
Rationale of the Indicator

Relevance of the Indicator:

R&D in low carbon technologies is included in the ACT Generic assessment for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • R&D is the principal proactive action to develop these technologies.
  • R&D is also one of the principal tools to reduce the costs of a technology in order to increase its market penetration.
  • Aside from technology, companies can also invest into R&D on operational practices to optimize the carbon impact where they have direct responsibility.
  • Lastly, the R&D investment of a company into non-mature technologies and practices allows for direct insight in the company’s commitment to alternative technologies that may not currently be part of its main business model.

 

5.3.3.2: GE 3.2 Company Low Carbon Patenting Activity (Weighting: 0-2.5%)

Description & Requirements GE 3.2 Company low carbon Patenting Activity
Short Description of Indicator A measure of the company patenting activity related to low-carbon technologies. The indicator identifies the ratio between the company’s patent activity for the last 5 years and average patenting activity linked to climate change of the sector.
Prerequisite The company operates in a sector where there are technological stakes regarding low-carbon transition (cf. ‘0. General Information’ sheet)
Data Requirements

Relevant and external sources of data used for the assessment of this indicator:

  • Patenting activity in climate change mitigation technologies of the company over the last 5 years.
  • Total patenting activity of the company over the last 5 years
   
How the Assessment will be done

1) Past low-carbon patents activity ratio

The assessment is based on the ratio of the company’s patenting activity dedicated to climate change mitigation technologies over the last 5 years to the company’s total patenting activity over the same span of time.

2) Final Score

The ratio will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for companies indicating a higher level of maturity, which means a higher share in Climate Change Mitigation Technologies (CCMTs) patenting activity.

The matrix is provided below:

 

Rationale GE 3.2 Company Low Carbon Patenting Activity
Rationale of the Indicator

Relevance of the Indicator:

The indicator on CCMTs patenting activity is complementary to the one dedicated to R&D in low carbon technologies, as it monitors the technology diffusion whereas R&D expenditures monitor the technology development.

It is included in the ACT Generic assessment for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • Patent data are commensurable because patents are based on an objective standard (OECD 2015)
  • Patent data measure the intermediate outputs of an inventive process, where R&D data expenditures measure the input (OECD 2015)
  • Patent data can be disaggregated into specific technological fields (OECD 2015)

Defining Climate Change Mitigation Technologies Patents:

The indicator focuses on patents that mitigate climate change. The European Patent Office (EPO) and the US Patent and Trademark Office (USPTO) have developed a dedicated patent classification scheme (Cooperative Patent Classification - CPC) which details patents for climate change mitigation or technologies:

  • Y02B – CCMTs related to buildings
  • Y02C – Capture, storage, sequestration or disposal of greenhouse gases
  • Y02E – Reduction of greenhouse gas emissions, related to energy generation, transmission or distribution
  • Y02P – CCMTs relating to production in energy intensive industries
  • Y02T – CCMTs related to transportation
  • Y02W – CCMTs related to wastewater treatment or waste management

(EPO, 2017)

Relevance of the indicator’s 5-year time horizon

Patents applications are typically disclosed 18 months after their filing date (OECD 2015). To avoid the effects of this “publication lag” and smooth the ratio used for the assessment, the indicator monitors the last 5 years of the company’s patenting activity.

 

5.3.4. Sold Product Performance (Weighting: 0-35%)

 

5.3.4.1: GE 4.1 Product-specific interventions (Weighting: 0-8.75%)

Description & Requirements GE 4.1 Product-specific interventions
Short Description of Indicator An analysis of the company’s reporting of mature interventions to reduce GHG emissions (upstream & downstream) for its products and in each category determined as being high GHG impact, compared to other categories of products relevant to the company.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Hotspotting tool (optional)
  • Intervention on products reporting tool
How the Assessment will be done

Calculation of Score:

To be ready for the transition to a low-carbon economy, retail companies need to plan and carry out “interventions” within the value chain in order to exercise their market position and influence to reduce GHG emissions.

For each product category, the company identifies interventions that determine the most ambitious impacts achievable by a company, and highlights the GHG hotspots for the different product categories in accordance with best practices (LCA, PCR, PEFCR, etc.). This establishes a relative benchmark. The analyst compares the interventions reported by the company with this benchmark and against other interventions reported by other reporting companies, whereby the analyst assigns a ‘maturity scoring’ to the reported interventions.

Several measures are combined to assign a score to the intervention. These measures are:

  • Intervention maturity scoring
  • Level of ambition
  • Carbon mitigation potential
  • Extent or size of the intervention
  • Correspondence between the product life cycle phase the intervention targets and the highest GHG impact life cycle phase of the product

Intervention Maturity Scoring

This assesses how advanced the intervention is relative to current practice, and other elements that can ensure its success like clear goals and measures of success, use of supporting technology, use of certification and verification.

Level of Ambition

The company shall report on the level of ambition of the intervention. The first level is an incremental improvement (e.g. packaging reduction). The second level is a complete product redesign, which consists of a new development (e.g. full product reparability to increase lifetime). The third level is a breakthrough innovation (e.g. replacing an electronic product with a low-tech solution that is no energy-using product).

Carbon Mitigation Potential

Only interventions that are verifiable and significantly reduce GHG emissions shall receive a non-zero score. It is not expected that the verification be complete, however a methodology must be in place to reliably assess or measure the GHG emissions reduction, which could be verified by a third party. The greater the GHG reduction resulting from the intervention, the higher the carbon mitigation potential.

Significance and Extent of the Intervention

Whether the intervention is large or small in scale affects its overall level of impact on GHG emissions. Large-scale interventions receive more points (e.g. significant interventions covering a high percentage of a product category).

Correspondence between the product life cycle phase, the intervention targets and the highest GHG impact life cycle phase of the product

To effectively reduce GHG emissions, interventions should target the life cycle phases or processes of product systems with the highest portion of GHG emissions attributed to them, so this is awarded more points.

The scorings for the product categories reported on (covering at least 70% of total product emissions) are then aggregated into a numerical value. The analyst assigns a scoring to all interventions reported. This exercise can make future analyses more robust, as better understanding is developed of how the RT sector is undertaking activities to reduce emissions in the value chain.

* This indicator is relevant for companies that operate upstream in a value chain of a product that can be considered “low carbon” referring to the EU Green taxonomy. This indicator evaluates the contribution of a semi-finished product or an equipment in the reduction of a final product. (e.g. contribution of tires in the reduction of emissions of a vehicle).

   
Rationale GE 4.1 Product-Specific Interventions
Rationale of the Indicator

This method aims to assess all product-specific dimensions of a low-carbon transition. This means the general indicators in other sections are only those that are applicable on a broad scale, and the elements that are integrated into the product-specific interventions are only those that differ from product to product.

While other sectors in the ACT project may have one activity indicator (generation emissions for electric utilities, fleet emissions for car companies) that can account for the majority of their total emissions, this is not the case for the generic approach, where emissions sources are scattered across the value chain and have different points of origin. To address all emissions, different types of actions are necessary to address different types of emissions sources. Furthermore, this multidimensionality means that large efforts, such as Life Cycle Assessments (LCA), are needed to accurately gain insight and information on exactly where the significant emissions sources are and what can be done about them from each company’s point of view. It is commonly understood that this information is scarce among companies, which operate in many different sectors and often have a large number of different tiers in their supply chains, requiring large transaction costs and research to obtain complete information.

Rationale on Measuring GHG Reductions:

A key issue with the interventions approach is that if interventions have no measurable impact on GHG emissions, they are effectively assimilated to “greenwashing”. However, we recognise that, when attempting to influence GHG emissions outside of direct operations, measurement may be difficult. It could be technically feasible yet impractical because of time or cost considerations [14]. GHG emissions reductions may also not occur immediately, or methodological approaches for measurement may be lacking (for example, measuring soil carbon stock changes or N2O emissions from soil for agricultural interventions). Barriers to measurement should not be barriers to action, therefore the analysis will consider interventions where the GHG emissions mitigation has not been measured. Nonetheless, companies should describe the rationale for emissions reduction connected to the intervention so that it is clear this potential exists.

The reporting should also include, where possible, enough detail on mitigation potential, and the scale of impact expected, to distinguish between interventions that could be considered tokenism or greenwash and those with a material, positive climate change mitigation impact.

 

 

5.3.4.2: GE 4.2 Product Specific Performance (Weighting: 0-8.75%)

Description & Requirements GE 4.2 Product Specific Performance
Short Description of Indicator An analysis of the company’s purchased or sold products performance for products with existing and reliable benchmark
Prerequisite

The company buys at least one of the products with existing and reliable benchmark (existing or future ACT methodology) and/or sells products that can directly be assessed through an existing benchmark (existing or future ACT methodology)

The list of those products is finite:

  • For purchased products: products that can be analysed are those produced by a company falling into one of the following ACT methodologies: Cement, Auto, Oil & Gas, Glass, Pulp & Paper, Iron & Steel, Food, Aluminium;
  • For sold products: products that can be analysed are those that are “ready-for-use” for by a company falling into one of the following ACT methodologies: Transport, Electric Utilities.

NB: As of the generic methodology development stage, some of the ACT methodologies mentioned above are still under development or not developed. The generic methodology will include the relevant benchmarks as soon as they are available.

Data Requirements

The questions comprising the information request that are relevant to this indicator are:

Carbon intensity of the purchased products (if relevant) at Y-5 and Y+5:

The benchmark indicators involved are:

NB: When finished, all upcoming methodologies covered by a specific ACT Framework will be integrated in ACT Generic methodology

  • Carbon intensity of the sold products (if relevant) at Y-5 and at Y+5:

The benchmark indicators involved are:

 

   
How the Assessment will be done

Purchased Products

For each purchased products, the analysis is based on the difference between the purchased products’ recent (reporting minus 5 years) emissions intensity trend gradient (CR′PP) and the purchased products’ decarbonization pathway trend gradient (CB′PP) in the short-term (reporting year plus 5 years)

CR′PP is the gradient of the linear trendline of the purchased products’ recent emissions intensity (CRPP)

CB′PP is the gradient of the linear trendline of the purchased products’ benchmark pathway for emissions intensity (CBPP). The purchased products’ benchmark is defined from the purchased products’ current emissions on reporting year, and from the relevant sectoral benchmark (cf. relevant ACT sectoral methodology)

The difference between (CR′PP) and (CB′PP) will be measured by their ratio (rTPP). This is the ‘Transition ratio” which is calculated by the following equation, with the symbol used to denote gradients:

 

If the transition ratio is a negative number, it means the company’s purchased product’s recent emissions intensity has increased (positive CR′PP) and a zero score is awarded by default. If the company’s purchased product’s recent emissions intensity has decreased, the transition ratio will be a positive number. The value of the ratio is capped at 1, which represents the maximum score. A score is assigned as a percentage value equal to the value of (1 = 100%).

Sold Products

  • Transport

The analysis is based on the difference between the sold vehicles’ recent (reporting year minus 5 years) emissions intensity trend gradient (CR′SP1) and the sold vehicles’ decarbonization pathway trend gradient (CB′SP1) in the short-term (reporting year plus 5 years).

CR′SP1 is the gradient of the linear trendline of the sold vehicles’ recent emissions intensity (CRSP1).

CB′SP1 is the gradient of the linear trendline of the sold vehicles’ benchmark pathway for emissions intensity (CBSP1). The sold vehicles’ benchmark is defined from the sold vehicle’s current emissions on reporting year, and from the relevant sectoral benchmark (cf. ACT Transport methodology)

The difference between CR′SP1 and CB′SP1 will be measured by their ratio (rTSP1). This is the ‘Transition ratio’ which is calculated by the following equation, with the symbol used to denote gradients:

If the transition ratio is a negative number, it means the company’s sold product’s recent emissions intensity has increased (positive CR′SP1) and a zero score is awarded by default. If the company’s sold product’s recent emissions intensity has decreased, the transition ratio will be a positive number. The value of the ratio is capped at 1, which represents the maximum score. A score is assigned as a percentage value equal to the value of (1 = 100%).

Electric Utilities

The analysis is based on the difference between the company’s recent (reporting year minus 5 years) sold products’ generation emissions intensity trend gradient (CR′SP2) and the company’s sold products’ decarbonization pathway trend gradient (CB′SP2) in the short-term (reporting year plus 5 years).

CR′SP2 is the gradient of the linear trend-line of the company’s recent sold products’ generation emissions intensity (gCO2e/kWh) of gross electricity generation over time.

CB′SP2 is the gradient of the linear trend-line of the company’s sold products’ performance benchmark pathway. Refer to the ACT Electric Utilities methodology for details on the computation of the company’s sold products performance specific decarbonization pathway and its trendline.

The difference between CR′SP2 and CB′SP2 will be measured by their ratio (rTSP2). This is the ‘Transition ratio’, which is calculated by the following equation:

If the transition ratio is a negative number, it means the company’s sold products’ recent emissions intensity has increased (positive CR′SP2) and a zero score is awarded by default. If the company’s sold products’ recent emissions intensity has decreased, the transition ratio will be a number between 0 and 1. A score is assigned as a percentage value equal to the value of (1 = 100%).

Rationale GE 4.2 Product Specific Performance
Rationale of the Indicator

Relevance of the Indicator:

This methodology covers heterogeneous sectors with companies situated at different levels of the value chain. This heterogeneity can therefore also be encountered in the levers that each company has to decarbonize its activities. To assess the upstream and downstream emissions of all those companies, a generic qualitative indicator is relevant (cf. 4.1. Product specific interventions).

However, wherever it is possible the ACT methodology prefers to assess companies through quantitative indicators. That is the purpose of the product specific performance indicator. This indicator gathers quantitative benchmarks built during the development of other ACT methodologies.

Scoring Rationale:

This indicator is where the principal difference between the company’s purchases and sells and the relevant benchmarks are assessed. Ideally, this would be done on a future date, whereby the company’s sales and purchases projections would dictate the company’s pathways. However, because of the confidentiality/uncertainty of such data, this is not a very robust approach. While it may be possible to do with improvements on data availability, we are aiming to use more available past data

 

 

5.3.4.3: GE 4.3 Share of low-carbon Products (Weighting: 0-8.75%)

Description & Requirements GE 4.3 Share of low carbon Products
Short Description of Indicator An analysis of the company’s share of low carbon products
Prerequisite The company's sector is covered by the EU Green Taxonomy
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Share of turnover generated by low-carbon products (out of total turnover) at Y-5, Y and Y+5

 

The benchmark indicators involved are:

 

   
How the Assessment will be done

The assessment is based on the share of low-carbon products, i.e. products meeting the mitigation criteria of the EU Green Taxonomy.

Calculation of Score:

The share of low carbon products will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for companies indicating a higher level of maturity, which means a higher share of low carbon products.

The matrix is provided below:

Rationale GE 4.3 Share of low carbon Products
Rationale of the Indicator

Relevance of the Indicator:

Share of low carbon product in the total turnover of the company is included in the ACT Generic assessment for the following reasons:

  • Low carbon sales is an indicator of corporate commitment to a low carbon transition, and are a meaningful metric of the company’s performance towards the transition. It indicates how its products will contribute to decarbonize the downstream of the value chain.

Scoring Rationale

As there is no quantitative benchmark available regarding the share of low carbon products in the total revenue of companies, the best way to assess the performance in this indicator is to compare the share of low carbon products to a maturity matrix.

With the further development of EU Green Taxonomy, quantitative benchmarks are likely to be built. The methodology may be updated to integrate such benchmarks as soon as they are available.

Definition Rationale

A “low-carbon product” is a product that meets the climate change mitigation criteria of the EU Green Taxonomy. The list of eligible products will be detailed in an appendix and is set to be updated with the further development of this taxonomy.

 

 

5.3.4.4: GE 4.4 Sub-contracted transport service performance (Weighting: 0-8.75%)

Description & Requirements GE 4.4 Sub-contracted Transport Service Performance
Short Description of Indicator This indicator is a qualitative assessment of the degree of knowledge the company has about its transport service subcontractors’ performance, and about the subcontractors’ performance itself.
Prerequisite The company is provided with transport services by a subcontractor
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • The reporter shall provide details on its knowledge of its subcontractors’ projected emissions (metric tonne CO2e) [Future]
  • The reporter shall provide details on its knowledge of its future activity sub-contracted (tonne.km) [Future]
  • The reporter shall provide details on its knowledge of its subcontractors’ time horizon investments [Future]
  • The reporter shall provide details on its knowledge of its subcontractors’ low-carbon vehicles [Future]
  • The reporter shall provide details on its knowledge of its subcontractors’ actions for emissions reduction [Future]
   
How the Assessment will be done

 

The analysis will look at the following dimensions:

  • If the company has a good forecast on the subcontracted activity
  • If the company is able to determine future emissions from its subcontractors, and if the intensity follows the decarbonization pathway
  • If the company knows the investment strategy of its subcontractors
  • If the subcontractors fleet include low-carbon vehicles
  • If the subcontractors carry out actions of GHG emissions reduction on its vehicles (other than purchasing new ones) and on operations

The analysis uses the following matrix:

Actions eligible for the dimension “GHG emissions reduction on material” are the following [5] [17] [18] [37] [38]:

  • Fuel efficiency devices
  • Preventive maintenance
  • Speed limitation devices
  • Predictive cruise control devices
  • Real-time fuel economy monitors (linked to driving methods)
  • Tire pressure monitoring systems
  • Low rolling resistance tires
  • Improvement of ship hull surface / hull cleaning
  • Air lubrication of the hull
  • Waste heat recovery from ship engine or exhaust gas
  • Reduce weight of internal equipment and interior design in aircrafts

 

Actions eligible for the dimension “GHG emissions reduction on operation” are the following [5] [17] [18] [37] [38]:

  • Eco-driving
  • Routing optimization
  • Load factor optimization
  • Reduction of empty runs
  • Improve backhauling
  • Speed regulation with Intelligent Speed Adaptation
  • Platooning
  • Re-timing urban deliveries to off-hours
  • Co-loading
  • Speed limitation in shipping
  • Participate in smoother ship-port interface to reduce waiting time of ship and optimize berths planning
  • Onshore power supply for ships in ports

Other actions than the ones listed above may be eligible, if judged relevant by the analysts.

For each action reported, the company shall describe:

  • The type of action
  • The goals
  • The implementation process
  • The monitoring of the action
  • The results obtained for the reporting year

 

Rationale GE 4.4 Sub-contracted Transport Service Performance
Rationale of the Indicator

Relevance of the Indicator:

This indicator is used in the ACT Transport methodology.

It stands as a mirror of indicators 2.1 assessing material investments of the company about its direct emissions from transport activities, but here it assesses the performance of the subcontractors. It is necessary that the company investigates about its transport services subcontractors’ performance, especially if a large part of the transportation activity is subcontracted, because its own performance depends on it. Through this indicator, the actions carried out by the transport service subcontractors to reduce their GHG emissions are assessed, along with investments made that will shape future levels of emissions. Some focus is made on the capacity of the company to collect data from its transport services subcontractors, because it is the first necessary step toward a full picture of its carbon impact, and it shows commitment for a low-carbon transition.

Scoring Rationale:

This indicator is assessed by a maturity matrix, because companies subcontracting their transport service face a lack of data from their subcontractors. Nonetheless, this indicator encourages companies to dialogue with their subcontractors and to set up a data collection process. Therefore, high levels of the matrix correspond to the ability to collect data that would be necessary to compute indicator from module 2. The aim of this indicator is to value companies that have transport services subcontractors with good carbon performance, so the highest level of the matrix corresponds to subcontractor’s performance aligned with the decarbonization pathway.

The various dimensions of the maturity matrix are weighted as follows:

 

Spot contract is a common subcontracting practice in the transport sector, and it makes data collection very difficult for companies. Therefore, the maturity matrix of this indicator shall be used only to score subcontractors under “long-term” contract. The score obtained is then adjusted with the share of GHG emissions represented by spot contracts. The final score is computed as follows:

It was decided to exclude spot contracts from the assessment with this maturity matrix, as it seemed hardly feasible to collect relevant data from such subcontractors, or to design adequate but nonetheless as ambitious maturity levels as for long-term contracts. Having few or poor-quality data should not be an excuse for bad carbon performance.

 

 

5.3.5. Management (Weighting: 10%)

 

Maturity matrix contains five levels of evaluation that are associated with scores given to the company for each indicator. Depending on the indicator, it might be possible to obtain only some score. Some of the indicators might be divided into sub-dimension that are evaluated individually before the score is aggregated to obtain the indicator score.

 

 

5.3.5.1: GE 5.1 Oversight of Climate Change Issues (Weighting: 3%)

Description & Requirements GE 5.1 Oversight of climate change issues
Short Description of Indicator The company discloses that responsibility for climate change within the company lies at the highest level of decision-making within the company structure.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Environmental policy and details regarding governance

External sources of data may also be used for the analysis of this indicator.

   
How the Assessment will be done

The benchmark case is that climate change is managed within the highest decision-making structure within the company. The company situation will be compared to the benchmark case, if it is similar then points will be awarded.

The position at which climate change is managed within the company structure will be determined from the company data submission and accompanying evidence.

 

Rationale GE 5.1 Oversight of Climate Change Issues
Rationale of the Indicator

Successful change within companies, such as the transition to a low-carbon economy, requires strategic oversight and buy-in from the highest levels of decision-making within the company. Evidence of how climate change is addressed within the top decision-making structures is a proxy for how seriously the company takes climate change, and how well integrated it is at a strategic level. High-level ownership also increases the likelihood of effective action to address low-carbon transition.

Changes in strategic direction are necessarily future-oriented, which fits with this principle of the ACT project.

Managing oversight of climate change is considered as a good practice.

 

 

5.3.5.2: GE 5.2 Climate Change Oversight Capability (Weighting: 3%)

Description & Requirements GE 5.2 Climate Change Oversight Capability
Short Description of Indicator Company board or executive management has expertise on the science and economics of climate change, including an understanding of policy, technology and consumption drivers that can disrupt current business.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Environmental policy and details regarding governance

External sources of data may also be used for the analysis of this indicator.

   
How the Assessment will be done

The presence of expertise on topics relevant to climate change and the low-carbon transition at the level of the individual or committee with overall responsibility for it within the company is assessed. The presence of expertise is the condition that must be fulfilled for points to be awarded in the scoring.

The analyst determines if the company has expertise as evidenced through a named expert biography outlining capabilities. The analysis is binary: expertise is evident or not. A cross check is performed against 5.1 on the highest responsibility for climate change, the expertise should exist at the level identified or the relationship between the structures/experts identified should also be evident.

Elements of biography outlining expertise might be:

  • Achievement of a course with a focus on climate change
  • Training in climate change subjects by a certified organism
  • Previous experience in an organization specialized in climate change (consulting companies in transition, NGO, …)

Supervision of studies to assess climate change impact on business and business impact on climate change

Rationale GE 5.2 Climate Change Oversight Capability
Rationale of the Indicator

Effective management of the low-carbon transition requires specific expertise related to climate change and its impacts, and their likely direct and indirect effects on the business. Presence of this capability within or closely related to the decision-making bodies that will implement low-carbon transition both indicates company commitment to that transition and increases the chances of success.

Even if companies are managing climate change at the Board level or equivalent level, a lack of expertise could be a barrier to successful management of low-carbon transition.

 

 

5.3.5.3: GE 5.3 Low-carbon Transition Plan (Weighting: 2%)

Description & Requirements GE 5.3 Low-carbon Transition Plan
Short Description of Indicator The company has a plan on how to transition the company to a business model compatible with a low-carbon economy.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

Environmental policy and details regarding governance

   
How the Assessment will be done

The analyst evaluates the description and evidence of the low-carbon transition plan for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

Among the best practice elements identified to date are:

  • The plan includes financial projections
  • The plan should include cost estimates or other assessments of financial viability as part of its preparation
  • The description of the major changes to the business is comprehensive, consistent, aligned with other indicators
  • Quantitative estimates of how the business will change in the future are included
  • Costs associated with the plan (e.g. write-downs, site remediation, contract penalties, regulatory costs) are included
  • Potential “shocks” or stressors (sudden adverse changes) have been taken into consideration
  • Relevant region-specific considerations are included
  • The plan’s measure of success is SMART - contains targets or commitments with timescales to implement them, is time-constrained or the actions anticipated are time-constrained
  • The plan’s measure of success is quantitative
  • The description of relevant testing/analysis that influenced the transition plan is included
  • The plan is consistent with reporting against other ACT indicators
  • The scope should cover entire business, and is specific to that business
  • The plan should cover the short, medium and long terms. From now or the near future <5 years, until at least 2035 and preferably beyond (2050)
  • The plan contains details of actions the company realistically expects to implement (and these actions are relevant and realistic)
  • The plan is approved at the strategic level within the organisation
  • Discussions about the potential impacts of a low-carbon transition on the current business have been included
  • The company has a publicly-acknowledged 2°C (or beyond) science-based target (SBT)

The maximum score (100%) is assigned if all of these elements are demonstrated.

Rationale GE 5.3 Low-carbon Transition Plan
Rationale of the Indicator All the sectors will require substantial changes to their business to align to a low-carbon economy, over the short, medium and long term, whether it is voluntarily following a strategy to do so or is forced to change by regulations and structural changes to the market. It is better for the success of its business and of its transition that these changes occur in a planned and controlled manner.

 

 

5.3.5.4: GE 5. 4 Climate Change Management Incentives (Weighting: 1%)

Description & Requirements GE 5.4 Climate Change Management Incentives
Short Description of Indicator The Board’s compensation committee has included metrics for the reduction of GHG emissions in the annual and/or long-term compensation plans of senior executives; the company provides monetary incentives for the management of climate change issues as defined by a series of relevant indicators.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Management incentives
How the Assessment will be done

The analyst verifies if the company has compensation incentives set for senior executive compensation and/or bonuses, that directly and routinely reward specific, measurable reductions of tons of carbon emitted by the company in the preceding year and/or the future attainment of emissions reduction targets, or other metrics related to the company’s low-carbon transition plan.

Rationale GE 5.4 Climate Change Management Incentives
Rationale of the Indicator

Executive compensation should be aligned with overall business strategy and priorities. As well as commitments to action the company should ensure that incentives, especially at the executive level, are in place to reward progress towards low-carbon transition. This will improve the likelihood of successful low carbon transition.

Monetary incentives at the executive level are an indication of commitment to successful implementation of a strategy for low carbon transition.

 

 

5.3.5.5: GE 5.5 Climate Change Scenario Testing (Weighting: 1%)

Description & Requirements GE 5.5 Climate Change Scenario Testing
Short Description of Indicator Testing or analysis relevant to determining the impact of transition to a low-carbon economy on the current and projected business model and/or business strategy has been completed, with the results reported to the board or c-suite, the business strategy revised where necessary, and the results publicly reported.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Scenario testing
   
How the Assessment will be done

The analyst evaluates the description and evidence of the low-carbon economy scenario testing for the presence of best-practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points is allocated for elements indicating a higher level of maturity.

Best-practice elements to be identified in the test/analysis include:

 

  • entire coverage of the company’s boundaries
  • timescale from present to long-term (2035-2050)
  • translation of results into value-at-risk or other financial terms
  • multivariate: a range of different changes in conditions are considered together
  • changes in conditions that are specific to a low-carbon climate scenario
  • climate change conditions are combined with other likely future changes in operating conditions over the timescale chosen.

Maximum points are awarded if all of these elements are demonstrated.

Rationale GE 5.5 Climate Change Scenario Testing
Rationale of the indicator

There are a variety of ways of analysing the potential impacts of climate-related changes on the business, whether these are slow and gradual developments or one-off “shocks”. Investors are increasingly calling for techniques such as use of an internal price on carbon, scenario analysis and stress testing to be implemented to enable companies to calculate the value-at-risk that such changes could pose to the business. As this practice is emergent at this time there is currently no comprehensive survey or guidance on specific techniques or tools recommended for the sector. The ACT methodology thus provides a broad definition of types of testing and analysis which can be relevant to this information requirement, to identify both current and best practices and consider them in the analysis.

Scenario stress testing is an important management tool for preparing for low-carbon transition. For businesses likely to be strongly affected by climate change impacts (both direct and indirect), it has even greater importance.

 

 

5.3.6. Supplier Engagement (Weighting: 0-15%)

 

5.3.6.1: GE 6.1 Strategy to Influence Suppliers to reduce their GHG Emissions (Weighting: 0-7.5%)

Description & Requirements GE 6.1 Supplier Engagement
Short Description of Indicator This indicator assesses the strategic policy and the process which are formalized and implemented into business decision making-process to influence, enable or otherwise shift suppliers’ choices and behaviours in order to reduce its GHG emissions.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Methods of supplier engagement, strategy to prioritizing supplier engagements and measures of success
  • Number of suppliers engaged and proportion of total spend
  • Data on suppliers’ GHG emissions and climate change strategies
How the Assessment will be done

The assessment will assign a maturity score based on the company’s formalized strategy with their suppliers, expressed in a maturity matrix.

A company that is placed in the ‘aligned’ category will receive the maximum score. Companies who are at lower levels will receive a partial score, with 0 points awarded for having no engagement at all.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies responses will be scrutinized by the assessor and then placed on the level in the matrix where the assessor deems it most appropriate.

 

Rationale GE 6.1 Strategy to Influence Suppliers to Reduce their GHG Emissions
Rationale of the Indicator

Relevance of the Indicator:

Supplier engagement is included in the ACT Generic assessment for the following reasons:

It might have a significant impact in terms of GHG emission, achieving decarbonization of the whole supply chain is also key to reach the ambitious goals in most of the companies

Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

Scoring the Indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emissions reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of supplier engagement and assess them together towards a single score for Supplier Engagement.

 

 

5.3.6.2: GE 6.2 Activities to Influence Suppliers to Reduce their GHG Emissions (Weighting: 0-7.5%)

Description & Requirements GE 6.2 Activities to Influence Suppliers to Reduce their GHG Emissions
Short Description of Indicator The company participates in activities that help, influence or otherwise enable suppliers to reduce their GHG emissions. The indicator aims to be a holistic measure of these activities to assess how active the company is in reducing the emissions of their products in the value chain across all products.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
   
How the Assessment will be done

The assessment will assign a maturity score based on the company’s formalized strategy with their suppliers, expressed in a maturity matrix.

A company that is placed in the ‘aligned’ category will receive the maximum score. Companies who are at lower levels will receive a partial score, with 0 points awarded for having no engagement at all.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies responses will be scrutinized by the assessor and then placed on the level in the matrix where the assessor deems it most appropriate.

 

Rationale GE 6. 2 Activities to Influence Suppliers to Reduce their GHG Emissions
Rationale of the Indicator

Relevance of the Indicator:

Activities to influence suppliers are included in the ACT Generic assessment for the following reasons:

  • It might have a significant impact in terms of GHG emission, achieving decarbonization of the whole supply chain is also key to reach the ambitious goals in most of the companies
  • Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

Scoring the Indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emission reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the assessor to consider multiple dimensions of supplier engagement and assess them together towards a single score for all the activities related to Supplier Engagement.

 

 

5.3.7. Client Engagement (Weighting: 0-15%)

 

5.3.7.1: GE 7.1 Strategy to Influence Customer Behaviour to Reduce their GHG Emissions (Weighting: 0-7.5%)

Description & Requirements GE 7.1 Strategy to Influence Customers to Reduce their GHG Emission
Short Description of Indicator The company has a strategy, ideally governed by policy and integrated into business decision making, to influence, enable, or otherwise shift customer choices and behaviour in order to reduce GHG emissions.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Strategy to influence clients GHG emissions
  • % of products/services
  • Data on customers’ choices and preferences towards reducing GHG emissions
   
How the Assessment will be done

 

Rationale GE 1.2 Alignment of Upstream Emissions Reduction argets
Rationale of the Indicator  

 

 

GE 7.2 Activities to Influence Customer Behaviour to Reduce their GHG Emissions (Weighting: 0-7.5%)

Description & Requirements GE 7.2 Activities to Influence Customers to Reduce their GHG Emission
Short Description of Indicator The company participates in activities, to influence, enable, or otherwise shift customer choices and behaviour in order to reduce GHG emissions.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Strategy to influence clients GHG emissions
  • % of products/services
  • Data on customers’ choices and preferences towards reducing GHG emissions
   
How the Assessment will be done

 

Rationale GE 7.2 Activities to Influence Customers to Reduce their GHG Emission
Rationale of the Indicator

Relevance of the Indicator:

Activities to influence customers are included in the ACT Generic assessment for the following reasons:

1. Companies usually have the ability to influence the strategy and performance of clients regarding climate thanks to their products or services.

2. The downstream can represent the largest source of emissions for some companies throughout the value chain and clients should be engaged through low-carbon solutions.

Scoring the Indicator:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not very feasible at this time. It is often challenging to quantify the emission reduction potential and outcome of collaborative activities with the supply chain. Therefore, the approach of a maturity matrix allows the assessor to consider multiple dimensions of supplier engagement and assess them together towards a single score for all the activities related to Client Engagement.

 

5.3.8. Policy Engagement (Weighting: 5%)

 

5.3.8.1: GE 8.1 Company Policy on Engagement with Trade Associations (Weighting: 1%)

Description & Requirements GE 8.1 Company Policy on Engagement with Trade Associations
Short Description of Indicator The company has a policy on what action to take when industry organisations to which it belongs are found to be opposing “climate-friendly” policies.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Public climate change policy positions
  • Description of this policy (scope & boundaries, responsibilities, process to monitor and review)
  • Trade associations that are likely to take a position on climate change legislation
   
How the Assessment will be done

The analyst will evaluate the description and evidence of the policy on trade associations and climate change for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

Best practice elements to be identified in the test/analysis include:

  • Having a publicly available policy in place
  • The scope of the policy covers the entire company and its activities, and all group memberships and associations
  • The policy sets out what action is to be taken in the case of inconsistencies
  • Action includes the option to terminate membership of the association
  • Action includes the option of publicly opposing or actively countering the association’s position
  • Responsibility for oversight of the policy lies at the top level of the organisation
  • There is a process to monitor and review trade association positions

Maximum points are awarded if all these elements are demonstrated.

 

Rationale GE 8.1 Company Policy on Engagement with Trade Associations
Rationale of the Indicator

Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, when trade associations take positions, which are negative for climate, companies need to take action to ensure that this negative influence is countered or minimized.

This indicator is consistent with the ACT philosophy, ACT framework and ACT guidelines and common to the other sectoral methodologies.

 

 

5.3.8.2: GE 8.2 Trade Associations Supported do not have climate-negative Activities or Positions (Weighting: 2%)

Description & Requirements GE 8.2 Trade Associations Supported do not have climate-negative Activities or Positions
Short Description of Indicator The company is not on the board or providing funding beyond membership of any trade associations that have climate-negative activities or positions. It should also be considered if the company is supporting trade associations with climate-positive activities and/or positions.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Company policy on engagement with trade associations
   
How the Assessment will be done

The list of trade associations declared in the CDP data and other external source entries relating to the company (e.g. RepRisk database), is assessed against a list of associations that have climate-negative activities or positions. The results are compared to any policy described in 5.1.

If the company is part of trade associations that have climate-positive activities and/or positions, this should be considered for the analysis.

 

Rationale GE 8.2 Trade Associations Supported do not have climate-negative Activities or Positions
Rationale of the Indicator Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, participating in trade associations which actively lobby against climate-positive legislation is a negative indicator and likely to obstruct low-carbon transition. However, membership in associations that support climate positive policies should also be considered in the analysis.

 

 

5.3.8.3: GE 8.3 Position on significant climate policies (Weighting: 1%)

Description & Requirements GE 8.3 Position on Significant Climate Policies
Short Description of Indicator The company is not opposed to any significant climate relevant policy and/or supports climate friendly policies.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Position of the company on significant climate policies (public statements, etc.).
   
How the Assessment will be done

The analyst evaluates the description and evidence on company position on relevant climate policies for the presence of best practice elements, negative indicators and consistency with the other reported management indicators. The company description and evidence will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

Maturity matrix contents may include (decreasing maturity):

 

a. The company publicly supports relevant significant climate policies

b.  No reports of any opposition to climate policy

c.  Reported indirect opposition to climate policy (e.g. via a trade association)

d.  Reported direct opposition to climate policy (third-party claims are found)

The company publicises direct opposition to climate policy (e.g. direct statement issues or given by a company representative in a speech or interview)

List of cross-sectoral initiatives on the low-carbon transition of the economy:

- Paris Agreement

- SBT Initiative (validated targets)

- …

Rationale GE 8.3 Position on Significant Climate Policies
Rationale of the Indicator Many initiatives have been developed about sustainable practices that contribute to the transition to a low-carbon economy. Companies should not oppose effective and well-designed regulation in these areas, but should support it. Assessing the position of the company regarding the evolution of the context is thus key to understand the corporate vision in these matters

 

 

5.3.8.4: GE 8.4 Collaboration with Local Public Authorities (Weighting: 1%)

Description & Requirements GE 8.4 Collaboration with Local Public Authorities
Short Description of Indicator The company is not opposed to any significant climate-relevant policy.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • Public climate change policy positions
  • Description of this policy (scope & boundaries, responsibilities, process to monitor and review)
How the Assessment will be done

The analyst evaluates the description and evidence on the company’s position on relevant climate policies for the presence of best-practice elements, negative indicators and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

 

Rationale GE 8.4 COLLABORATION WITH LOCAL PUBLIC AUTHORITIES
Rationale of the Indicator Collaboration with public authorities can be a key instrument by which companies can indirectly influence policy on climate. Thus, participating actively in local dialogues shows leadership in climate actions and can significantly help climate policies enforcement.

 

 

5.3.9. Business Model (Weighting: 10-15%)

A company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of a low-carbon transition while continuing to generate value. This can be done by developing activities outside the core business of the company.

This module aims to identify both relevant current business activities and those still at a burgeoning stage. It is recognised that transition to a low-carbon economy, with the associated change in business models, will take place over a number of years. The analysis will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

  • Focus will be on new business models
  • High emissive / involved in high emissive activity companies should be benchmarked by quantitative modules (not in business model module)
  • Score will be based on long-term viability of the company’s business model in the low carbon economy
  • Is the company developing levers, and actioning them, to transition to LCE?
  • Is there a need to change the fundamental business model? e.g. ticket agencies can just do train not air travel, engineering services no longer provided to fossil fuel companies.
  • How linked to emissive activities is the business model?
  • New business models vs. transitioning existing business model
  • We shouldn’t penalise companies who can’t shift a business model because they are already low carbon

Note: Assessing a multi-activity Company

Depending on the amount of activities covered by a single company and their heterogeneity, it might make more sense to assess different divisions as separate ACT assessments. Ideally a common company strategy should be the common denominator which indicates the ACT assessment should be done on the company in a unified way. We suggest that the ACT assessment be carried out following the company’s low-carbon strategy, if a company has different low-carbon strategies for each of their business segments, then multiple ACT assessments can be carried out.

 

5.3.9.1: GE 9.1 Identification of the level of Decarbonisation Required (Weighting: 3.3-5%)

Description & Requirements GE 9.1 Identification of the level of Decarbonisation Required
Short Description of Indicator The company has identified the level of decarbonisation required for its activity.
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • % of company activities that need to be decarbonize
How the Assessment will be done

In order to align with a low-carbon future, it is expected that companies identify the level of decarbonisation required for their activity and show understanding on the efforts that need to be implemented to survive in a low carbon economy.

The analyst evaluates the description and evidence of the company’s activities that remain to be decarbonised in the coming years.

The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

The maturity matrix is provided below:

 

Rationale

GE 9.1 Identification of the level of Decarbonisation Required

Rationale of the Indicator

This indicator aims to promote companies that have already started to decarbonise their activity over the years. ACT is willing to capture the dynamic of the company in its transition towards a low-carbon economy and this indicator shows both efforts that have been made by the company and progress that still needs to be achieved.

 

 

5.3.9.2: GE 9.2 Integration of the low-carbon Economy in current and future Business Models (Weighting: 3.3-5%)

Description & Requirements GE 9.2 Integration of the low-carbon Economy in current and future Business Models
Short Description of Indicator The company is actively developing business models for a low-carbon future by demonstrating its application of low-carbon business model pathways.
How the Assessment will be done

Best practice elements to be identified in the test/analysis include:

  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale.

Maximum points are awarded if all of these elements are demonstrated.

 

Rationale

GE 9.2 Integration of the low-carbon economy in current and future business models

Rationale of the Indicator

In addition to developing sustainable practices, a company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of low-carbon transition while continuing to generate value.

This indicator aims to identify both relevant current business activities, and those still at a burgeoning stage. It is recognized that transition to a low carbon economy, with associated change in business models, will take place over a number of years. The assessment will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

 

 

GE 9.3 Share of low carbon Client (Weighting: 3.3-5%)

Description & Requirements GE 9.3 Share of low carbon Client
Short Description of Indicator A measure of the company contribution to decarbonize the value chain through the share of its low carbon clients
Prerequisite The company operates upstream of an emissive activity where there is an existing trajectory, producing a part of the final product (e.g. transport equipment manufacturer) (cf. ‘0. General Information’ sheet)
Data Requirements

The questions comprising the information request that are relevant to this indicator are:

  • The company’s share of product use by final low carbon products / activity.
How the Assessment will be done

The analyst will evaluate the share of the company’s products or services used by final low carbon products / services.

Low carbon products /services are defined according to the EU taxonomy. Please refer to the section “Appendix” in order to have more information

The company description and evidence will be compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

Low-carbon use mix:

 

Rationale

GE 9.3 Share of low carbon Clients

Rationale of the Indicator

ACT Generic also aims to engage all the companies operating in the value chain of sectors specifically covered by ACT frameworks.

Therefore, this indicator is relevant for companies that operate upstream in a value chain of a product that can be considered “low carbon” referring to the EU Green Taxonomy.

 

 

6. Assessment

 

6.1 Sector Benchmark

 

6.1.1. General Benchmark Approach

The fundamental target to achieve for all organizations is to contribute to not exceeding a threshold of 2⁰ global warming compared to pre-industrial temperatures. This target has long been widely accepted as a credible threshold for achieving a reasonable likelihood of avoiding climate instability, while a 1.5⁰C rise has been agreed upon as an aspirational target.

A sector benchmark for the generic approach of ACT is a complex task, as the methodology covers heterogeneous sectors and companies that produce GHG emissions in very different ways.

In ACT sectoral methodologies, the benchmarks used rely on a unique intensity metric based on a physical unit. For instance, in the cement sector, tonnes of CO2 per tonne of cement produced in the activity indicator is used. This approach is not possible for ACT Generic. There are some reasons for this:

  • An activity indicator may be relevant for a company but not for another. Indeed, the ACT Generic methodology covers companies operating very different activities: from mining companies to electrical equipment manufacturers, through pharmaceutical companies.
  • On a company-scale, no single activity indicator can capture the majority of emissions. For instance, tonnes of CO2e per unit of floor space can capture emissions performance and trend of the buildings owned by a company, but does not provide any information about the emissions intensity for transport activities or industrial processes.

The large differences in business models among the companies to be assessed under the ACT generic methodology, the diversity of the products or services they offer and the fact that their most material sources of emissions are different from one another pose significant challenges for developing standardised benchmarks for the methodology. Therefore, the benchmark approach for the generic methodology implements a combination of strategies to address those challenges, including:

  • use of a range of different benchmarks;
  • flexibility in applying them to ensure that they are relevant to the company being assessed:
    • where relevant, the methodology uses benchmarks in emissions intensity that were built during the development of previous ACT sectoral methodologies;
      • For the assessment of direct emissions, the methodology mainly relies on benchmarks developed in ACT Real Estate and ACT Transport;
      • For the assessment of indirect emissions, the methodology identifies the links between the value chain where the company operates and sectors covered by a sectoral approach of ACT. If a company is upstream or downstream to a sector covered by a specific ACT methodology, the generic methodology will assess this company’s performance thanks to the relevant benchmarks developed in other ACT methodologies.
    • where there is no existing benchmark, the benchmark used is an absolute contraction approach, as developed by SBTi (see figure below)

 

Figure: Scenarios in 1.5°C. The minimum annual linear reduction rates aligned with 1.5˚C is 4.2% (solid black line). (Source: SBTi)

 

 

  • developing benchmarks in terms of potential actions and activities in addition to GHG emissions measurement.

To deal with the heterogeneity of sectors and activities covered in the Generic approach of the ACT methodology, the company’s GHG emissions to be benchmarked have been split in three categories:

a. Direct emissions caused by the company activities (Scope 1 + 2)

b.  Indirect emissions caused by upstream activities (Scope 3)

c.  Indirect emissions caused by downstream activities (Scope 3)

Those three dimensions may represent a small or a large part of the emissions of an assessed company, depending on its activities. The wide range of specific cases justify to tailor the benchmarks used to the company being assessed.

 

6.1.2. Benchmarking Company Direct Emissions Targets and Performance

In the generic approach of ACT, benchmarks have been taken from different sources. Where it was relevant, the methodology uses benchmarks that were built during the development of previous sectoral methodologies (ACT Real Estate, ACT Auto, ACT Transport). Otherwise, the generic methodology relies on SDA methodologies (service buildings, power generation). When no sectoral benchmark is available or usable, the benchmark used is an absolute contraction approach, developed by SBTi.

 

Mapping of benchmarks used of sources of direct emissions

 

 

Buildings

The sectoral benchmarks for building emissions are, where possible, taken from the ACT Real Estate methodology, that mainly relies on IEA ETP 2DS scenario (Option A). Otherwise, they are taken from the SDA methodology “Services Buildings” applied to the IEA ETP 2DS scenario. (Option B) The figure below synthesizes the distinction between the two options.

 

Figure: Synthesis of the buildings’ GHG emissions assessment in ACT Generic

 

The option A enables a more accurate assessment of the emissions of buildings owned by a company. However, it requires a high level of details in the data provided by the company (almost as much details as in the ACT Real Estate methodology). Therefore, this option will be used only for companies meeting specific requirements. For other companies, the option B, which requires less detailed data, would be more appropriate.

Option A
  • Geographical Coverage

The geographical coverage of buildings is detailed in the ACT Real Estate methodology.

  • Reference pathway

For owned or rented buildings falling into the scope of ACT Real Estate methodology, a reference pathway defines the carbon intensity (kgCO2/m²) pathway from a given geographical area and/or country, as well as by building type. The reference pathway considers all the energy consumption from all the relevant end-uses (space heating, space cooling, lightning, water heating, appliances and miscellaneous and cooking).

The reference pathway classification is defined considering the three input data parameters:

  • Building type: Office, Hotel, Retail, Residential;
  • Geographical area: group of countries or relevant country in terms of CO2 emissions;
  • Country level: country pathway (e.g. for EU-28) or State pathway for relevant countries (e.g. for USA, but it is not developed in the first version of ACT Real Estate).

The generic reference pathway designation is composed as follows:

Pathway_name =” Building type””_”Geographical zone”_”Country”

Example:

Name of the pathway for offices owned by a company in Germany = Office_Europe_Germany

  • Available Reference Pathways

To date, 154 reference pathways are available:

  • Geographical areas: Europe, USA, China, India, Brazil, Russia, ASEAN and South Africa
  • Countries: E.U. 28 countries (as they are in 2018)
  • Building types: Office, Retail and Hotel (Reference pathways for the different building types are only available at country level)

Since this part of the generic approach of ACT is based on ACT methodology for Real Estate, it has to include the points of attention raised during the development of the former. As the ACT methodology for Real-Estate is meant to be used in any part of the world, the assessment report shall mention when data is unavailable for an area and which “proxy” has been used, with justification, according to the following table:

Description of the area with missing data compared to another documented area

Proxy

Country level data not available

1. If this zone is relatively similar (in terms of GDP/capita, type of energy and industry infrastructure, main features of the building stock…) to another one already documented, consider the same data,

2. If this zone is relatively similar to another one, but differs by climatic conditions, use the same data where applying specific climatic coefficients to in-use energy consumption,

3. If this zone is included in a larger zone that is already characterized, then consider the data of the larger zone,

Option B
  • Geographical Coverage

The reference pathway is given at global level only.

  • Reference pathway

For other type of buildings, a default reference carbon intensity (kgCO2/m²) pathway is used. The figure below shows this default benchmark. In this chart, the ‘activity index’ represents the global growth of area in floor space in commercial buildings (excluding residential buildings). The ‘Scope 1 emissions index’ represents how the absolute emissions of the entire sector are poised to develop according to this benchmark. For retailers, this means that between the reporting year and 2050, total absolute emissions from their buildings need to be reduced by about 23%. ‘Scope 1 carbon intensity’ is calculated by dividing absolute emissions by the activity index. This means that the intensity in emissions (expressed in gCO2 per square meter) needs to be reduced by ~ 55% according to the benchmark.

 

 

  • Available Reference Pathways

The option B relies only on SDA Service Buildings pathway, 

 

Option A and Option B

 

  • Company Benchmark

The company benchmark is a custom benchmark based in the 2°C scenario from the IEA, and its assets. A company benchmark is built following three steps.

  • The company must calculate the different reference pathways for each building type and geographical area within its portfolio (option A)
  • The company must calculate the floor area of its buildings falling into the option B. A default pathway is associated with it.
  • Then, the company benchmark is built as a weighted (buildings’ floor area) sum of one or a combination of several reference pathways, considering current values.

Example:

A company has an office building in Germany (Option A) and an “Education” building (Option B) with respectively 1000 m² and 2000 m² of floor area.

To determine the company benchmark one reference pathways is needed: Office_Europe_Germany. The other pathway is given by default (SDA Service buildings)

 

Transport

The sectoral benchmarks for transport emissions are taken from the ACT Auto, for Light Duty passenger vehicles and ACT Transport methodologies, for other vehicles. Both methodologies mainly rely on IEA ETP 2DS scenarios. The figure below synthesizes this approach:

 

Figure: Synthesis of the transports’ GHG emissions assessment in ACT Generic

 

 

Light Duty passenger vehicles
  • Geographical Coverage

As the ACT generic methodology relies on ACT Auto regarding light duty passenger vehicles, the sectoral decarbonisation pathway is divided into several pathways corresponding to the following regions/countries:

  • USA
  • EU-27
  • China
  • Japan
  • Brazil
  • Canada
  • South Korea
  • Mexico
  • Australia
  • India
  • Russia
  • Other

 

 

  • Available Reference Pathways

The assessment of “other vehicles” relies on pathways developed in ACT Auto methodology. More details about those pathways could be found in this specific methodology.

Other vehicles
  • Geographical Coverage

As the ACT generic methodology relies on ACT Transport regarding other vehicles, the sectoral decarbonisation pathway is divided into several pathways corresponding to the following regions/countries:

  • OECD countries
  • Non-OECD countries
  • European Union
  • United States
  • Mexico
  • Brazil
  • Russia
  • China
  • India
  • ASEAN
  • South Africa

If no breakdown in geographical repartition of the transportation activities is available, there is a benchmark at world level.

  • Available Reference Pathways

The assessment of “other vehicles” relies on pathways developed in ACT Transport methodology. More details about those pathways could be found in this specific methodology.

All vehicles
  • Company Benchmark

The company benchmark is built following the following steps.

  • The company must calculate the different reference pathways for each different geographical area for vehicles falling into option A (light duty passenger vehicles)
  • The company must calculate the different reference pathways for each different geographical area for vehicles falling into option B (other vehicles)
  • Then, the company benchmark is built as a weighted sum of one or a combination of several reference pathways, considering current values. The different pathways are computed according to the associated company’s GHG emissions.

 

Industry energy consumption

The benchmark for industry energy consumption emissions is based on the absolute-contraction approach of the Science-Based Targets initiative. This method requires all companies to reduce their emissions by the same percentage of absolute emissions reductions as required for a given scenario. This benchmark relies on the IPCC Special Report on Global Warming of 1.5°C (SR15) for a 1.5C trajectory. This equates to at least 4.2% absolute reduction per year.

 

Industry direct process

The benchmarks for industry direct process emissions are based on the best available scenarios. Where possible, the industry direct processed are benchmarked specific scenarios. As of this stage of methodological development, only one specific scenario has been identified: cold production (refrigerant leakage).

  • Cold production (refrigerant leakage)

The HFC (hydrofluorocarbons) and related gases globally leak from refrigerators and other cold equipment, and have high global warming potentials (GWP) of up to 2000. This is a problem for a few specific sectors. Therefore, the generic approach of ACT would like to incentivise companies, where relevant, to take actions on this matter by instating a separate, ambitious benchmark that reduces refrigerant leakage drastically in the short term.

No identified pathway is available from the IEA ETP 2DS via the SDA approach. The default sectoral benchmark for refrigerant leakage is therefore taken from the Reduced GWP Refrigerant Scenario for 15 European Union countries (RGR EU15 scenario) until 2030 and linearly extended to zero GHG emissions from leakage in 2050.

  • Other industry direct process

The benchmark for other industry direct process emissions is based on the absolute-contraction approach of the Science-Based Targets initiative. This method requires all companies to reduce their emissions by the same percentage of absolute emissions reductions as required for a given scenario. This benchmark relies on the IPCC Special Report on Global Warming of 1.5°C (SR15) for a 1.5°C trajectory. This equates to at least 4.2% absolute reduction per year.

 

Renewable energy

The benchmark for renewable energy is based on SDA Power Generation. The targets set by companies regarding their share of renewable energy will be assessed according to it.

 

6.1.3. Benchmarking company upstream indirect emissions targets and performance

Given the heterogeneity of the sectors covered by the ACT Generic methodology, two distinct types of benchmarks are necessary to assess the upstream Scope 3 emissions targets (GE 1.2) and performance (GE 4.2): ETP Scenario or SBT Absolute contraction.

The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process:

  • If a specific pathway based on carbon intensity from an ETP scenario is available for products and materials purchased, and if the emissions related to these purchases represent a high source of emissions for the company upstream scope, a target in carbon intensity will be asked and analysed (E.g. cement, steel...). Concretely, if a company is upstream on the value chain of a sector covered by a specific ACT methodology and sells products that have already been benchmarked, those products’ performance will be assessed according to this benchmark.

E.g.: A company buys cement to build road and other infrastructures. The company will be assessed on the carbon intensity of this cement. If the company asks its supplier for the carbon intensity of the cement, this data will be compared to the ACT Cement benchmark. Otherwise, average carbon intensity of the sector will be used.

  • Otherwise, a default pathway in absolute contraction is used as the benchmark.

 

6.1.4. Benchmarking company downstream indirect emissions targets and performance

 

Given the heterogeneity of the sectors covered by the ACT Generic methodology, two distinct types of benchmarks are necessary to assess the downstream Scope 3 emissions targets (GE 1.3) and performance (GE 4.2): ETP Scenario or SBT Absolute contraction.

The choice of the benchmark depends on the scenario availability. The selection will be made according to the following process:

  • A benchmark in carbon intensity is applied If the company meets the following requirements:
    • The use of sold products represent a high source of downstream emissions;
    • The company produced ready-to-use products and is able to measure their carbon intensity;
    • A specific pathway based on carbon intensity from an ETP scenario is available;

E.g.: A plane manufacturer knows the carbon intensity of the products (planes) it sells. The company will be evaluated on the carbon intensity of its planes, thanks to the benchmark developed in ACT Transport.

  • Otherwise, a default pathway in absolute contraction is used as the benchmark.

 

6.2. Other quantitative benchmarks used for indicators

 

Benchmark for the CAPEX Low carbon & mitigation technologies

Still to be defined

Benchmark for the R&D in Low carbon & mitigation technologies

Still to be defined

Benchmark for the Company patenting activity in low carbon & mitigation technologies

Still to be defined

 

6.3. Weightings

As explained in the description of modules and indicators, the weight allocated to some indicators and modules varies depending on the company’s breakdown of emissions. The weightings associated with the modules/indicators are set to evaluate the company on its most materials sources of emissions.

When starting the evaluation in the Excel tool, the company will be asked several questions that will determine the indicators that will appear in its ACT evaluation. It will also determine the weighting of each indicator/module. The assessment will therefore be adapted to each company depending on its activities and on its main sources of emissions. The flexibility of this method enables the analyst to keep the initial objective of ACT initiative by assessing companies with sectoral specificities.

The general information asked to the company in order to build its scoring framework will be detailed in the appendix section.

TABLE: GHG emissions company’s profile in the general information section

In order to avoid requesting data regarding sources of emissions that are not material for a company, it has been decided to put thresholds that determine whether modules 2 and 4 are activated or not. Those thresholds are set in both absolute and relative values. They are displayed in the table below:

 

The module 2 is activated if direct emissions meet one of the thresholds set (absolute or relative).

The module 4 is activated if indirect emissions meet one of the thresholds set (absolute or relative).

Those thresholds have an incidence on the weighting scheme. Indeed, on the one hand, if module 2 is not activated because direct emissions of the company are not material enough, module 4 is weighted 35%. On the other hand, if module 4 is not activated, module 2 is weighted 35%. If both modules are activated, they are weighted on a pro rata basis, according to the proportion of direct emissions VS indirect emissions.

TABLE: Performance Indicator Weightings

The quantitatively scored modules (Targets, Material Investments, Intangible investment, Sold product performance) carry 55 to 60% of the final weight, and the qualitatively scored modules (Management, Client engagement, Supplier Engagement, Policy engagement, Business model) carry 40 to 45%. The indicators within the modules also carry their own weighting.

Rationale for Weightings

The selection of weights for both the modules and the individual indicators was guided by a set of principles (see the ACT framework document for more information). These principles helped define the weighting scheme of the modules and indicators.

Principle Explanation
Value of information The value of the information that an indicator gives about a company’s outlook for the low-carbon transition is taken into account in the selection of the weights, since indicators’ weights reflect the materiality of the source of GHG emissions they assess for the company evaluated.
Future orientation Indicators that measure the future, or a proxy for the future, are more relevant for the ACT assessment than past & present indicators, which serve only to inform the likelihood and credibility of the transition. They are therefore given a higher weight.

The weightings have been designed for each type of company covered by the ACT Generic methodology in order to reflect the strategic stakes which are different from a company to another.

Targets 15%

The targets module has a relatively large weight of 15%. Most of it (12%) is shared between three indicators: alignment of Scope 1+2 emissions, alignment of Scope 3 upstream emissions and alignment of Scope 3 downstream emissions. Those 12% are allocated on a pro-rata basis according to the emissions breakdown between Scope 1+2 emissions, Scope 3 upstream emissions and Scope 3 downstream emissions.

A weight of is attributed to the previous achievement indicator, which measures the company’s past credentials on target setting and achievement. It is not very important by the principles outlined above, but nonetheless can provide contextual information on the company’s experience to meet ambitious targets Finally, the time horizon of targets has a weight of 2%. It is a proxy of how forward-looking the company is, which is very long-term oriented. 

 

Material Investment 0-35%

The material investment module has a variable weight that ranges from 0% to 35%. The weight is allocated on a pro rata basis to modules 2 (material investment) and 4 (sold product performance), according to the respective share of direct and indirect GHG emissions.

The three indicators within this module, trend in emissions intensity, share of low carbon assets and locked-in emissions will be weighted as follows:

Given Y% the weight of the module:

 

Intangible Investment 0% or 5%

The R&D investments in climate change mitigation technologies indicator is focused on the company’s intangible investments or financial costs into climate change mitigation technologies. For companies operating in value chains with high stakes regarding low carbon transition, R&D investments towards low-carbon technologies are crucial. For those companies, the module is given a weight of 5%.

For companies within the scope of the ACT Generic methodology that are not operating in a carbon intensive value chain, this indicator is not relevant and is therefore weighted 0%. In that case, the remaining 5% are allocated to module 9 (Business Model).

The general information given by the company will determine whether this module is relevant for it.

Nota Bene: For companies operating in sectors that are not very technology-dependent, module 3 is weighted 0%. The 5% normally allocated to it are allocated to module 9. The companies that cannot rely on R&D to decarbonize their activities are expected to develop new business models compatible to a low carbon economy.

 

Sold product performance 0-35%

The material investment module has a variable weight that ranges from 0% to 35%. The weight is allocated on a pro rata basis to modules 2 (material investment) and 4 (sold product performance), according to the respective share of direct and indirect GHG emissions.

The indicators within this module will have a variable weight too, since the sources of GHG emissions may be significantly different from a company to another in this generic methodology of ACT. Therefore, the weight of each indicator will be calculated on a pro rata basis according to the detailed breakdown of emissions between upstream and downstream emissions, as well as to the nature of the company’s activities. It will enable the assessment of the most material sources of emissions for each company.

 

Management 10%

Management is a multi-faceted module that makes up 10% of the score, because it incorporates many different smaller indicators that together paint a picture of the company’s management and strategic approach to the low-carbon transition. The majority of this weight is placed on the oversight of climate change issues and the climate change oversight capability, which are weighted 3% each. These two indicators measure the ability of the company to integrate sustainability to its strategy and to embrace the main challenges related to low-carbon transition. Besides, according to the principle of future orientation, the transition plan provides more information on how this company will specifically deal with the transition, and has a weight of 2%.

The remaining indicators (climate change management incentives and climate change scenario testing) have a low weight of 1%, as they are contextual indicators whose outcome can either strengthen or undermine the company’s ability to carry out the transition plan and meet ambitious science-based targets.

 

Supplier engagement 0% to 15%

In order to decarbonize the whole economy, it is essential that all stakeholders get involved.

Depending on their Scope 3 emissions breakdown (upstream emissions VS downstream emissions), companies will have to focus on either their supplier’s engagement or their client’s engagement towards decarbonization. The modules “Supplier engagement” and “Client engagement” are therefore weighted on a pro-rata basis, according to the Scope 3 emissions breakdown between upstream and downstream emissions.

The two indicators within the “Supplier engagement” module (Strategy to influence suppliers to reduce their GHG emissions and Activities to influence suppliers to reduce their GHG emissions) are equally weighted.

 

Client engagement 0% to 15%

In order to decarbonize the whole economy, it is essential that all stakeholders get involved.

Depending on their Scope 3 emissions breakdown (upstream emissions VS downstream emissions), companies will have to focus on either their supplier’s engagement or their client’s engagement towards decarbonization. The modules “Supplier engagement” and “Client engagement” are therefore weighted on a pro-rata basis, according to the Scope 3 emissions breakdown between upstream and downstream emissions.

The two indicators within the “Supplier engagement” module (Strategy to influence suppliers to reduce their GHG emissions and Activities to influence suppliers to reduce their GHG emissions) are equally weighted.

 

Policy engagement 5%

In line with the rationale for the management indicators of low weight, the policy engagement indicators are also contextual aspects which tell a narrative about the company’s stance on climate change and how the company expresses it in their engagement with policy makers and trade associations. The total weight for this module is therefore medium at 5%. The company policy on engagement with trade associations, and the company’s position on relevant climate policy make up the bulk of this, with 2% each. Finally, 1% is allocated to positions of the company’s trade associations that do not have climate-negative activities as this is a very specific question and concerns a minority of companies.

 

Business model 10-15%

The module captures many elements and aspects that cannot otherwise be captured in any of the other modules. It includes those aspects that are relevant to the transition but are not directly a part of the primary activities. It is future oriented by asking the companies on its narrative on certain future directions it can/has to take is standard to enable the transition.

Nota Bene: For companies operating in sectors that are not very technology-dependent, module 3 is weighted 0%. The 5% normally allocated to it are allocated to module 9. The companies that cannot rely on R&D to decarbonize their activities are expected to develop new business models compatible to a low carbon economy.

 

6.4. Data request

Table 6 introduces the list of information which will be requested to companies through a questionnaire, as well as the corresponding indicators.

Data requested to the company
Environmental policy and details regarding governance
Management incentives
Scenario testing
List of environmental/CSR contract clauses in purchasing & suppliers’ selection process
List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
Client policy
List of initiatives implemented to influence client behaviour to reduce their GHG emissions
Company policy on engagement with trade associations
Position of the company on significant climate policies (public statements, etc.)
List and turnover or invested capital (or other financial KPI) of activities in new businesses related to low carbon business models
Current position and action plan of the company towards the identified low-carbon business models
List and turnover or invested capital (or other financial KPI) of activities in new businesses related to low carbon business models
Current position and action plan of the company towards the identified low-carbon business models

 

 

7. Rating

 

The ACT rating shall comprise:

  • A performance score
  • A narrative score
  • A trend score

These pieces of information shall be represented within the ACT rating as follows:

a.  Performance score as a number from 1 (lowest) to 20 (highest)

b.  Narrative score as a letter from E (lowest) to A (highest)

c.  Trend score as either “+” for improving, “-” for worsening, or “=” for stable.

In some situations, trend scoring may reveal itself to be unfeasible depending on data availability. In this case, it should be replaced with a “?”.

The highest rating is thus represented as “20A=”, the lowest as “1E=” and the midpoint as “10C=”.

Table 6: Lowest, highest and midpoint for each ACT score type

Each responding company in the ACT pilot project received not only an ACT rating but a commentary on their performance across the three aspects of the rating. This gave a nuanced picture of the company’s strengths and weaknesses. Detailed information on the ACT rating is available in the ACT Framework document

 

7.1. Performance scoring

Performance scoring shall be performed in compliance with the ACT Framework.

 

7.2. Narrative scoring

Narrative scoring shall be performed in compliance with the ACT Framework.

 

7.3. Trend scoring

Scoring shall be performed in compliance with the ACT Framework.

To apply the trend scoring methodology presented in the ACT Framework, the analyst should identify the trends from the existing data infrastructure based on the data points and/or indicators that can indicate the future direction of change within the company.

 

 

8. Aligned state

The table below presents the response of a low-carbon aligned company of the sector to the 5 questions of ACT:

  • What is the company planning to do? [Commitment]
  • How is the company planning to get there? [Transition Plan]
  • What is the company doing at present? [Present]
  • What has the company done in the recent past? [Legacy]
  • How do all of these plans and actions fit together? [Consistency]

 

Figure : Aligned state for Companies in the Generic Sector

 

 

9. Glossary

2 degrees (2°C) A political agreement was reached at COP21 on limiting global warming to 2°C above the pre-industrial level (COP21: Why 2°C?). A 2°C scenario (or 2°C pathway) is a scenario (or pathway) compatible with limiting global warming to 2°C above the pre-industrial level.
ACT The Assessing low-Carbon Transition (ACT) initiative was jointly developed by ADEME and CDP. ACT assesses how ready an organization is to transition to a low-carbon world using a future-oriented, sector-specific methodology (ACT website).
Action gap In relation to emissions performance and reduction, the action gap is the difference between what a given company has done in the past plus what it is doing now, and what has to be done. For example, companies with large action gaps have done relatively little in the past, and their current actions point to continuation of past practices.
Activity data Activity data are defined as data on the magnitude of human activity resulting in emissions or removals taking place during a given period of time (UNFCCC definitions).
ADEME Agence de l'Environnement et de la Maîtrise de l'Energie; The French Environment and Energy Management Agency (ADEME webpage).
Advanced vehicle

Advanced vehicles include:

Plug-in hybrid vehicles (PHEV)

Battery electric vehicles (BEV)

Fuel cell electric vehicles (FCEV)

Conventional hybrids

Other high-efficiency ICE vehicles

Conventional hybrids and other high-efficiency ICE vehicles are advanced vehicles but they are not low-carbon vehicles.

Alignment The ACT project seeks to gather information that will be consolidated into a rating that is intended to provide a general metric of the 2-degree alignment of a given company. The wider goal is to provide companies specific feedback on their general alignment with 2-degrees in the short and long term.
Analyst Person in charge of the ACT assessment.
Assess Under the ACT project, to evaluate and determine the low-carbon alignment of a given company. The ACT assessment and rating will be based on consideration of a range of indicators. Indicators may be reported directly from companies. Indicators may also be calculated, modelled or otherwise derived from different data sources supplied by the company. The ACT project will measure 3 gaps (Commitment, Horizon and Action gaps – defined in this glossary) in the GHG emissions performance of companies. This model closely follows the assessment framework presented above. It starts with the future, with the goals companies want to achieve, followed by their plans, current actions and past actions.
Asset An item of property owned by a company, regarded as having value and available to meet debts, commitments, or legacies. Tangible assets include 1) fixed assets, such as machinery and buildings, and 2) current assets, such as inventory. Intangible assets are nonphysical such as patents, trademarks, copyrights, goodwill and brand value.
AU Abbreviation of the ‘Automotive’ sector
Barrier A circumstance or obstacle preventing progress (e.g. lacking information on supplier emissions and hotspots can be a barrier to companies managing and reducing their upstream Scope 3 emissions).
Base year  According to the GHG Protocol and ISO14064-1, a base year is “a historic datum (a specific year or an average over multiple years) against which a company’s emissions are tracked over time”. Setting a base year is an essential GHG accounting step that a company must take to be able to observe trends in its emissions information (GHG Protocol Corporate Standard).
bc Abbreviation of the ‘Building Construction’ sector
Benchmark A standard, pathway or point of reference against which things may be compared. In the case of pathways for sector methodologies, a sector benchmark is a low-carbon pathway for the sector average value of the emissions intensity indicator(s) driving the sector performance. A company’s benchmark is a pathway for the company value of the same indicator(s) that starts at the company performance for the reporting year and converges towards the sector benchmark in 2050, based on a principle of convergence or contraction of emissions intensity.
Board Also, the “Board of Directors” or “Executive Board”; the group of persons appointed with joint responsibility for directing and overseeing the affairs of a company.
Business-as-usual No proactive action taken for change. In the context of the ACT methodology, the business-as-usual pathway is constant from the initial year onwards. In general, the initial year – which is the first year of the pathway/series – is the reporting year (targets indicators) or the reporting year minus 5 years (performance indicators).
Business model A plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. Under ACT, evidence of the business model shall be taken from a range of specific financial metrics relevant to the sector and a conclusion made on its alignment with low-carbon transition and consistency with the other performance indicators reported.
Capacity (power) In relation to power generation, nameplate capacity is the power output number, usually expressed in megawatts (MW), and registered with authorities for classifying the power output of a power station.
Capital expenditure Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
Carbon Capture and Storage (CCS) The process of trapping carbon dioxide produced by burning fossil fuels or other chemical or biological process and storing it in such a way that it is unable to affect the atmosphere.
CDP Formerly the "Carbon Disclosure Project", CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces, including 827 institutional investors with assets of over US$100 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them. More than 5,500 companies worldwide disclosed environmental information through CDP in 2015. CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions (CDP website).
Climate change A change in climate, attributed directly or indirectly to human activity, that alters the composition of the global atmosphere and that is, in addition to natural climate variability, observed over comparable time periods (UNFCCC).
Company A commercial business.
Company pathway A company’s past emissions intensity performance pathway up until the present.
Company target pathway The emissions intensity performance pathway that the company has committed to follow from the initial year on until a future year, for which it has set a performance target.
Commitment gap In relation to emissions performance, the difference between what a company needs to do and what it says it will do.
Confidential information Any non-public information pertaining to a company's business.
Conservativeness A principle of the ACT project; whenever the use of assumptions is required, the assumption shall err on the side of achieving 2-degrees maximum.
Consistency A principle of the ACT project; whenever time series data is used, it should be comparable over time. In addition to internal consistency of the indicators reported by the company, data reported against indicators shall be consistent with other information about the company and its business model and strategy found elsewhere. The analyst shall consider specific, pre-determined pairs of data points and check that these give a consistent measure of performance when measured together.
COP21 The 2015 United Nations Climate Change Conference, held in Paris, France from 30 November to 12 December 2015 (COP21 webpage).
Conventional (technology)  In relation to automobiles and emissions, conventional internal combustion engines (ICE) are those that generate motive power by burning fossil fuels, as opposed to advanced (low-carbon) vehicle engines such as battery electric vehicles or hydrogen fuel cells.
Data Facts and statistics collected together for reference and analysis (e.g. the data points requested from companies for assessment under the ACT project indicators).
Decarbonization A complete or near-complete reduction of greenhouse gas emissions over time (e.g. decarbonization in the electric utilities sector by an increased share of low-carbon power generation sources, as well as emissions mitigating technologies like Carbon Capture and Storage (CCS)).
Decarbonization pathway Benchmark pathway (See ‘Benchmark’)
Emissions The GHG Protocol defines direct GHG emissions as emissions from sources that are owned or controlled by the reporting entity, and indirect GHG emissions as emissions that are a consequence of the activities of the reporting entity, but occur at sources owned or controlled by another entity (GHG Protocol).
Energy Power derived from the utilization of physical or chemical resources, especially to provide light and heat or to work machines.
EU Abbreviation of the ‘Electric Utilities’ sector.
Fleet A group of vehicles (e.g. all the automobiles manufactured by an automotive manufacturing company and currently in use by private individuals).
Fossil fuel A natural fuel such as coal, oil or gas, formed in the geological past from the remains of living organisms.
Future A period of time following the current moment; time regarded as still to come.
Power generation The process of generating electric power from other sources of primary energy.
Primary energy Primary energy is an energy form found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels, and other forms of energy received as input to a system. Primary energy can be non-renewable or renewable.
Greenhouse gas (GHG) Greenhouse gas (e.g. carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and three groups of fluorinated gases (sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs)) which are the major anthropogenic GHGs and are regulated under the Kyoto Protocol. Nitrogen trifluoride (NF3) is now considered a potent contributor to climate change and is therefore mandated to be included in national inventories under the United Nations Framework Convention on Climate Change (UNFCCC).
Guidance Documentation defining standards or expectations that are part of a rule or requirement (e.g. CDP reporting guidance for companies).
Horizon Gap In relation to emissions performance, the difference between the average lifetime of a company’s production assets (particularly carbon intensive) and the time-horizon of its commitments. Companies with large asset-lives and small-time horizons do not look far enough into the future to properly consider a transition plan.
Incentive A thing, for example money, that motivates or encourages someone to do something (e.g. a monetary incentive for company board members to set emissions reduction targets).
Indicator

An indicator is a quantitative or qualitative piece of information that, in the context of the ACT project, can provide insight on a company’s current and future ability to reduce its carbon intensity. In the ACT project, 3 fundamental types of indicators can be considered:

Key performance indicators (KPIs);

Key narrative indicators (KNIs); and

Key asset indicators (KAIs).

Intensity (emissions) The average emissions rate of a given pollutant from a given source relative to the intensity of a specific activity; for example, grams of carbon dioxide released per MWh of energy produced by a power plant.
Intervention Methods available to companies to influence and manage emissions in their value chain, both upstream and downstream, which are out of their direct control (e.g. a retail company may use consumer education as an intervention to influence consumer product choices in a way that reduces emissions from the use of sold products).
Lifetime The duration of a thing's existence or usefulness (e.g. a physical asset such as a power plant).
Long-term Occurring over or relating to a long period of time; under ACT this is taken to mean until the year 2050. The ACT project seeks to enable the evaluation of the long-term performance of a given company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.
Low-carbon scenario (or pathway)  A low-carbon scenario (or pathway) is a 2°C scenario, a well-below 2°C scenario or a scenario with higher decarbonization ambition.
Low-carbon transition  The low-carbon transition is the transition of the economy according to a low-carbon scenario.
Low-carbon solution  A low-carbon solution (e.g. energy, technology, process, product, service, etc.) is a solution whose development will contribute to the low-carbon transition.
low-carbon vehicle

Vehicles described as low-carbon (LCV) are defined as vehicles that have a drivetrain that have the potential to operate on non-fossil energy sources for at least > 50% of their common use phase. This includes:

Plug-in hybrid vehicles (PHEV)

Battery electric vehicles (BEV)

Fuel cell electric vehicles (FCEV)

Conventional hybrids are excluded from the definition of low-carbon vehicles. Because conventional hybrids do not eschew fossil fuels (aside from the minor addition of biofuels into the fuel mix), they are not qualified for the definition of an LCV.

Manufacture Making objects on a large-scale using machinery.
Maturity matrix A maturity matrix is essentially a “checklist”, the purpose of which is to evaluate how well advanced a particular process, program or technology is according to specific definitions.
Maturity progression An analysis tool used in the ACT project that allows both the maturity and development over time to be considered with regards to how effective or advanced a particular intervention is.
Mitigation (emissions) The action of reducing the severity of something (e.g. climate change mitigation through absolute GHG emissions reductions)
Model A program designed to simulate what might or what did happen in a situation (e.g. climate models are systems of differential equations based on the basic laws of physics, fluid motion, and chemistry that are applied through a 3-dimensional grid simulation of the planet Earth).
Pathway (emissions)  A way of achieving a specified result; a course of action (e.g. an emissions reduction pathway).
Performance Measurement of outcomes and results.
Plan A detailed proposal for doing or achieving something.
Point A mark or unit of scoring awarded for success or performance.
Power Energy that is produced by mechanical, electrical, or other means and used to operate a device (e.g. electrical energy supplied to an area, building, etc.).
Progress ratio An indicator of target progress, calculated by normalizing the target time percentage completeness by the target emissions or renewable energy percentage completeness.
RT Abbreviation of the ‘Retail’ sector
Relevant / Relevance In relation to information, the most relevant information (core business and stakeholders) to assess low-carbon transition.
Renewable energy Energy from a source that is not depleted when used, such as wind or solar power.
Reporting year  Year under consideration.
Research and Development (R&D) A general term for activities in connection with innovation; in industry; for example, this could be considered work directed towards the innovation, introduction, and improvement of products and processes.
Science-Based Target To meet the challenges that climate change presents, the world’s leading climate scientists and governments agree that it is essential to limit the increase in the global average temperature at below 2°C. Companies making this commitment will be working toward this goal by agreeing to set an emissions reduction target that is aligned with climate science and meets the requirements of the Science-Based Targets Initiative.
Scenario The Fifth Assessment Report (AR5) of the Intergovernmental Panel on Climate Change (IPCC) presents the results of an extensive climate modelling effort to make predictions of changes in the global climate based on a range of development/emissions scenarios. Regulation on climate change-related issues may present opportunities for your organization if it is better suited than its competitors to meet those regulations, or more able to help others to do so. Possible scenarios would include a company whose products already meet anticipated standards designed to curb emissions, those whose products will enable its customers to meet mandatory requirements or those companies that provide services assisting others in meeting regulatory requirements.
Scenario analysis A process of analysing possible future events by considering alternative possible outcomes.
Sectoral Decarbonization Approach (SDA) To help businesses set targets compatible with 2-degree climate change scenarios, the Sectoral Decarbonization Approach (SDA) was developed. The SDA takes a sector-level approach and employs scientific insight to determine the least-cost pathways of mitigation, and converges all companies in a sector towards a shared emissions target in 2050.
Short-term Occurring in or relating to a relatively short period of time in the future.
Stress test A test designed to assess how well a system functions when subjected to greater than normal amounts of stress or pressure (e.g. a financial stress test to see if an oil & gas company can withstand a low oil price).
Scope 1 emissions All direct GHG emissions (GHG Protocol Corporate Standard).
Scope 2 emissions Indirect GHG emissions from consumption of purchased electricity, heat or steam (GHG Protocol Corporate Standard).
Scope 3 emissions Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal, etc. (GHG Protocol Corporate Standard).
Sector A classification of companies with similar business activities, e.g. automotive manufacturers, power producers, retailers, etc.
Strategy A plan of action designed to achieve a long-term or overall aim. In business, this is the means by which a company sets out to achieve its desired objectives; long-term business planning.
Supplier A person or entity that is the source for goods or services (e.g. a company that provides engine components to an automotive manufacturing company).
Target

A quantifiable goal (e.g. to reduce GHG emissions).

The following are examples of absolute targets:

metric tonnes CO2e or % reduction from base year

metric tonnes CO2e or % reduction in product use phase relative to base year

metric tonnes CO2e or % reduction in supply chain relative to base year

The following are examples of intensity targets:

metric tonnes CO2e or % reduction per passenger. Kilometre (also per km; per nautical mile) relative to base year

metric tonnes CO2e or % reduction per square foot relative to base

metric tonnes CO2e or % reduction per MWh

Trade association Trade associations (sometimes also referred to as industry associations) are an association of people or companies in a particular business or trade, organized to promote their common interests. Their relevance in this context is that they present an “industry voice” to governments to influence their policy development. The majority of organizations are members of multiple trade associations, many of which take a position on climate change and actively engage with policymakers on the development of policy and legislation on behalf of their members. It is acknowledged that in many cases companies are passive members of trade associations and therefore do not actively take part in their work on climate change (CDP climate change guidance).
Transport To take or carry (people or goods) from one place to another by means of a vehicle, aircraft, or ship.
Trend A general direction in which something (e.g. GHG emissions) is developing or changing.
Technology The application of scientific knowledge for practical purposes, especially in industry (e.g. low-carbon power generation technologies such as wind and solar power, in the electric power generation sector).
Transition The process or a period of changing from one state or condition to another (e.g. from an economic system and society largely dependent on fossil fuel-based energy, to one that depends only on low-carbon energy).
Verifiable / Verifiability To prove the truth of, as by evidence or testimony; confirm; substantiate. Under the ACT project, the data required for the assessment shall be verified or verifiable.
Weighting The allowance or adjustment made in order to take account of special circumstances or compensate for a distorting factor.