When climate goes beyond carbon

Issue 84 l Eka’s Weekly Roundup (6 August 2024)

Aug 06, 2024

This week, we take a look at how the climate community is moving from carbon-based thinking to broader measures of sustainability.

Climate 1.0 mainly focussed on reducing carbon emissions, as the world slowly moves towards Net Zero.

For decades, the primary metric for assessing environmental impact has been greenhouse gas (GHG) emissions, measured in carbon dioxide equivalents (CO2e).

This focus stems from global initiatives like the Kyoto Protocol, which established legally binding emission reduction targets for developed countries. The subsequent Paris Agreement reinforced the ambition to limit global warming to well below 2 degrees Celsius, ideally 1.5 degrees, above pre-industrial levels.

Since the target was set in 2015, there have been frequent updates to show how the world has been tracking against the target. See below from the BBC’s piece in December 2023.

These efforts have made "net zero" a ubiquitous goal, proposing a balance between the amount of greenhouse gases emitted and the amount removed from the atmosphere. Net zero and decarbonisation targets have grown from 300 public companies in 2015 to >900 in 2020.

Next gen climate will go deeper: encompassing land, water, and material use.

While reducing GHG emissions is crucial, it doesn't encompass the full spectrum of climate challenges. The Planetary Boundaries framework, developed by the Stockholm Resilience Centre, highlights nine critical areas where human activity is pushing Earth's systems beyond safe limits. These include not only climate change but also biodiversity loss, land-system change, freshwater use, and the introduction of novel entities (e.g., chemicals and plastics).

This broader framework reveals that focusing solely on GHGs overlooks other significant environmental impacts. For example, intensive agriculture and deforestation, driven by the demand for food and materials, contribute massively to biodiversity loss and water scarcity, even if they aren't major GHG emitters.

Examples of where carbon isn’t the No. 1 climate impact

Understanding the varied impacts of different industries is key to comprehensive environmental stewardship. Consider:

Fashion: This industry is characterized by high water and land usage but relatively low GHG emissions. The production of textiles, particularly cotton, requires vast amounts of water and land, leading to significant environmental degradation and biodiversity loss.
Mobility (Transport): Conversely, the mobility sector exhibits high GHG emissions but comparatively lower water and land usage. The burning of fossil fuels for transportation is a major source of CO2e, yet the industry's impact on water and land is less severe than that of fashion.

This nuanced understanding prompts a more holistic approach to sustainability, acknowledging that different industries affect various environmental dimensions uniquely.

Ivanova et al’s 2016 paper illustrates this in a thoughtful way across carbon, land, material, and water footprint. For example, the authors chart how much climate impacts are a result of domestic versus foreign operations. China has a high domestic carbon footprint, while India has high domestic water footprint.

The chart below shows the relationship between 1) spend, 2) climate impact, and 3) economic sectors. For example, we can see that the mobility has a disproportionate impact on carbon relative to its spend levels (orange chart on the left). Conversely, Food and Fashion have high material and water footprints relative to their spend.

Eka's climate goals: a multi-faceted approach

At Eka, we recognize the necessity of addressing climate issues from multiple angles. Our climate strategy focuses on three core areas:

Carbon (GHGs, CO2e): Reduce greenhouse gas emissions through decarbonised products and services.
Natural Resource Use (Land, Water): Improve sustainability and reduce linear inputs from land and water for product & services.
Materials Use: Promote circular design, production, and consumption to minimize linear material usage for products.

For instance, compare Hylo and Axle, two companies in the Eka portfolio.

Hylo focuses on producing sustainable athletic footwear using bio-based materials, reducing plastic-based resource usage and also reducing carbon emitted per shoe produced. Hylo shoes post around 7-8kg of CO2e per shoe, compared to the industry benchmark of 14 kg per shoe.

Axle, on the other hand, offers residential flexibility solutions. They connect home energy assets with flexibility incentives, which lower consumer costs and lower CO2e. Countries around the world are setting ambitious net zero targets for their energy systems. In parallel, many grid operators are taking steps to utilize demand-side flexibility: the ability of consumers and businesses to shift their energy usage to different times. Axle is enabling this shift towards demand-side flexibility.

Looking Forward: Climate Adaptation

Increasingly, a climate thesis will also need to consider climate adaptation.

This calls for a different framework, focused on resilience and preparedness. At Eka, we are currently exploring two key areas of climate adaptation (and are open to more!):

Insurance, Climate Risk, and Spatial Monitoring: Developing advanced insurance models and spatial monitoring technologies to predict and mitigate climate-related risks. We wrote about this at length in our Climate x Insurtech piece in December 2023.
Food Resilience, Genetics, and Crop Adaptation: Innovating agricultural practices to ensure food security in the face of changing climate conditions.

While achieving net zero remains a critical goal, we must consider 1) what climate means beyond carbon, and 2) the balance of mitigation and adaptation in the face of a changing climate.

At Eka, we are committed to this comprehensive approach, working towards a sustainable future on multiple fronts.