Avoided Emissions: Paving the Way for Green Leadership in Business
With ESG compliance being increasingly perceived as a must-have for all companies (e.g., SBTi commitments), today’s Green Leaders distinguish themselves by actively choosing to develop and commercialize green solutions that decarbonize end sectors, such as mobility and power generation. The effectiveness of these solutions in reducing global carbon emissions can be calculated and communicated through a new KPI: Avoided Emissions (AE).
The World Business Council for Sustainable Development's 2023 AE guidance provides a clear, uniform methodology for calculating AE. This methodology leverages eligibility criteria and precise calculation steps to ensure accuracy and prevent greenwashing. BCG partnered with WBCSD to frame and test this new methodology on WBCSD members products.
In contrast to traditional emission metrics (e.g., Scopes 1, 2, & 3), which are perceived as measures of risk, AE are a revenue based KPI that communicates a company's positive environmental impact. They represent the difference in carbon emissions between an existing product and a new, greener alternative. This metric not only reflects a company's contribution to reducing global emissions but also supports its creation of value by, for example:
- Justifying a product’s green premium.
- Helping to prioritize the development of new sustainable products.
The rising usage of AE by sustainability-focused asset owners and asset managers to understand the positive impact of their investments also underscores its growing importance in supporting the transition towards a net-zero world.