Five Things to Consider at the Start of Your Journey to Net-Zero Emissions
The minute a company makes net-zero declaration, the clock starts ticking for to maintain credibility by demonstrating to its stakeholders that its sustainability and Environmental Social Governance (ESG) program is making progress. Much of that early work takes place behind the scenes before anything gets reported – for example, ensuring that the right measurement tools are in place and data is accurate.
But think back to writing a paper in college. You didn’t just start writing without preparation. Instead, your first step was think about the questions, familiarize yourself with the task, maybe underline key facts, outline, and only then did you start to write. Without prep work, the risk of heading in the wrong direction or getting suboptimal results that are hard to reverse increases. In the sustainability world, these material issues have implications for a company's financial value its global impact. Ensuring that an ESG program is focused on efforts that truly drive value within a company is critical. A significant and impactful initiative, such as net-zero emissions by 2040, comes with uncertainty. However, a company still must take that first step and do the foundational work relating to its products, operations, and brand. This is a reflection of what we do, how we do things, and who we are as an organization. To do it right is to start it right.
Below I will highlight five key areas that warrant extra preparation when taking that first step to launch an ESG program. Along the way, I will share some examples from our journey at onsemi.
Establish a Vision: What is Your North Star
Sustainability has been a buzzword in the news for a while. However, it is impossible to achieve if it isn’t lived by the company and its people day in and day out. For that to happen, sustainability must be a clear business priority. It should act as a guiding light, a North Star, for every decision and every action. This commitment should be driven from the top and reinforced throughout processes to drive value, decrease enterprise risk and increase resilience. Sustainability should be a lens through which we operate, rather than an organizational silo from which we operate.
At onsemi, sustainability is intricately woven into both our company values and our business strategy. It’s not just how we operate, it’s the products we make and the applications our products enable. We are design our products to our values, ensuring that new products go to market with a clear, sustainable value proposition that germinates at product ideation, comes to fruition in design, and culminates in a go-to-market communication strategy. A great example is our focus on silicon carbide (SiC). In line with our vision to “drive technology breakthroughs that deliver on the promise of a sustainable future,” onsemi continues to invest heavily in its vertical integration capability for SiC solutions. SiC enables a sustainable future by being a critical component for electric vehicles (EVs), EV charging and renewable energy.
However, nothing speaks louder than results. For 2022, onsemi reported $6.454B in triple bottom line revenue, which equates to 78% of its annual revenue. We define “triple bottom line” revenue as income derived from products that contribute to sustainability efforts toward the triple bottom line - people, planet, profit. This includes image sensors that go into ADAS and automation systems leading to increased safety in automotive applications, solar string inverters in solar panels, power optimization in cloud and telecommunication infrastructure, lighter and longer-range EVs and products that enable efficient fast-charging systems for EVs. This demonstrates that the company’s intelligent power and sensing technologies enable emissions reductions and energy efficiencies. onsemi’s overall success is tied to its ability to enable our customers’ ability to implement sustainable solutions.
As for “driven from the top,” onsemi’s ESG goals are linked to executive compensation and supported by President and Chief Executive Officer, Hassane El-Khoury, and our Board of Directors. This alignment is critical because it ensures that we have the governance structures in place to prioritize sustainabilty as a problem to collaborate on and collectively solve. Sustainability is not an issue we can successfully tackle in a vacuum. Collaboration is critical, and with alignment, we prioritize working on the most material issues, which requires everyone’s alignment to the North Star - including top-down, bottoms-up, and sideways participation.
Establish Resources: Building the Right Team
Another highly visible sign of sustainability as a business priority is the allocation of funding and the hiring of an ESG team with the latitude to work cross-functionally towards a shared vision. Leaders don’t provide resources to carry out a vision they don’t believe in.
An ESG program needs team members with diverse and specific skillsets. Even if it is a small core team at the beginning, it is important to prioritize the goals with the greatest impact on the business. Not only do you need the people with the latest knowledge in the different specialties in ESG on your team, but you also need the right people in the right places outside of the team. ESG team members are working across many functions within the company: operations, EHS, facilities, procurement and supply chain, finance, product development, legal and marketing are some examples. In addition, working with the right external partners and software tools will close gaps of knowledge and build upon efficiencies in-house.
onsemi set its net-zero emissions goal in August of 2021. The ESG team officially launched in 2022, when I joined onsemi as the senior director and head of Sustainability and ESG. And we are moving fast. The team now consists of subject matter experts that work to move the needle on our social impact within the community and create a cohesive reduction strategy across our Scope 1, 2, and 3 emissions. We have the backing of executives that form our ESG Executive Steering Committee and are further supported by internal stakeholder partners to execute our goals. We also partner with our suppliers to reduce their Scope 1 and 2 emissions, as those roll up into our Scope 3 emissions. These are all critical pieces of the entire net-zero puzzle.
Establish a Baseline: Processes, Data, and Analytics
It is crucial to establish a baseline. No matter where you are or where you are headed, establishing an honest assessment of the current state is universally critical. From there, you develop your vision of the future state and form the gap assessment of what critical areas are a priority to close. This applies to your net-zero goal and establishing baseline emissions data, upon which your reduction targets will be applied. It also applies to company products and understanding the current state systems and processes that govern how products are defined, designed and developed.
For many companies today, emissions data collection and calculation start with good ol’ Excel spreadsheets. We all must start somewhere, and as the adage goes, don’t let perfection be the enemy of progress. Whether you operate with manual spreadsheets or more sophisticated software tools, it is important to put a system in place to ensure data quality and accuracy. Invest time into ensuring you have a good data collection and validation system; good data is the foundation to good problem solving. Otherwise, steering toward any sustainability goal will be a challenge, not to mention the risk of not passing third-party data assurance for greenhouse gas emissions reporting.
onsemi completed a full inventory of its Scope 1, 2, and 3 emissions in 2022, and this data will serve as the baseline for onsemi’s journey towards its net-zero by 2040 goal. 2022 marks the first year for which onsemi’s Scope 3 emissions expand from reporting of just emissions from business travel to now accounting for other applicable categories as defined by the GHG Protocol such as emissions from our purchased goods and services. onsemi also started using an improved calculation methodology for our public emissions reporting, resulting in a significant change in our reported Scope 1 emissions compared to the previous year. Energy conservation and energy efficiency/optimization practices, divestitures and downsizing of fabs and non-manufacturing sites as well as the installation of energy-efficient equipment for new and expanded sites led to a 20% energy intensity (MWh/$ revenue) reduction.
Establish a Near-Term Target: Set Milestone Goals
The journey of a thousand miles begins with a single step. For us, tackling our net-zero by 2040 goal means establishing smaller interim milestones along the way. In December 2022, we committed to developing near-term targets under the Science Based Target initiative (SBTi), which requires us to submit a 5–10-year target to SBTi for validation within 24 months of our commitment (i.e., December 2024). Near-term targets are an important milestone as they solidify our commitment with tangible actions and data by which to measure our progress. Our near-term targets will cover Scope 1, 2 and 3 emissions.
To meet net-zero emissions by 2040, onsemi is in the process of developing a climate transition plan that includes emission reduction initiatives across its facilities and within the company’s value chain. We outlined a preliminary transition plan, which includes a high-level overview of the company’s Scope 1, 2, and 3 reduction strategies, as well as assumptions, challenges, and uncertainties associated with it. onsemi plans to release a more comprehensive climate transition plan in the future.
Establish ESG Reporting Frameworks and Standards: Transparency is Key (Communicate, Communicate, Communicate)
Media coverage about the environment has been ongoing for decades. As such, the public most likely understands the environmental parts the best out of all three ESG criteria. With that knowledge, stakeholders expect more than just talk and make promises. Stakeholders expect to see concrete actions that can be validated and data that can be compared. They require detailed reports about ESG efforts and accountable goals. So, the more transparent a company is, the better. Bring others in on your journey so that you take the journey of a thousand miles together.
How do you know what to measure and how to measure to show progress? ESG frameworks and reporting standards are guidelines that aim to ensure companies disclose key information; ESG assessments help to make ESG results available and comparable via a consistent set of data and information.
In a consistent effort to remain transparent with investors, customers, stakeholders and employees, onsemi’s sustainability report was prepared in accordance with the Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) standards, and we disclose under assessments such as S&P Global’s Corporate Sustainability Assessment (CSA) and CDP’s Climate Change and Water Security.
What comes next?
In 2022, onsemi remained committed to building a better future through innovations in intelligent power and sensing technologies and by implementing emission reduction initiatives. In 2023 and 2024, we will develop and start to execute reduction strategies and targets. With nearly 2 years of work under our belts since announcing net-zero by 2040 goal, we are officially at the start of our journey. We know that there is a lot of work to be done in the future, but we are proud of the progress we made and where we are at with our efforts. We made that first step and then some, and we have the efforts of our 30,000+ worldwide employees supporting us. Next, we will work with our ecosystem of partners across our Scope 1, 2, and 3 emissions, including our suppliers and other partners across our entire value chain. This is a full ecosystem change that we are embarking upon, and we need everyone’s collaboration.
In the words of our CEO: “It is everyone’s responsibility to do their part in reducing greenhouse gas emissions to address the risk we are facing with climate change. At onsemi, we are learning about the ways in which we can reduce our carbon footprint and we are taking action, today. Sometimes, it’s about knowing your destination while carving out the path to get there and for us, that destination is Net Zero by 2040.”
What will be your first step?
To learn more about onsemi and its ESG initiatives, read “Onward: for People and Planet 2022 Sustainability Report.”
