It Takes (at least) Two to Make Real Progress toward Emissions Reduction Goals

Many large companies have made a commitment to reducing their greenhouse gas emissions to combat global warming. But doing so is particularly challenging for industrial companies that have energy-intensive production processes or sell products that consume a great deal of energy during their use. BASF and Henkel, two major industrial players, decided to tackle this challenge through a joint project. And as Professor Martin Glaum (Chair of International Accounting), Professor Alexander Gerybadze (University of Hohenheim), Dr. Thomas Müller-Kirschbaum (formerly of Henkel), and Ralph Schweens (formerly of BASF) show in an article now published in the renowned MIT Sloan Management Review, even in an especially challenging industrial context, it’s possible to achieve meaningful progress on reducing greenhouse gas emissions.

Roughly ten years ago, Henkel had assessed its carbon footprint and noted that a substantial portion of its scope 3 emissions were caused by the raw materials it was sourcing. One of their closest suppliers was BASF, whose customers had increasingly shown their own concerns and interest in sustainability by that point. The two companies opted to join forces and tackle this issue at its very core, with BASF providing Henkel with data vital for fully understanding where and how carbon emissions could be reduced. The companies’ holistic approach included assembling the right team representing several departments—research and development, marketing, procurement, sales—and saw Henkel employ BASF’s biomass calculation model. By starting small, scaling the project over time, and identifying the right custodians for the project, the companies set themselves up for success—which they achieved in only two years’ time. 

As the researchers point out in their article, the BASF-Henkel collaboration offers some lessons for organizations with similar scope 3 aspirations.

• Think big and have courage: Small pilot projects are useful to test the technological feasibility of changes in production, but without meaningful, substantial measures in place, companies will not be able to reach their emission reduction targets.
• Find a strong partner: It’s crucial to team up with partners within the value chain that are committed and have a common vision, technological capabilities, and the resources to deliver.
• Closely involve senior management: The sponsorship of senior management and the constant interaction between management and the project team foster fast and tangible results, especially when unforeseen difficulties arise.
• Encourage agility. Many variables—raw material supply and cost, consumer preferences, and consumer readiness to pay for more sustainable products—can vary across markets and over time. That means projects to reduce emissions in the value chain require flexibility and the ability to adapt quickly.

As the researchers conclude, BASF and Henkel’s experiences show that, with strong partnerships, it’s possible to make real progress toward emissions reduction goals. The collaborative strategy they describe can also be applied along the value chains of other CO₂-intensive manufacturing sectors.

Click here (paywall) to read the article as published in the MIT Sloan Management Review, which highlights the most relevant research and expert findings concerning the corporate world. The publication provides a venue for experts in science, economics, and technology to give readers a greater understanding of the factors affecting the progress and stability of today’s companies.