Bayer’s approach to building a transformative carbon reduction programme

SL Staff

The life sciences company has built governance and reporting structures with the aim of hitting net zero across scopes 1, 2 and 3 by 2050

2021 World Sustainability Awards Shortlisted Initiative

This example was shortlisted for the Carbon Reduction Award at the 2021 World Sustainability Awards after being reviewed, scored and discussed by a panel of 17 global Chief Sustainability Officers. The judging panel was impressed by the progress being made and felt this initiative was one that should be shared and celebrated.

Challenge

While most large companies are facing increasing pressure to substantially reduce their carbon emissions, this isn’t a transformation that can happen overnight. Successful programmes generally require substantial and empowered governance structures and clear, achievable goals spanning all three scopes of emissions, on top of the practical measures taken to actively reduce carbon use.

This was a challenge recognised by Bayer, the German-headquartered global life sciences company. While sustainability isn’t a new priority for Bayer, which employs 100,000 staff in 83 countries, it previously lacked an ambitious GHG reduction target and the global governance structure was focused on retrospective reporting, which made it challenging to anticipate future carbon generation and plan the concrete steps it needed to take to get emissions down.

At the end of 2019, Bayer’s board of management made sustainability to one of the four strategic levers of the group strategy. The company defined sustainability as an impact generator, which means that economic growth and sustainability ought to go hand in hand. The company aims to contribute to the UN’s Sustainable Development Goals (SDGs) by focusing on inclusive growth and putting carbon reduction at the heart of the entire group’s strategy. This ultimately led to the company setting a goal to stay on a 1.5°C pathway for 2030 in line with the Science-Based Targets Initiative.and reaching net zero across scopes 1 (emissions from internal operations), 2 (emissions from its energy consumption) and 3 (emissions from the rest of its value chain) by 2050.

The company created a robust implementation plan that would ensure it had the right governance, metrics, targets and initiatives to support it in reaching these ambitious aims.

Approach

Summarising Bayer’s approach

Key elements underpinning Bayer’s implementation plan include:

  • Robust governance structure lead by the CEO
  • Strong mid term targets for 2029 in line with the Paris Agreement – validated by Science Based targets
  • Comprehensive measurement system tied to company targets and integrated into the remuneration systems of all managerial staff incl. the Board of Management
  • Measures to reduce scope 1 & 2 emissions, including use of renewables and carbon pricing
  • A scope 3 emissions supplier engagement plan

Bayer’s emissions governance

Creating a robust governance structure was vital to ensuring that emissions reduction would be at the heart of Bayer’s company strategy for a long time to come.

First responsibility for this falls to the CEO Werner Bauman, who is also Bayer’s chief sustainability officer. He can draw on advice from a panel of nine renowned external experts sitting on Bayer’s independent Sustainability Council, with areas of expertise ranging from agriculture to human rights and sustainable finance.

Internally, Baumann can rely on his Corporate Sustainability team that covers the areas Ecological footprint, Ethics & Social, Governance & Strategy, Investor Engagement & Reporting and Impact Measurement.

Furthermore, each division of the business has their own dedicated sustainability team with full-time staff focusing specifically on this topic and other sustainability aspects along Bayer’s vision of “Health for all, Hunger for none” to ensure the importance of sustainability is embedded throughout the organisation.

Measuring emissions and setting targets

Being able to measure emissions and understand this data fully is vital to being able to track Bayer’s progress, identify areas for improvement, set realistic targets and ensure they are delivered upon.

Emissions form part of Bayer’s annual reporting cycle, with all three scopes externally audited to ensure the highest quality standard. This is complemented by a central impact measurement team, with environmental and engineering backgrounds, that validates these figures and focuses on enhancing the quality of the insights generated.

Internally, performance data is available on a global consolidated CO2 dashboard. This is used by more than 100 people, including sustainability experts in corporate functions and senior management. The tool is also used as the source of data for Bayer’s annual report.

This is accompanied by one of three deep dive models for scope 3 purchased materials. The most prominent of these is a macroeconomic model for purchased goods and services that calculates the CO2 emissions based on spend and multiple emission factors associated with the respective product categories. Another model is applied to logistics, based on transport modes and transport legs, and for travel calculations are based on each individual flight taken.  For scopes 1+2 a global collaborative management tool, M2030 Bee, enables best practice sharing.

Target-setting and accountability

In order to make the necessary progress towards its net-zero goal, Bayer has set ambitious intermediate targets, committing to make the following reductions against its 2019 base level by 2029:

  • Absolute scope 1 and 2 GHG emissions by 42%, with the remaining 58% being offset as additional measure beyond Science Based Targets
  • Scope 3 emissions from purchased goods and services, capital goods, fuel and energy related activities, upstream transportation and distribution, and business travel by 12.3%

In line with principles set out by the Taskforce on Climate Related Financial Disclosures, Bayer has ensured that climate action if firmly embedded in its overall business strategy. Reflecting that, sustainability targets account for 20% of the value of executive long-term incentive schemes, with emissions forming a key part of that, and are also incorporated into targets for all of Bayer’s ~20,000 managerial staff.

To boost transparency and external accountability, all of Bayer’s emissions data is published in its annual report, as well as on the website of the Carbon Disclosure Project.

Tackling emissions in scopes 1 & 2

In order to execute against these targets, Bayer has developed a comprehensive plan for reducing emissions arising within its own operations and from the energy that it consumes, with the intention of investing €500m of capex over the next 10 years.

This is spread over three key areas:

  • Switching to renewable electricity – with a focus on use of Power Purchase Agreements. These involve Bayer committing to purchase power from an energy company over a long-term period, giving them the confidence to invest in new renewable capacity to service the demand.
  • Increasing efficiency in operations, for instance through upgrading HVAC systems
  • Changing energy sources, for instance using geothermal energy for heating or to produce steam for production processes

To ensure it is investing appropriately, Bayer has implemented a voluntary internal carbon price of €100 per tonne, ahead of future regulations. This mimics mechanisms like the EU Emissions Trading System, incentivising investments in low-carbon projects by effectively making them more cost-effective than high-carbon alternatives. It also conducts ecological assessments of all investments including a specific focus on CO2, to ensure they are aligned with its targets.

Tackling scope 3 emissions

To tackle emissions in its wider supply chain, Bayer has implemented a supplier engagement programme through the Carbon Disclosure Project with more than 250 suppliers. These report their CO2 footprint through the CDP, and at the same time Bayer uses this as an opportunity to raise awareness of its expectations and engage with them about their own activities. Bayer is also leading a cross-industry scope 3 programme leveraging the chemical industry’s “Together for Sustainability” initiative, working collaboratively to set consistent standards, send a joint message about the importance of sustainability and avoid suppliers having to double-report their emissions.

In order to drive action in its supply chain, Bayer has incorporated primary information from its suppliers into its accounting process and engages with the suppliers as part of the CDP Supply Chain programme.

Bayer has also integrated CO2 into all of its discussions with key and strategic suppliers, based on the following questions:

  • Strategy: What are the key elements of your climate protection programme?
  • Reduction target: What are your concrete reduction targets until 2030?
  • Type of target: Have you already joined the Science-Based Targets Initiative? Are you planning to do so? By when?
  • Renewable electricity: How much renewable energy will you source by 2025 and 2030? (as a % of total corporate footprint)
  • Collaboration: What could we do together to reduce emissions?

Furthermore, following the lessons of the Covid-19 pandemic, Bayer has decided to immediately reduce business travel by 50%, which will save roughly 150,000 tonnes of CO2E annually.

Going beyond: Enabling a climate-smart agriculture

In addition to the Group-wide GHG commitments, Bayer aims to enable its farming customers to reduce their field emissions per kg of crop produced by 30% in 2030. To reduce these emissions, it wants to foster the adoption of climate-smart practices and technologies. The company believes that reaching its goal of a carbon-zero future for agriculture relies on combining different levers to customise profitable tailored solutions such as:

  • High-yielding crop genetics, advance breeding, crop protection agents and precision irrigation systems to improve energy and water use efficiency
  • Soil management tactics through no-till and cover crops, crop rotation, root health, fertilisation management, microorganisms and inoculants
  • Switching to dry-seeded rice
  • Digital and precision farming tools to support decision processes or better target applications to enhance nutrient and crop protection products use efficiency.

Outcome

Results

By establishing clear governance, putting in place systems to measure its emissions, setting targets and embarking on a number of specific initiatives across scopes 1, 2 and 3, Bayer has been able to formalise its approach to cutting emissions and set itself on a course to reach its targets over the next 30 years.

The initiatives are already making a tangible impact, delivering:

  • A reduction of 4.8% across scope 1 & 2 in 2020 compared to 2019 baseline
  • A reduction of 11.8% across scope 3 in 2020 compared to 2019 baseline

Advice for others

Delf Bintakies, Bayer’s head of ecological footprint, shared some key things to get right when putting in place a carbon reduction programme:

  • Anchor Sustainability at the top management: Bayer’s CEO is also its chief sustainability Officer
  • Accountability: Set clear targets and anchor the targets in the incentives of the management
  • Collaboration: Build a robust implementation programme with involvement of all key stakeholders
  • Use investors as supports: Powerful investor groups like the CA100+ as well as upcoming regulations like the EU taxonomy incentive investors to push for ambitious climate goals

Next steps

The measures outlined above have put Bayer on a strong trajectory towards its 2030 target. However, the sustainability team is conscious that to reach net zero in 2050 it will need to take further steps.

Some areas it expects to focus on include:

  • Fossil fuel-free technologies: Replacing the use of fossil fuels in manufacturing processes with alternatives such as green hydrogen
  • Reducing emissions from production chemical reactions: For instance by capturing the carbon released in the manufacturing process or finding substitutes for these products

Bintakies says: “There is no silver bullet and all available levers will need to be used.”

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