There is an opportunity to increase corporate demand for P-RECs and expand clean energy access in fragile, energy poor countries by tapping into value chain decarbonization initiatives. Energy Peace Partners (EPP) developed new research assessing the geographic match between different industrial value chains and these countries to help companies more easily understand the geographies where they should prioritize decarbonization measures. This overlap matters because companies prioritize emission reduction measures, such as clean energy procurement, in the same markets as where their emissions and their value chain partners’ emissions originate.
For context, a growing number of companies are setting goals and launching initiatives to reduce emissions across their global value chains, from upstream suppliers to downstream customer product use. These “Scope 3” emissions represent the largest share of emissions for most companies compared to emissions associated with their own facilities.
Value chain decarbonization initiatives offer a powerful lever for companies, particularly multinationals, to promote emission reductions through their business relationships across the globe. Corporate leaders are beginning to, for example, ask their suppliers to reduce emissions and offer them support and incentives to enable implementation. In some cases, leaders may also take actions on behalf of their suppliers or customers to reduce their Scope 3 emissions.
Scope 3 decarbonization is, however, challenging for a variety of reasons, from evaluating the value chain partners’ emissions to implementing initiatives and verifying emission reductions across complex value chains with dispersed actors.
Building on our 2023 collaboration that produced guidance about how corporate clean energy buyers can report P-RECs in different voluntary and regulatory ESG-related disclosure frameworks, EPP collaborated again this fall with Columbia University’s School of International and Public Affairs (SIPA) to develop new research guidance for mapping the relationship between notable corporate value chains, fragile countries, and internal decision making processes. This guidance helps connect the dots between which types of multinational corporations would have the greatest incentive to support P-REC projects in one country versus another due to the geographic match.
More specifically, the new guidance reveals both the value chains that are most relevant to a given fragile, energy poor country and, inversely, which of these countries are most relevant to a given industrial value chain. It also offers insights about how to communicate P-RECs across different internal business units—from the sustainability and energy teams to public affairs, finance, and audit teams—as well as three company case studies to illustrate where and why P-RECs may fit into each company’s respective value chain decarbonization efforts.
As a preview, consider the maps in Figure 1 and Figure 2 below. Figure 1, for example, illuminates how cocoa, coffee, rubber, and nuts and seeds represent the largest inputs from various fragile countries for global agricultural value chains. It indicates the most notable inputs for each fragile country individually. It also can, for example, help a coffee company more easily identify Burundi, Ethiopia, and Uganda as the countries where this company would most likely consider supporting a P-REC project. Similarly, food producers and restaurant chains offering rice may prioritize Myanmar as where they support P-REC projects. Figure 3 below shows the most relevant value chains for a wider set of fragile countries.
Figure 1: Notable Inputs for Agricultural Value Chains from Various Fragile Countries
Figure 2: Fragile Countries with Notable Inputs to Garment Value Chains
Figure 3: Assessment of Overall Value Chain Overlap with Fragile Countries
The guidance identifies potentially relevant companies to prioritize for P-RECs across these and other corporate value chains given their sustainability goals and the overlap between their value chains with fragile countries. To support the evaluation and strategy development for engaging other companies and industries, the guidance includes a template for how to structure and replicate similar value chain analysis.
Corporate buyers and advisory firms can use these types of insights to more quickly understand the overlap between their value chain and fragile countries—simplifying the identification of applicable P-REC projects that align with Scope 3 reduction goals. Alternatively, for companies that do not plan to claim emission reductions from Scope 3 from a P-REC project, these insights can help identify the country where the social impact is the most applicable to a given company’s value chain.
In addition, P-REC project developers can use this research similarly to better identify and target likely corporate buyers from relevant industries whose respective value chain overlaps with the project country. In addition, developers can use this research to better understand how P-REC buyers make decisions internally about value chain decarbonization measures.
To request a copy of the guidance, please contact Doug Miller, Director of Market Development, at dmiller@energypeacepartners.com.