Energy transformation key to SDX Foundation's climate crisis planBy Ko Dong-hwanOrganization heads, business experts, company officials and government officials gathered for ReWorld Forum 2024 in Seoul on Wednesday where they exchanged facts and ideas on how the country should realize RE100 — relying on renewables and nothing else — and how imminently global trade hurdles demanding carbon reduction have loomed upon the country's private firms, according to SDX Foundation, Wednesday.
Hosted by the nonprofit organization in Korea, the annual forum focused mainly on how the country's large firms and small and medium-size firms (SMEs) should mutually cooperate to realize the global initiative.
The event shared with some 350 participants how global enterprises have restructured their business methods to cope with the rising worldwide demand for renewable energies and lower carbon footprints. Participating experts also talked about Korea's weaker investment in renewable energies compared to China, Japan and other economic giants and what Korea should do to raise the carbon-free energy sources' portion in the country's energy mix.
"This forum wants to look at solutions that are entirely realistic, feasible and aggressive," Lee Byung-hwa, the forum's co-president, said in an opening speech. "With those solutions, companies can take their environmental responsibilities and satisfy their financial goals at the same time."
Rising environmental regulations over companies around the world, like the European Union's carbon border adjustment mechanism (CBAM) and the U.S. Inflation Reduction Act (IRA), are forcing major companies to minimize the carbon footprint of their products and, to do that, they should know how much emissions were generated throughout their entire supply chains, according to the experts.
Choi Jung-kiu, managing director and partner at Boston Consulting Group, said that BMW, Volvo, Porsche, Audi, IKEA and other global enterprises have introduced a new management framework that allows better communications between the companies and their smaller business partners.
"Large companies can no longer act aloof from their subcontractors as their end products, a result of their supply chains overall, are being increasingly forced by the global regulations to reduce carbon footprints and the large firms should understand how their products are made in terms of manufacturing processes," Choi said. "Even banks are now being increasingly urged to know carbon emission status of companies before they decide to lend money to them."
Large companies should know their carbon emission status across their entire supply chains, from Scope 1 (direct emission from manufacturing facilities) to Scope 2 (emissions from generating electricity purchased by companies) and Scope 3 (other indirect emissions), according to Choi. He also proposed nine methods for the companies to reduce carbon emissions — improving product specifications, purchasing materials made by eco-friendly green manufacturing practices, calculating greenhouse gas emission amounts produced by suppliers and jointly developing decarbonizing technologies with SMEs.
"BMW has reduced body masses of its cars by 50 percent and is making green purchases for its steel materials, while Audi is maximizing its use of renewable energies for aluminum bodies for some of its models," Choi said, introducing examples of mutual operation between global enterprises and their subcontractors. "Such partnerships have become an inevitable condition for businesses, not an option. Under this global trend, Korean financial groups, on the other hand, have caught flak from global communities for having supported the world's largest number of fossil fuel projects."
Environmental principles being highlighted by CBAM and IRA should not be recognized separately from the country's commerce but rather in unison, according to Kim Sung-woo, head of the Environment and Energy Research Institute under Korean law firm Kim & Chang. Mentioning that pandemics such as COVID-19 that affect the global economy are correlated to extreme climate conditions, he said that more products should be made with eco-friendly methods and the eco-friendly practices will naturally spread throughout companies and countries.
"In Korea, to produce a ton of steel generates nearly two tons of carbon dioxide," Kim said. "To export that same steel to the Europe, the region's environmental regulations require us to pay an additional 200,000 won ($146). So far, carbon reduction responsibility in Korea has been believed to be limited to the country's manufacturing plants. We should instead understand that carbon emissions should be accounted for by all end-products, not just manufacturing plants."
One of the fundamental steps for companies to reduce carbon emissions is knowing precisely how much emissions are being generated, where they are generated and how much they can be reduced throughout supply chains, according to Baek Seung-taek, head of power grid marketing team under LS Electric, an ocean power cable manufacturer.
Baek said that raising energy efficiency is a key to RE100 and to do that, an analysis on energy consumption patterns throughout a company's entire supply chain is necessary to get a complete picture of how and where energy is spent and how its spending can be reduced.
"We diagnose power usage for our customer companies and propose them ways to save their power by using unused spaces like building roofs or parking lots," Baek said. "While Korea's power infrastructure is heavily concentrated in and around Seoul, there is so much free land and space for photovoltaic panels in countryside regions outside Seoul."