A roadmap to travel industry’s decarbonisation journey

The connection between business activity and climate change is clear. Climate change has become ‘code red for humanity’ and urgent action is required across all sectors from businesses of all sizes. The travel and tourism industry is incredibly diverse and sits within a shifting landscape, so identifying where emissions arise throughout all value chains is not a straightforward exercise.

From climate change and biodiversity loss to increasing government regulation and stakeholder expectations, travel companies, now more than ever are increasingly under pressure to be transparent about their climate and nature related risks, and carbon footprints. Whether subject to mandatory carbon reporting initiatives or strict pro-environmental stakeholder expectations, it is imperative for companies to understand their disclosure landscape. These requirements include the recommendations set out by the Task Force on Climate-Related Financial Disclosures (TCFD), such as acknowledging and addressing climate-related risks and opportunities for the travel and tourism industry.

Net zero describes the scenario in which a company cuts its greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed into the atmosphere – typically via ‘nature-based solutions’. For companies, a net-zero commitment needs to be backed up by a plan or roadmap – even if not yet fully articulated or financed – that sets out actions to reduce emissions. Achieving this entails progressive action, not only to limit the dual challenges of climate change and biodiversity loss, but also to safeguard the environment the travel industry depends on for tourism. This sector’s resilience, competitiveness, and growth are tied to its capacity to be both climate and nature positive.

In this article we look at how the industry can be one for the future – one that understands, responds to, and reports its climate-related (and nature-related) risks and opportunities, and that sets ambitious net-zero targets considering its unique emissions profile.

Towards net zero

The Taskforce on Climate-related Financial Disclosures (TCFD)

Financial markets are interested in understanding businesses’ climate-related risks and opportunities through the TCFD. This framework suggests using scenario analysis to stress test current strategies against future outcomes to best position companies to respond to climate disruptions. Scenario analysis identifies risks within two categories: transition (legal, technological, and market-based) and physical (chronic and acute). For each risk here, there is an opportunity. Capitalising on and building resilience against the most material risks from this scenario analysis can sustain and even enhance the sector’s growth.

Scope 3 emissions

As part of this increasingly mandatory disclosure framework, attention is being placed on the actions companies are taking to transition to net zero. This includes measuring Scope 3 emissions, i.e., those that arise from a business’ value chain, both up and downstream. This includes those with nature-related impacts, such as deforestation and land conversion. Understanding which supply chain activities yield the highest emissions allows companies to target those which can deliver the highest reduction impact.

Businesses that organise activities and outsource to third parties will typically have a significant Scope 3 footprint. This Scope is generally considered less straightforward to measure than Scopes 1 and 2 due to a larger set of emission sources and data challenges. As a result, most companies have concentrated on reporting Scope 1 and 2 emissions and have failed to acknowledge the true scale of emissions along their value chains. As regulatory standards and stakeholder expectations strengthen, uncertainty around Scope 3 will no longer be an option. Companies are starting to take decarbonisation seriously, and the travel industry must follow suit. Measuring and reporting Scope 3 emissions is the first step.

Varied but collective action across the sector

Given that travel encompasses a global value chain by nature, industry-wide climate action has the unique potential to disseminate sustainable values to every corner of the planet. Different areas of the industry have different roles to play in generating this comprehensive impact. Accommodation providers can encourage less carbon-intensive menu options and reduce waste. Aviation and asset-heavy tour operators can explore high-value material recovery and end-of-life options and maximise low-carbon technology. Asset-light tour operators can offer customers low-carbon modes of travel and support accommodation options with decarbonisation programmes. Though aviation and cruise are contingent on the advancement of certain technologies, such companies can consider strategies for remanufacturing and refurbishing. Together, these businesses can catalyse net zero transitions across their value chains.

Next steps for your decarbonisation journey

For companies without a net zero strategy or commitment, or for those with a strategy that is not underpinned by a detailed transition plan, now is the time to act – before decisive regulation and public opinion force your hand. The process of making a net zero commitment involves five steps:

• Establish a baseline and identify hotspots: Agree on a carbon emissions footprint for the company and identify which activities have the most material carbon impact.
• Set a target: Consider where emissions reduction can be made and set a reduction target covering Scope 1, 2, and 3 emissions set to be achieved by 2050, replete with interim targets and detailed roadmaps for each.
• Draw up a roadmap: Develop a roadmap that establishes where carbon reductions will be made and how they will be financed.
• Develop a plan for residual emissions: Only residual emissions should be offset through the purchase of carbon credits.
• Track reductions and report: Reporting requires establishing capability for data capture and analysis, including reporting progress against the reduction target.

For more information, see Deloitte’s Climate Action Guidebook developed in partnership with ABTA.

This is part of a series of articles that outlines priorities for the travel sector to achieve greater resilience. If you found this article interesting, you may also be interested in reading: A more sustainable future for the travel industry, The role of nature in the travel industry, and Linking sustainability and finance in the travel industry.