Quantifying avoided emissions: The key to unlocking industrial decarbonisation

As the world faces the urgent challenge of climate change, industries are under immense pressure to accelerate decarbonisation efforts. Manufacturing, automotive, aerospace, and other sectors play a crucial role in reducing greenhouse gas emissions and transitioning towards a net-zero future. However, achieving this ambitious goal requires a comprehensive approach that leverages a company’s impact beyond reducing its own carbon footprint. In this article, we’ll explore decarbonisation and the concept of avoided emissions. Then, we’ll discuss why quantification is so important and the way that Hexagon approaches it. Finally, we’ll look ahead to what the future holds for Hexagon. 

A multi-faceted undertaking

Hexagon has made tangible strides in demonstrating its commitment. Decarbonisation is a multi-faceted undertaking that involves a range of strategies and actions. Companies can contribute to a net-zero world in three primary ways. 

Decarbonising their inventory by reducing their Scope 1, 2, and 3 emissions, including implementing measures to minimise direct emissions from their operations and indirect emissions from purchased energy and throughout their value chain. 

Introducing or financing solutions that contribute to global decarbonisation, generating avoided emissions. 

Contributing to carbon sink development through direct removals, indirect removals, or financing of removals.

 

The concept of avoided emissions

”Avoided emissions” refers to greenhouse gas emissions that are prevented or reduced by implementing specific technologies, products, or solutions — emissions that would’ve occurred without such interventions. By quantifying avoided emissions, companies can gain a deeper understanding of their offerings’ positive environmental impact and make informed decisions that have an impact beyond its carbon footprint. 

Quantifying avoided emissions sends a strong message to stakeholders. It demonstrates to customers that Hexagon is actively helping them reduce their environmental impact. For investors, it showcases that Hexagon’s product portfolio is future-proof and aligned with sustainability objectives. Management can leverage avoided emissions data to highlight areas for focused investment and future growth. And product developers gain insight into how their work contributes to the planet’s future and can prioritise solutions with the greatest potential for decarbonisation.

 

The importance of quantification

Quantifying avoided emissions is critical in supporting corporate accountability, driving innovation, and prioritising solutions that contribute to net-zero targets. Without accurate quantification, it becomes challenging for companies to assess the impact of decarbonisation initiatives and make strategic decisions that align with sustainability goals.

 

Enabling transparency and accountability

Quantified avoided emissions reporting fosters transparency and accountability toward external stakeholders, including customers, investors, and regulatory bodies. By providing tangible evidence of the environmental benefits of their products and solutions, companies can demonstrate their commitment to sustainability and build trust among stakeholders. This transparency allows stakeholders to make informed decisions and hold companies accountable for their decarbonisation efforts.

 

Guiding innovation and product development

For example, Hexagon’s Manufacturing Intelligence (MI) portfolio focuses on two key areas: product design and manufacturing. In product design, solutions such as Emendate enable optimising products for weight. At the same time, Adams, VTD, and Simufact Forming allow companies to replace physical prototypes with digital twins and real-world tests with simulations. And Odyssee helps reduce computational efforts. 

In manufacturing, Hexagon’s solutions avoid emissions in several ways:

• Metrology devices and software minimise scrap and rework
• RADAN and ALPHACAM reduce waste
• Production software solutions optimise energy consumption
• NCSIMUL extends machine lifetimes
• ETQ Reliance enables paperless operations

By quantifying the avoided emissions associated with these solutions, Hexagon can prioritise our development and deployment to maximise our positive impact on societal emissions. 

Informing strategic portfolio decisions

As companies strive to future-proof their product portfolios, quantifying avoided emissions becomes crucial for strategic decision-making. Solutions with a proven ability to contribute to global decarbonisation will likely experience increasing demand in a carbon-constrained world. By prioritising and scaling up these solutions, companies can position themselves for long-term success while actively supporting the transition to a net-zero economy.

Hexagon has identified specific product lines and solutions with the greatest potential for providing customers with quantifiable avoided emissions. For example, Applied Solutions has designed a wind turbine gearbox used in approximately 50 projects with wind turbine gearbox suppliers and original equipment manufacturers (OEMs). This solution is estimated to contribute the majority of avoided emissions for Hexagon’s MI division. 

Hexagon’s approach to quantifying avoided emissions

At Hexagon, we recognise the pivotal role our products and solutions play in facilitating decarbonisation across industries. As a leading digital reality solution provider, we’re committed to quantifying the avoided emissions associated with our offerings, empowering our customers to make informed decisions, and driving sustainable practices.

Identifying eligible customer scenarios

When selecting customer use cases, Hexagon focuses on three main criteria:

Representative 
The use case should be representative in terms of region, industry, and customer type, which simplifies scaling to a product level. 

Data sharing 
The customer’s willingness to contribute data is essential, and Hexagon has had positive experiences in this regard so far. 

Clear mechanism 
It’s easier to quantify avoided emissions when there is a clearly understood mechanism for avoiding emissions.

To prioritise customer use cases for different products, Hexagon also considers product revenue, as avoided emissions must be reported in the context of product revenue. The approach is to choose between one and three representative use cases per product, generalise the underlying mechanisms for avoiding emissions, and then scale it up to a product level.

In some cases, avoided emissions heavily depend on the specific use case, and scaling to a product level isn’t feasible. In such situations, Hexagon employs project accounting, where each project is evaluated individually. 

For example, the previously mentioned wind turbine gearboxes exemplify this approach, as the gearbox design can’t be scaled to other applications like vehicle gearboxes. In contrast, solutions like Emendate that help reduce gearbox weight can be scaled across different industries, as less weight translates to less material required for production, regardless of the specific application.

Implementing a robust quantification process

Hexagon follows a rigorous five-step process outlined by the World Business Council for Sustainable Development’s “Guidance on Avoided Emissions.” 

1. Identify the timeframe, which can be either forward-looking or year-on-year

   Forward-looking quantification considers avoided emissions for the complete lifetime of the solution. In contrast, year-on-year quantification focuses on avoided emissions for the reporting year only. The choice usually depends on the business model — for solutions with recurring revenues, a year-on-year approach is preferred. In contrast, a forward-looking approach is used in all other cases.

2. Define the reference scenario 

   Avoided emissions are a relative metric that quantifies the current solution scenario’s benefits against the most likely alternative, known as the reference scenario. For the reference scenario, Hexagon distinguishes between four options: new demand with no previous solution, new demand with a competitor solution, replacement of an existing solution, and improvement of an existing solution. For avoided emissions, the cases of new demand with no previous solution and improvement of an existing solution are particularly relevant.

3. Assess lifecycle emissions for the solution and reference scenarios 

   This assessment involves considering emissions throughout the product or solution’s lifecycle, from raw material extraction to end-of-life disposal.

4. Calculate avoided emissions as the difference between the solution and reference scenarios 

   This calculation quantifies the net impact of the solution in terms of emissions avoided compared to the alternative scenario.

5. Scale the avoided emissions to the company level, aggregate them, and report the results 

   It’s crucial to separate avoided emissions from the company’s carbon footprint, as avoided emissions can’t be compared to or used to offset a company’s emissions.

 

Leveraging competitive advantages

Hexagon has gained a competitive advantage by quantifying avoided emissions in supporting industrial decarbonisation. We can provide our customers with valuable insights into the impact of our solutions on their carbon footprints, allowing them to identify additional ways to decrease their emissions. Additionally, we can better understand the sustainable value propositions of our offerings, allowing us to focus investments on strengthening these value propositions and fostering growth in relevant solutions.

And by actively supporting customers in their decarbonisation journeys, Hexagon can build long-term relationships and establish itself as a trusted partner. This support enhances customer loyalty and creates opportunities for collaboration and the co-creation of innovative solutions that drive industry decarbonisation.

 

Looking ahead: Scaling up

Hexagon has already made significant progress in prioritising solutions within the Manufacturing Intelligence and Asset Lifecycle Intelligence divisions. We see these divisions as starting points for implementing the quantification methodology and establishing best practises that we can replicate across other divisions.

Our approach to scaling up involves identifying representative customer use cases, quantifying avoided emissions for these specific scenarios, and then generalising the underlying mechanisms to scale the results to a product level. Doing so will allow us to efficiently assess the avoided emissions potential of our entire product portfolio without analysing every use case.

The goal is to report the aggregated avoided emissions at the company level, providing a comprehensive view of our contribution to global decarbonisation. This company-wide metric will serve as a powerful tool for communicating our sustainability impact to stakeholders and guiding strategic decision-making.

At Hexagon, we recognise that solutions with a high potential for avoiding emissions aren’t just environmentally beneficial — they’re commercially viable in a world increasingly focused on decarbonisation. By prioritising the development and deployment of these solutions, our company aims to secure its future business success while actively contributing to the transition to a net-zero economy.

Additionally, by quantifying avoided emissions and demonstrating the sustainability value of its solutions, we can attract environmentally conscious customers and investors. As stakeholders increasingly prioritise sustainability in their decision-making, our ability to provide quantifiable evidence of our decarbonisation impact becomes a critical competitive advantage.