Sustainability leaders play an increasingly transformational role globally as organisations embrace the net zero challenge. But this transformation takes time. Keep reading as we explore the risks of taking a short-term view and the key steps to consider when preparing your business to thrive in the new low-carbon economy.
The stakes are high for corporate sustainability leaders. Balancing climate and corporate goals and setting ambitious yet achievable decarbonisation goals, all while navigating short-term and long-term change.
The urgency to act comes from climate science, government regulation, customer demand, employee expectations and investor pressure. It comes from the growing signs of a planet-in-crisis as seen in our everyday lives.
It also comes at a time of increased scrutiny into corporate climate action, public scepticism of tools such as carbon credits and growing competition for high quality nature-based solutions. Businesses are concerned with ‘greenwashing’, but ‘green-hushing’ is also problematic.
So while the question is no longer ‘Why?’, the question of ‘How?’ is complex and multi-faceted.
Short term focus on emissions reduction is critical, but a lack of long-term planning is risky.
When approaching decarbonisation, sustainability leaders must take a long-term view and consider the processes, technology and resources needed to thrive in the new low carbon economy.
Starting with deep Scope 1, 2 and 3 emissions reduction, a future-focused strategy includes planning for climate change mitigation activities that fall outside of a company’s value chain - such as investment in high quality nature-based solutions.
Keep reading as we explore:
Climate change is a critical agenda item for corporate boards globally.
In a recent Deloitte survey, 61% of CxOs said climate change will have a high or very high impact on their organisation’s strategy over the next three years. With many ranking climate changes as a ‘top three issue’, ahead of innovation, competition for talent, and supply chain challenges. With only economic outlook ranking higher.
The urgency to act comes from an acceptance of the scientific consensus on climate change as outlined by the International Panel on Climate Change (IPCC). We must achieve net zero carbon emissions globally by 2050 to limit global warming to 1.5°C.
The pressure also comes from customers, employees and investors who increasingly witness the impact of climate change on their communities and expect more of businesses they invest in with their time or money.
More than one-third of the world’s largest publicly traded companies now have net-zero targets, with most large organisations actively planning for the net zero transition.
And the stakes are high.
The ultimate and most important risk is the possible loss of a liveable planet and, in the meantime, the financial, reputational, and regulatory risk for businesses is also significant.
Government policy is evolving at a rapid pace globally. This includes:
At the same time, public scepticism in corporate climate action has never been higher.
Carbon neutrality claims made possible through the purchase of carbon offsets are those most often being challenged, whether by activist groups, individual social media activity, or by late-night comedians.
The sceptics rightly challenge the practice of offsetting emissions without meaningful emissions reduction. They rightly highlight the use of less credible credits that do not deliver incremental environmental benefits.
These issues are markers of a global transformation and rapidly evolving market mechanism.
While generally well-meaning, the sceptics often miss the positive impact that investment in high quality nature-based carbon solutions has already had and continues to have on the environment and local communities.
In 2022 alone, the voluntary carbon market (VCM) is estimated to have directed more than US$1.3 billion to help mitigate around 173 mega tonnes of carbon emissions. This is in addition to the growing number of carbon projects which focus on delivering co-benefits, such as positive social, economic or biodiversity impact, thereby helping to support an organisation’s impact on broader Sustainable Development Goals (SDGs).
Navigating this changing regulatory, competitive, and reputational landscape is challenging. Sustainability leaders must act, and action must begin with meaningful emissions reduction.
Climate science, regulators, customers, and employees are aligned on this.
And if your own emissions reduction initiatives are still being developed, or still being delivered, it may seem premature to invest in activities that avoid, reduce or remove greenhouse gas emissions beyond your own emissions boundaries.
Both the Science Based Targets initiative (SBTi) and the IPPC, however, recognise investment in high quality solutions outside of an organisation’s own value chain as an important part of the net zero solution. Provided that emission reductions within the value chain are prioritised.
But while revising operational processes to reduce Scope 1, 2 and 3 emissions should be a priority, it cannot be at the cost of long term and strategic planning for the overall carbon footprint of the business.
Despite best emissions reduction efforts, most organisations will be left with unavoidable residual emissions.
Waiting until all emissions reduction efforts are finalised before exploring investment in carbon reduction or removal projects comes with its own risks.
There are many parallels between the low carbon transformation and the digital transformation most organisations have recently completed or are in the process of finalising.
Like the digital transformation, the low carbon transformation touches all parts of the business, requires new processes and ways of thinking, and can be daunting at the beginning. As such, both change programs involve a heavy reliance on external consultants in the initial stages.
But both examples also herald a new era. There is no going back.
Businesses that will thrive in our new low carbon world will be the ones that take a strategic, long-term view, leverage all tools at their disposal and build their in-house knowledge and capability.
Just like we now rarely hear of external digital consultants, organisations will, over time, reduce their reliance on external advice when it comes to energy efficiency, sustainability strategy, emission reductions and beyond value chain climate change mitigation.
Instead, they will lead this activity in-house, with external advice providing important assurance on an as-needed basis.
This transformation takes time. Forward-looking organisations are starting today.
There is no one right strategy or path to net zero. What is best for your organisation will vary to that of your peers, and will depend on individual emissions profile, your level of control within your emissions boundaries (especially Scope 3), the status of your emissions reduction initiatives, your resources and budget. Your organisation's climate ambitions will also be an important factor.
One thing is for certain, corporates with net zero strategies based on a long-term view and incorporating all available tools, are likely to be better equipped to meet the challenges of the new low carbon normal.
Here are key points to consider when exploring and documenting your way forward.
Sustainability leaders play an increasingly transformational role globally as organisations embrace the net zero challenge and prepare for new ways of working in the emerging green economy.
And while the green economy will be the new normal, this transformation across large and complex organisations takes time. Organisations that will thrive are focused on deep emissions reductions today, and on building their in-house knowledge, tools, and capabilities for the low carbon future - and beyond by considering carbon negative (climate positive) targets.
This includes active planning on how to manage residual exposure over the medium and long term, determining what types of investments you will make and how you’ll communicate and manage delivery of your climate program.
The road will be bumpy and there will be challenges along the way, but the stakes could not be greater.
About CORE Markets
CORE Markets is an end-to-end markets, technology and climate solutions partner for business.
We offer corporate net zero services, project optimisation services, and corporate and institutional brokerage services, all backed by a powerful software-as-a-service platform.
We help corporate sustainability teams, carbon & clean energy project developers, and wholesale & industrial clients, take decisive action to net zero. Get in touch with our team to see how we can help.
The future starts now. Strategies for the new green economy normal.