From offsetting and governance to 'low-hanging fruit' and collaboration, business leaders discussed the critical components of credible net zero strategies in the latest BusinessGreen webinar, hosted in association with Engie UK
In the space of 18 months, corporate net zero pledges have gone from niche to mainstream. Forty-five per cent of companies listed on London's Stock Exchange are now committed to the goal, according to consultancy EcoAct, and momentum is building at home and internationally as more and more governments and businesses announce net zero goals. Just this week, Business Secretary Alok Sharma noted the world had reached an "important inflection point" for climate action, pointing to a wave of net zero commitments in recent months from public and private sector bodies, such as the NHS, Facebook, and HSBC.
But declaring a net zero target is one thing, delivering it is quite another. Carbon goals are meaningless if they are not followed up with a practical, effective, and science-informed roadmap for how companies' intend to practically achieve their new goal. The same EcoAct analysis revealed that less than two in 10 FTSE 100 companies have realistic decarbonisation strategies in place. Clearly, there is still a yawning gap between corporate net zero ambition and action.
This week, participants from media group Sky, energy giant ENGIE, environmental think tank Green Alliance, and research centre Cambridge Institute for Sustainability Leadership (CISL) discussed the practical steps corporates can take to remedy that disconnect and establish robust net zero plans as part of a BusinessGreen webinar hosted by editor-in-chief James Murray.
While every organisation's decarbonisation journey is unique and influenced by the myriad factors specific to its business model, sector, size, and reach, credible net zero roadmaps are founded on a number of shared priorities, the panellists argued.
These includes an urgent focus on chipping away at easy-to-abate carbon emissions as quickly as possible, and a push to ensure net zero goals are supported by the entire organisation and bolstered by effective corporate governance structures. In the longer term, successful decarbonisation strategies acknowledge that collaborarations and partnerships are key to addressing harder-to-abate and indirect emissions, and ensuring that carbon offsets are used as abstemiously as possible.
"A real net zero target, a seriously-held one, is a transformation strategy for a company," observed Eliot Whittington, director of policy at the Cambridge Institute for Sustainability Leadership (CISL) and director of the Prince of Wales's Corporate Leaders Group. "There is some easy stuff in terms of the decarbonisation journey in terms of getting started, but to do it properly requires a top-to-toe reinvention of a company, for which you need really good change management systems - you need to work out the strategy."
The first step of all companies' decarbonisation efforts, according to the panellists, should be an immediate effort to target 'easy-win' carbon reductions, such as renewable energy procurement or energy efficiency improvements. "Understanding your data in regard to your energy, and where your costs are, will improve competitiveness by ensuring you invest in 'low-hanging fruit' at the outset," advised Engie UK's solutions development director Kirti Rudra.
Companies should continually measure and monitor their environmental footprint in order to understand what these 'easy wins' are, especially as the shift towards home working during the pandemic has changed how and where corporate carbon is emitted. Fiona Ball, director of Sky's 'Bigger Picture' sustainability agenda, noted that the media group was in the process of encouraging employees to switch to renewable energy providers at home in a bid to curb emissions generated by remote working.
Another early priority should be a drive to ensure that all individuals and departments are engaged and invested in the net zero target, panellists said. "Key is ensuring the sustainability team are facilitators and advisors [to the net zero mission], not the owners," explained Ball. "The owners and responsibility needs to sit within different areas of business." Exactly where responsibility is assigned should depend on how a company's carbon footprint is divided, she added.
It is at this point that net zero strategies can start to run up against internal opposition. Virtually every sustainability executive has tales of CEOs and CFOs who are dismissive of the case for investing in accelerating decarbonisation efforts, or, where the board is supportive, colleagues in middle management who refuse to prioritise new climate policies.
But Gordon Sheret, sales and marketing director of business services at Engie, argues the growing library of case studies demonstrating how companies have successfully developed climate strategies that help to cut costs and enhance competitiveness provides an effective tool for selling senior management and critical decision makers on the need to deliver net zero emissions. "We're getting some great case studies that we can use as examples," he said. "It's not just the evidence around the reduction in carbon, but its other measures, such as how employee engagement scores have improved, or the [firm's] sense of purpose [has improved] so they are able recruit and retain best talent, or if they are in a consumer market, how their sales have improved."
Once 'easier' carbon reduction projects have been set in motion and the net zero mission has been entrenched in the minds of decision makers and company governance, companies should then address those emissions that are more out of reach, either by virtue of being indirect and generated by suppliers, or because the relevant zero carbon technology and solutions are yet to be commercialised, the panellists advised.
"You set out the big vision, you think about the immediate strategy, you need the governance mechanism that takes you there," CISL's Whittington advised. "But if you are doing next zero, then at a certain point, you start to engage with [questions like] 'where are the precompetitive issues that I can't change in my business?' and 'how do I reach out my supply chain that might include thousands of smaller companies?'"
This is where the "most exciting things" are happening, according to Whittington, in the form of collaborations across supply chains and partnerships between companies within sectors. The Climate Group's EV100 and RE100 - which bring together companies invested in transitioning fully to electric vehicles and renewable energy, respectively - are early examples of companies coming together to share best practices and send an enormous demand signal to green suppliers to boost their zero emission offerings.
And in order to get a better idea of when to invest in emerging technologies, companies should consider entering into strategic partnerships with firms that can provide macroeconomic oversight on when best to take the plunge with new approaches, ENGIE's Rudra said. "Companies are looking for a strategic partners, someone that can understand the technical nuances of when technologies will change, and when is best to invest, because it might not be the best case to invest all their capital - or funders capital - now," she explained.
With an innovation and supply chain strategy in place, the last remaining key component of any net zero roadmap is provided by the crucial question over how much a company should rely on carbon offsets to meet their goal.
Deputy policy director at think tank Green Alliance, Roz Bulleid, stressed the need for companies to use offsetting only when absolute emission reduction efforts had been exhausted and to prioritise offsetting schemes that enhance natural ecosystems and draw carbon dioxide from the air. As such she urged companies to invest in UK-based afforestation and peat reforestation schemes, which she argued stood to benefit hugely from a boost of private finance. "It might not be the cheapest option to work in the UK, but its something your customers could see in their backyards, and it has wider benefits beyond carbon absorption," she said. "You are improving habitats, helping address the biodiversity crisis and flooding, all sorts of things."
Noting that there will be fierce competition for carbon removals over the decades to come as a growing number of companies turn to offsetting in their net zero programmes, Bulleid suggested that companies "with deeper pockets" should consider investing in more expensive, tech-based forms of carbon removal - such as direct air capture - as they emerge, so as to ensure carbon-intensive sectors with greater budgetary pressures, such as agriculture, can secure nature-based offsets. "There's coordination about how we first ramp up the use of those resources, but also over time how we manage them appropriately and make sure the right people have access to the right affordable options," she said.
Sky's Ball pointed out that any companies unsure about the level of offsetting required to meet net zero should consult the Science-Based Targets initiative (SBTi), which had provided the media group with a detailed breakdown of the level of carbon offsets required once the company's ability to reduce direct carbon emissions had been reasonably exhausted. Both Bulleid and Ball stressed that companies should only offset where absolute emissions reduction are not feasible or possible - and that what is feasible should be frequently reassessed.
As the global economy pivots towards a future aligned with the Paris Agreement's lower target of 1.5C of warming, companies have their work cut out for them. The challenge may be daunting, but pioneering companies and consultants are starting to show how credible net zero roadmaps can be developed for any business, combining short term emissions savings and longer term strategic plans to embrace clean tech innovation, collaborate with suppliers and peers, and catalyse a rapid expansion in nature based carbon sinks. The path towards a net zero future is challenging and uncertain, but with the right roadmap there are reasons to think it can be traversed.
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