New survey finds many companies have set net zero climate targets, but few have milestones to reach them, explains South Pole CEO Renat Heuberger
After decades of glacially slow steps to address the climate emergency, we are finally seeing an uptick in climate commitments by high profile companies and countries, most recently in the statements by President-elect Joseph Biden who one expects will realign the United States with the Paris Agreement.
Along the way, an avalanche of governments and organisations have publicly enshrined commitments to reduce greenhouse gas (GHG) emissions down to zero, but how many are serious about meeting their targets and taking concrete steps to decarbonise?
The chasm between Net Zero ambition and action
In a recent poll of C-level executives and CSR-focused professionals, we found that a major chasm exists between net zero ambition and concrete action. Aspirations are high, but action is concerningly low.
Let's start with the good news: 61 per cent of the organisations we polled had either set a net zero target (NZT), or a science-based target (SBT). Another 33 per cent were considering setting one of these targets. This is important, since NZTs and SBTs are major external commitments that reflect serious internal movement towards decarbonisation, and guide the quantity and speed of GHG emission reductions along a company's entire value chain, to constrain global warming to 1.5C. In the multi-stakeholder world we live in, these are not steps to be taken lightly.
Drilling down further, we see that only 11 per cent of the surveyed companies have set an SBT. This is key, since while companies can set NZTs, they need to also develop decarbonisation strategies in line with climate science. The strategy is integral to an SBT, by definition, and therefore is conceivably a more ambitious commitment. It is worrisome that many more companies are setting NZTs instead of SBTs, as this may be an indication that while they are setting targets, they are not looking at the science-based steps needed to reach such targets.
To that point, only 48 per cent of those who had set NZTs had also set milestones to get there. That's like having an aspiration to 'get fit after the holidays' by just buying the gear, but without proactively changing one's diet and lifestyle and keeping to a schedule. There is a risk that CEOs and boards have adopted NZTs as a means to drive goodwill and manage reputational risk, but too many of them are not taking the difficult steps to restructure their business models and decarbonise their supply chains to reach these targets on time.
Greenwash called on 'toothless' net zero commitments
The problem with the surge of commitments is that the fundamental transformation required for a net zero company journey gets lost after the press launch. Groups such as Corporate Accountability are calling brands out for using net zero as a veil to disguise climate inaction. Cynics may say that given the average lifecycle of a CEO is only five years, many of them may not be held accountable for what does - or does not - happen after they are gone. To inoculate themselves and their organisations from suspicion of greenwash, leaders must ensure that targets and milestones are woven into the fabric of their business strategy so that current and future leaders can be held accountable.
Covid-19 is making organisations 'net zero-ready'
Despite the concerning lack of milestones to reach net zero targets, our research also indicates that the post-Covid-19 recovery can be a catalyst for the innovative business thinking and approaches needed for climate action.
Excitingly, organisations' climate commitments are not only showing some immunity to the Covid-19 crisis, but many are actually using this pandemic to recognise and analyse their vulnerabilities, and accelerate climate action. Most organisations' climate mitigation efforts (65 per cent) have either remained the same through Covid-19 (38 per cent), or their climate mitigation efforts have actually accelerated (27 per cent).
The Covid-19 crisis has seemingly given rise to a new 'net zero-ready' mindset. The majority of respondents to our survey reported an increased focus on innovation and collaboration, plus supply chain resilience, following the pandemic. This is an exciting indication that the incremental change we have seen over decades is possibly being replaced by bigger, bolder action, which certainly supports the journey to net zero.
Crucially, C-level executives (including CEOs and CFOs) are trusted by most CSR and environment professionals to have the knowledge and expertise to lead the race to Net Zero. That is key, given the risks and opportunities associated with climate change are so integral to the success of an organisation. It is also key that awareness of the issues now seems to have spread beyond only the CSR staff.
Leaders must seize back control of Net Zero to avoid risk
To pivot from the current response to Covid-19 to a full focus on decarbonisation, it is time net zero journeys are fully locked-into the satellite navigation of all organisations to show stakeholders their exact time of arrival. In other words, NZTs need to be set and milestones to get there must be communicated to stakeholders - not only to build trust and manage risk, but also because it makes financial sense. Boards that set NZTs did not do so simply out of goodwill; climate action is a proxy for efficiency and profitability - the triple bottom line benefit is clear.
Now is not the time to stall. The organisations that fully embrace net zero should set in motion the mechanisms for value chain transformation to minimise losses from the oncoming economic and climate disruption. But first, they must cement their aspirations with accountable and transparent milestones. It's high time organisations earn their claim on net zero.
Renat Heuberger is a founding partner and CEO of global sustainability company and carbon finance consultancy South Pole.
He is also a Schwab Foundation Social Entrepreneur, a member of the Expert Network of the World Economic Forum, and a board member of Climate-KIC and the InnoSuisse Innovation Council.