Corporate commitments alone under the Race to Zero campaign now cover over 12% of the global economy and USD$ 9.81 trillion in revenue.
There has been a threefold increase in the number of businesses that have set net-zero goals, rising from 500 at the end of 2019 to 1,541 currently.
From a UK perspective this is now one fifth of the FTSE.
So why is there a race to Net Zero? And how can we get even more companies over the line?
- Climate change is a systemic risk and urgent action is needed: The challenge to reach net zero is huge, so practical action is a priority. The International Energy Agency says that by 2030 emissions must fall by 45 per cent relative to 2010 to be on track to reach net zero. Rapid progress, it says, is ‘crucial’. In a letter to CEOs last month, BlackRock CEO Larry Fink said climate change has become a “defining factor in companies’ long-term prospects” with a significant reallocation of capital on the horizon a lot sooner than expected.
- Join the party: Net Zero is a massive focus of COP 26: Alok Sharma, the COP26 president and UK business secretary speaking to business leaders, Mr Sharma noted that the fight against climate change “has to be a joint endeavour between nations, civil society and business”. The climate-related shift could be as transformational as the advent of the internet. Businesses that do not adapt will be at risk, while those that embrace change will see greater opportunities.
- Setting a target raises ambition, be a catalyst for action and drive the race to the bottom – Net Zero. Unilever says to be a leader in sustainable business you need to be a leader in net zero emissions. 300 out of the 338 companies with an SBTi cut their emissions by 25% between 2015 and 2019. https://www.bloomberg.com/news/articles/2021-01-26/companies-with-science-based-climate-goals-cut-emissions-faster
- Engage with customers and meet their societal expectations: The Edelman Trust Barometer found that 80% of consumers want the brands they buy from to solve society’s problems. Customers are looking for companies to step up-by addressing climate change, inequality, cleaning up plastic waste and supporting the local economy.
- Purpose is a core differentiator: Purpose-oriented companies have higher productivity and growth rates, along with a more satisfied workforce who stay longer with them. Deloitte research shows that such companies report 30 percent higher levels of innovation and 40 percent higher levels of workforce retention than their competitors.
- Engage with your own people – future and existing talent: According to Glassdoor 75% of millennials expect employers to address the climate crisis, and recent research suggests that Generation Z take an equally strong stance on climate issues
- The risk of being left behind: Manage risks better: improve governance and help guard against stranded assets. Questions will be asked – If an oil and gas company can sign up to net zero why can’t others? Suppliers might also promote more environmental products to the exclusion of others. See Ocado’s announcement on the B-Corp aisle.
- Be a sustainable leader and learner: Setting an example can help give others the confidence they need to increase their own climate ambition and help drive the market shift required for more competition and innovation. Through shared partnerships and collaboration there is a learning opportunity. This is a journey -ask questions – what are we good at and where can we improve?
Communications around net zero:
The ‘Net Zero Campaign’ is one of the major pushes for COP26 so there has been growing momentum with increased sign up by major brands. Consumers, investors, employees and the media want to see action and meeting the milestones along the way to Net Zero. However, many companies have not set medium term decarbonisation plans to meet the long-term goals. This is a combination of interim target setting, reporting, transparency, executive pay alignment and customer engagement.
So the question is not if but when… and how fast you can get there demonstrating action on the way. Many brands are more cautious about their value chain commitments. They are either waiting to see or getting ahead and being proactive with customer engagement and responsible use seeing this as an opportunity to communicate directly with the customer on an important issue which matters to them. Many are working with NGO partners and partnerships to learn and also for impact measurement and credibility.
While we don’t know all the answers yet, a great starting point is What’s the Net Zero plan for our business?