COP26 was a gathering point for government, business and civil society and whilst many of the ambitions set for COP26 fell short, global financial institutions are pressing ahead and big business has stepped up a gear, with around two thirds of FTSE100 companies and 60% of the UK’s largest businesses having signed up to the Race to Zero with associated science-based/near-term targets.
So what does this mean for business in general? The short answer is more compelling reasons to cut carbon and embed sustainability. Those businesses not planning for net zero will become increasingly unsustainable in every sense of the word, facing challenges on multiple fronts, whether regulatory, reputational or financial. This will be partly driven by requirements for transparency but companies will also find their ‘carbon credentials’ coming under scrutiny when tendering for new business or seeking investment.
For those businesses that haven’t, now’s the time to re-assess climate risk and start investing and innovating, whether in operational efficiencies, new products, new markets or in some cases, completely new business models.
COP26 can be seen as a watershed moment and a signal to business that change really is coming. The specifics of what it implies depends on the size and nature of your business and how much it has done already, but there is a well-trodden path on how to approach this.
Here are some pointers:
Think about leadership and governance. The best-laid plans will fail if not incentivised from the top down, and supported from the bottom up. C-suite leadership, carbon reduction integrated into the business strategy, incentivised delivery.
What does transition to net zero mean for your business and its stakeholders? This should begin with some form of materiality assessment to help inform your strategy. Then set targets and develop plans to deliver them.
Long-term carbon reduction targets are necessary but not sufficient. Decarbonisation needs to happen quickly to ensure progress is made to reduce global temperature rise in the short term. Near-term targets, on a ‘science-based’ 1.5 degrees trajectory, are key in ensuring credibility and avoiding accusations of greenwash.
Prioritise the areas where investment provides the best return, not only financially but in terms of cutting carbon/ building resilience. Measure and communicate progress to ensure benefits are realised. Build capacity - be aware that your carbon reduction commitments are likely to be ahead of your capacity to deliver them!
Learn from, educate and collaborate, with employees, customers and suppliers. Engage in pre-competitive collaboration within your sector. Net zero transition will need to happen across the value chain. Working collaboratively will create opportunities and cut costs.
Think of your business in terms of the part it will play in the future economy. Act strategically in developing new markets. Examine the potential for a more sustainable business model (e.g. products as a service). Start investing early and building in future value in the process.
Keep a watching brief. Change is happening quickly and is likely to speed up. Don’t get left behind. Expect to see more announcements from the government and potentially on the international stage as the UK continues its COP presidency until November 2022.
Making a successful transition can be a steep learning curve for many businesses but there’s no need to re-invent the wheel. Understandably, not all companies have the right skills in-house or are able to employ sustainability experts. Focus on getting it right in terms of strategy, performance and communication. It won’t all be plain sailing but if you would like more information on how to start the process please contact the Asesoria Group, Sustainability Team (01985 844000 or [email protected]), and we would be happy to help.