Skip to content

22 March, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • ethical decision-making

      Call for FTSE 100 companies to give guidance on ethics

      Most top firms have a published code of ethics, but many lack the framework to...

    • BlackRock Larry Fink Larry Fink puts focus on finance and inflation

      Although BlackRock’s CEO does not mention the term ‘ESG’ in his annual letter, he highlights...

    • woke silicon valley bank News round-up: this week in governance

      GOP declares SVB ‘woke’; banks slow to sustainability; fund managers accused of dodging voting risks;...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • data decision

      How to boost decision making

      Innovative digital tools can help boards to deliver against strategic objectives, but it is the...

    • remote working

      Navigating the new world of work

      Firms need to focus on building an inclusive environment and a culture of trust to...

    • digital transformation

      Digital transformation: Get the basics right

      Board involvement at the get-go will boost the chances of a successful digital transformation for...

  • Comment
      • View all
    • uncertainty in 2023

      Being a CEO in 2023: how to navigate uncertainty

      Agility, planning in the shorter term and bravery will all stand chief executives in good...

    • A week of business moving to the centre of human rights

      A week of events signals the initiatives underway to have companies play a central role...

    • audit reform IIA Why we need audit reform right now

      There is an "urgent need" for reform to the audit landscape as well as internal...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

    • Group of investors/shareholders in glass building Climate issues likely to figure prominently at next year’s AGMs

      A recent webinar heard that say-on-climate voting is expected to rise, while ESG remains a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • female ceo Less than a third of FTSE 100 executives are women

      In Europe as a whole, only 7.7% of top companies’ chief executives are female, gender...

    • board size Performance declines as boards grow in size

      Researchers found that investment dropped by 2-3 percentage points as companies passed from 12 to...

    • Silicon Valley governance Silicon Valley improves its governance

      Big technology companies are stealing a march over other top corporates when it comes to...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Gender diversity barometer

      Barometer of Gender Diversity in Governing Bodies in Europe

      The 2023 Barometer of Gender Diversity in Governing Bodies in Europe looks at the 16...

    • geopolitical risk airmic

      Navigating geopolitical risk

      Today, the future feels less secure, and optimism is more restrained. Taking decisions in an...

    • Edelman Trust Barometer 2023

      2023 Edelman Trust Barometer

      The report is the result of the Edelman Trust Institute's research, which sampled more than...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

From A to Zero: how to build a credible corporate net zero strategy

by Stuart Lemmon on November 17, 2020

The target of net zero carbon emissions poses many challenges, particularly for companies with complex supply chains. But it also creates opportunities.

Compass showing net zero carbon target

Image: Olivier Le Moal/Shutterstock

Over the past 18 months, the gears have shifted when it comes to climate change, with pressure for both transparency and proactivity now coming from seemingly every angle: the general public, government legislation for net zero, climate groups, corporate customers and investors. Consequently, corporate commitments to climate action are on the rise.

In September 2020, EcoAct’s 10th annual Sustainability Reporting Performance of the FTSE 100 found that 45% of companies are now committed to net zero by 2050 or earlier. Good news for our climate. However, the report cautions that comparatively few companies—only 16% of the entire index—have an adequate strategy in place for meeting this increasingly urgent global goal. This is bad news, not just for the climate, but for business.

How can organisations build a robust strategy to achieve such a seemingly distant target which, as yet, has no internationally agreed definition and all at a time when we are grappling with the implications of a global pandemic? The aim of this article is to provide some clarity on the term net zero, lay out five key components of a robust net zero strategy and demonstrate how climate action translates to organisational resilience, which is more important now than ever before.

Net zero: a clear definition

Simply put, net zero is a state where we add no incremental greenhouse gases to the atmosphere. This means emissions output is balanced with removal of carbon from the atmosphere via carbon sinks (e.g. forests, mangroves, carbon capture, etc). Essentially, what is emitted must be removed to equal net zero.

However, with global temperatures already rising, net zero cannot simply be a carbon accounting exercise (and certainly not one we can wait until 2049 to start undertaking). Fundamental to net zero must be significant carbon reductions aligned to the decarbonisation pathway needed to limit global warming to 1.5 deg C. Therefore, we must rapidly reduce emissions to as close to zero as possible and offset, via removal, any emissions we are unable or are still working to reduce.

Despite no agreed international definition, since we published this explanation in February 2020 it is fast becoming consensus among climate experts and industry bodies as a robust interpretation of a net zero target.

What does net zero mean in practical terms?

How can an organisation build a credible strategy for successfully achieving net zero and what is really in it for an organisation? The following are five key components of a net zero strategy and the opportunities that they can present.

1. Decarbonisation aligned with climate change science

As mentioned, a net zero ambition is going to fall prey to criticism unless it includes an ambitious emissions reductions target. We recommend setting a science-based target (SBT), which are deemed best practice in target-setting. Climate disclosure frameworks, like the investor-led CDP, are now looking for these commitments.

At this time, it can still be a market differentiator for many organisations. For example, Landsec was recognised for climate leadership in our annual research, being the first in its sector not just to set an SBT but to have met its target so far by achieving a 40% reduction in its emissions.

With a national net zero target set for 2050, the expectation for emissions reduction is going to get stronger, legislation is going to get stricter and the costs of carbon removals will be great unless a business can successfully decarbonise. Having an ambitious target and, perhaps as importantly, a clear understanding of where actions need to be taken to achieve this target and the costs involved will ensure a business is well prepared to weather the increasing demands of the climate agenda.

2. A clear understanding of climate risks and opportunities

This month, chancellor Rishi Sunak announced that it will be mandatory for all large companies and financial institutions to disclose their exposure to climate risks by 2025 to support the greening of the UK economy.

Risk disclosure is being demanded by government as well as investors

This comes during the year that that the World Economic Forum named climate change as the top global risk both in terms of impact and likelihood. Just one year prior it had published a report titled Outbreak Readiness: Protecting Lives and Livelihoods across the Global Economy, which warned of the increasing risk of global pandemic and outbreaks of infectious diseases and the need to reduce our economic vulnerabilities. Given the context, this provides us with a sharp reminder of the necessity of heeding the warnings on future risks.

Risk disclosure is being demanded by government as well as investors, and net zero strategies are going to be much stronger if we understand both the risks and the opportunities that we face from climate change but also from the transition itself. This is how we can create adaptation and mitigation plans to future proof our organisations and seek out potential value in order to turn the net zero transition into positive business transformation.

3. Inclusion of the full value chain

Many organisations find that the largest part of their carbon footprint is their value chain emissions. These are emissions which fall outside of the organisations’ direct control. Organisations are coming under increasing pressure to demonstrate that they are taking responsibility for their full climate impact and the growing expectation is that a net zero strategy should encompass all emissions, direct or indirect of an organisation.

Organisations are coming under pressure to demonstrate that they are taking responsibility for their full climate impact

This poses many challenges, particularly for large organisations with complex supply chains or multiple products. However, it also holds the key to potentially large emissions reductions, increased efficiency, supply chain resilience and collaboration which can lead to new market opportunities.

For example, EcoAct worked with Telefónica, a multinational telecommunications company headquartered in Madrid, to set up a supplier engagement programme with its largest suppliers. This has proven extremely effective at getting these companies to set their own targets for a variety of environmental KPIs, which in turn are contributing to Telefónica’s value chain emissions reduction targets and helping it to build a more climate-resilient supply chain.

4. Innovation

To achieve the emissions reductions required is going to need transformational change for businesses—but this is quite possibly where the largest opportunities lie.

Consumers and other businesses are going to look to companies to provide them with the means to reduce their own emissions and solve their sustainability challenges. We are increasingly seeing businesses, not only realising the urgency of the climate crisis, but recognising the importance of transforming their businesses and bringing to market more sustainable products to remain competitive.

5. Offsetting

Unfortunately, there is no silver bullet for tackling climate change. Very few organisations will be able to eliminate all their carbon emissions today or potentially even in 2050. Offsetting, via credible, verified carbon credits, allows us to take urgent action to neutralise our emissions as we continue our efforts to reduce. The carbon market also provides a valuable source of finance to help share renewable technologies, preserve and regenerate precious habitats and improve the livelihoods of communities while reducing and/or sequestering global carbon emissions.

Climate is no longer the siloed responsibility of sustainability teams

Earlier this year, we supported British designer Anya Hindmarch in making her new “I Am A Plastic Bag” project carbon neutral. The bags, made out of an innovative new fabric created from recycled plastic bottles and coated with plastic from recycled windshields, result from a collaboration with suppliers to innovate new processes to reduce environmental impacts. To attend to remaining carbon impacts, carbon credits were purchased from a wind power generation project that aims to close the supply–demand energy gap in India with renewable energy and provide employment opportunities to local communities.

For many companies the carbon credits they purchase provide an additional means of engaging their internal and external stakeholders through stories of sustainability in the company and its climate targets.

Perhaps most importantly, climate is no longer the siloed responsibility of sustainability teams. The change that net zero requires and the growing demands of investors and customers for proactivity on climate places the net zero agenda firmly in the laps of business leaders, board members and senior managers. The decisions we as business leaders make today around climate change have more bearing on our future resilience than ever before.

Stuart Lemmon is chief executive (Northern Europe) of sustainability and climate consultancy EcoAct.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • Directors need to ‘up their game’ on ESG strategy
    April 4, 2022
    Board members looking at corporate reports

    Study says 70% of board directors say they are “not at all” or only “moderately“ effective at integrating ESG concerns into company strategy.

  • Are UK corporate governance rules leading to market malaise?
    January 14, 2022
    Share listings board

    A recent article argued the UK needs "more directors who understand risk-taking, not virtue signalling" if London is to regain its status.

  • Companies must put equality at the heart of the race to zero
    November 10, 2021
    Trees reflected in buildings

    Singular pursuit of net-zero by 2050 could exacerbate inequality and derail our chances of a climate-resilient future.

  • Pandemic 'has shown how vital employees are to corporate success'
    November 9, 2021
    Employees commuting to work

    Chartered Governance Institute report reveals 53% of FTSE 350 firms have changed their approach to “workforce voice” during Covid-19.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

carbon emissions, climate change, climate risk, corporate governance, EcoAct, strategy, Stuart Lemmon, sustainability

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • ESG resilience requires leaders to manage without certainty
  • News round-up: this week in governance
  • Being a CEO in 2023: how to navigate uncertainty
  • Sally Johnson joins Rentokil Initial as NED
  • How to boost decision making

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

2022 AGM Season Forecast: An Eye on The Horizon

To help prepare for AGMs in 2022, Equiniti (EQ) hi...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Creativity in a Crisis: a Boardroom Map for Innovation

Creativity in a Crisis: a Boardroom Map for Innovation

In the uncertain times at the height of any crisis...
Board Directors Guide to D&O Liability Insurance - November 2020 - AIG & Board Agenda

Board Directors' Guide to D&O Liability Insurance

Directors face liability over a range of new threa...
Leadership-in-Risk-Management-Board-Report

Leadership in Risk Management: Board Report

Board Agenda, in association with Mazars and INSEA...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...

 


 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|