Giving importance to sustainability is essential to meet investor pressure, consumer demand, regulatory requirements, talent acquisition and ensure increased productivity, explains Talal Rafi, Deloitte Climate and Sustainability Consultant.
1.5°C Business Playbook4 ways for companies to take effective climate action
- Companies have the scale, flexibility, resources and expertise to achieve ambitious climate goals.
- Leaders can start by mapping out the net-zero future of their company.
- Businesses can be climate leaders, become resilient, drive innovation and create growth at the same time.
Taking climate action is good for the planet, society and the corporate bottom-line. Plain and simple.
That’s a simple statement with a complex history and background. But today there is a clear shift in the demands of customers, employees, governments, investors and more. They expect companies to be climate leaders and with good reason. Companies that don’t consider climate risks and act to mitigate them will find it difficult to adapt and thrive.
We see this in recent stands by investors such as Investor AB, which is a minority owner of Ericsson. Customers demand change, and shareholders accountability. And prospective employees are clear in their desire to work for companies that take climate action seriously. Eighty-eight percent of millennials say their job is more fulfilling when they have a chance to make a positive impact on social and environmental issues.
Companies are among the best positioned organizations in the world to achieve ambitious goals. They have scale, flexibility, resources and expertise. Many have either a global reach or an intimate knowledge of local markets and societies.
To take the telecoms sector as an example, a significant part of a service provider’s emissions comes from the power used to run the network. With investments in renewable energy and energy efficiency, service providers can have a real impact globally. Already, the ICT industry is by far the largest purchaser of renewable energy.
Besides environmental benefits, there are other incentives such as more efficient operations and lower costs. Network operators spend around $25 billion on energy to run their networks. And we project that data traffic on mobile networks will quadruple in the near future.
To address this challenge, Ericsson has developed a network-level approach called Breaking the energy curve that both supports cost savings and enables an exponential growth of data traffic without increasing energy consumption.
However, the private sector cannot work alone. Companies need to partner with governments, public agencies and civil society movements to effect real change.
What action must companies take?
What’s the challenge? We must stabilize global temperature rise to a maximum of 1.5°C above pre-industrial temperatures. To achieve this objective, global carbon emissions need to peak at the end of this year and reduce by at least 50% each decade reaching net zero by 2050. At the same time, we must remove some carbon already emitted into the atmosphere.
Small and medium-sized enterprises (SMEs) make up about 90% of businesses and account for more than 50% of employment worldwide, according to the World Bank. Right now the maturity and available resources of small and medium-sized companies to take climate action is limited. To have any possibility of halving global emissions by 2030, SMEs need to join the race to zero.
In order to help companies of any size take climate action, a group of industry and academic partners recently launched the 1.5°C Business Playbook. It is a framework for enterprises to identify value opportunities in their own business and prepare for a transition to this new economy.
Small, medium and larger companies may find it useful both for strengthening their own strategy and to help in engaging suppliers and setting requirements. Companies with advanced climate strategies that have already joined sector climate initiatives can use it to benchmark their approach and raise ambitions. In this capacity, the playbook will help to establish a clear climate strategy, define targets aligned with science, set requirements for suppliers, and align supply chains and value propositions with a 1.5°C ambition.
The playbook outlines four pillars for climate leadership within your business:
Pillar 1: Reduce your own emissions
Emission reduction targets should align with climate science, starting with at least 50% reduction in carbon emissions from company operations in the next ten years. These include emissions from sources such as furnaces and vehicles, as well as purchases of electricity, cooling and heating. Business travel should also be included in this pillar. One way to effectively reduce emissions from business travel is the potential for virtual meetings to become a permanent feature of our working lives. The working from home culture developing due to the COVID-19 pandemic has showed that we can effectively reduce the need for many kinds of business travel.
Important actions for pillar one include:
- Map out your own greenhouse gas emissions.
- Decide your base year for the reduction commitment and set an official target.
- Decide in which order to eliminate emissions and develop a plan on how to reach the targets. Start with easy to achieve targets that are economically beneficial and create positive momentum in the organization.
- Be transparent. Disclose your company’s own carbon emissions, plans to reduce them, and emissions reductions as part of your public reporting annually.
Pillar 2: Reduce your value chain emissions
Value chain emissions include all the emissions “outside the company walls” and including upstream activities, such as from suppliers, and downstream activities, such as sold products. They normally represent the largest share of a company’s total footprint.
Enterprises need to work actively to drive down value chain emissions. This can be done in many ways. Examples include procurement guidelines and supplier code of conduct criteria, changes in the design of products and collaborations with suppliers and customers.
Important actions for pillar two include:
- Map out the carbon emissions associated with your value chain to understand which are the most substantial and start tracking them systematically.
- Within the first year, set a target for the first halving of absolute value chain emissions.
- Decide in which order to reduce carbon emissions and develop a plan on how to reach the targets.
- Be transparent here as well. Disclose value chain emissions and plans to reduce them as part of your public reporting annually.
Pillar 3: Integrate climate into your business strategy
Many industries must be fundamentally redesigned to achieve a 1.5°C target. This will require transforming business models that could open up new revenue streams and drive innovation. Company leaders can start by mapping out the net-zero future of their company. What does it look like and what will it take to get there?
Some examples include developing new fossil-free materials and adopting renewable energy solutions and electric vehicles. Enterprises can also help shift consumer patterns through vehicle sharing, circular economies or close-to-home tourism.
Important actions for pillar three include:
- Review and update your vision, mission statement, strategy and processes to reflect your climate commitment.
- Move your portfolio towards solutions which help your customers avoid emissions and scale these solutions exponentially.
- Integrate your climate strategy in your services and product roadmaps and require all new solutions to be compatible with the 1.5°C ambition.
- Consider accounting for a price on carbon to make climate an integral part of your investment procedures.
Pillar 4: Influence climate action in society
Climate leaders use their company network and sphere of influence to support and accelerate climate action. This can be done by influencing and working with a wide circle of customers, suppliers, governments and NGOs.
One example of this is the Race to Zero campaign, which has mobilized a coalition representing over 2,000 cities, regions, businesses, some of the world’s biggest investors and universities. These “real economy” actors have joined in the largest-ever alliance committed to achieving net zero carbon emissions by 2050 at the latest.
Important actions for pillar four include:
- Collaborate with suppliers and customers to enable innovative technologies and sustainable transformation of value chains.
- Influence local and national policymakers to step up climate action and policies in line with a 1.5°C ambition.
- Integrate a 1.5°C climate commitment in overall public affairs and corporate policies, including those related to finance and financial investments.
Take the next step towards climate leadership
As the Chinese proverb attributed to Lao Tzu goes: “A journey of a thousand miles begins with a single step.”
By building on the four pillars from the playbook, companies can be climate leaders, become resilient, drive innovation and create business growth at the same time.
Many companies will have some things in place already and some might not. Some have more resources than others. You just need decide to start your journey today. In the end, our society and climate cannot afford to only have a few leaders. We need everybody to become a leader.
This article was originally published by the World Economic Forum.
This week’s Bonn Climate Conference provided an opportunity to take stock of real economy action and workshop how non-State actors can help address loss and damage.
Deloitte Climate and Sustainability Consultant, Talal Rafi, explains why with increasing support for environmental sustainability, green investments and climate innovation, key sectors can decarbonize and move towards a net zero.