Why Net-Zero Planning is Important for your organization
The impact of climate change has become one of the important issues facing humanity in the 21st century.
With a renewed focus on reducing carbon emissions and greenhouse gases (GHGs), many governments have committed to targets of net-zero emissions by 2050 or 2060, with smaller businesses (SMEs and MSMEs) pivotal in this journey to net-zero
What are the barriers to preventing action to decarbonize?
Costs
Lack of appropriate technology and infrastructure
Not enough government incentives
Lack of knowledge
Ten Reasons
Physical Factors
Technology
Staff and employees
Investors and Lenders
Society and Pressure Groups
Customers
Competition
Regulations
Corporate Compliance
True Believer
Physical Disruptions
Floods, droughts, typhoons, sea level changes are affecting our daily activities, including supply chain disruptions
Physical risks were 6 of the top risks according World Economic in 2022
Microclimate change
Higher chance of catastrophic loss e.g. from natural disasters
Pathogen evolution
As these risks become more likely and more impactful, businesses need to consider how resilient they are to the effects
Organizations such as the Task Force on Climate-related Financial Disclosures (TCFD) is supporting organizations to assess the financial impact of climate change on their business models
Technology
Missing opportunities to capture value from new trends
Costs and first mover risks of adopting new technologies
There are many research grants now available for new technology development we are waiting for the next technology/cost paradigm shift, such as we saw in the past few years with solar power and electric vehicles.
Staff, Employees and Consultants
It is highly likely that your employees already thinking, or even worrying, about climate climate change. Yu may miss out on the best talent if they attracted by your competitors’ better climate efforts
It is important to set up dialogues with staff about your planning
Investors and Lenders
Many new grants, funds and “green” loans facilities are becoming available all over the world. Also, many traditional sources of finance (especially multilateral agencies) are now not available to some of the more traditional resource suppliers (such as coal miners).
Also, the investment valuation methodology has changed considerably (for example the of internal carbon pricing).
There is growth in popularity of sustainability indices such as FTSE Smart Sustainability Index, FTSE Environmental Markets Index, and the Dow Jones Sustainability Index. These are likely to become more stringent.
Fiduciary duties are now recognized as incorporating sustainability perspectives. For example, under the UK ESG regulations, pension funds have a duty to disclose their consideration of ESG factors, and their engagement with investee companies on those factors.
The market for Green Bonds is growing rapidly, with global sales reaching US$513 million in 2021. State-based green funding mechanisms are becoming more common in many countries.
Shareholders, Society and Pressure Groups
Many politicians and executive from public companies are very alert to being accused of “greenwashing”.Greenwashing is a tactic that companies use to ‘appear’ more sustainable than they actually are In these days of social media, many organizations find themselves victims fo targeted protests - "naming and shaming".
Customers
In may retail, hospitality and food sectors , emissions reporting is critical and is often used as as a criteria for companies provided goods and services to government bodies and large corporations increasingly required to show their net-zero or decarbonization planning credentials.
Competition
Risk of competitors growing share & competitive advantages
Potentially costly to keep pace with larger competitors
Regulations
Governments usually use two methods for control – the “carrot” and the ”stick”. The “carrot” often takes the form of a grant or special incentives to comply with low carbon objectives , and the “stick” can be in the fprm of a carbon tax, based upon emissions of CO2eq.
Costly to implement and demonstrate compliance
Implementation may obstruct other commercial priorities
Fines for breach/non-compliance
Corporate Compliance
Many organizations, whether non-profit, corporate or franchises, needb yo have consistent decarbonization policies and emissions reoorting meethodlogies throughout, regardless of their location.
The True Believer in Climate Change
I like to use the example of SolarCentury, UK’s biggest solar energy producer. The founder, a PhD Geoscientist (funded by BP) became what I call a “true believer”, bybrecognizing, raising the profile of climate change risk, and starting a new business that made a difference.
Jeremy, his colleagues and investors, started this business amongst a lot of skeptics (myself included) and has succeeded in changing the outlook for solar power , not only in the UK, but also in many parts of Africa.
Why Commit to a Decarbonization Plan? A summary:
Improve Efficiency
Reduce costs by managing your resources more efficiently. You can take steps today that benefit both your business and the climate.
Manage Business Risk
Build a more resilient business and better protect yourself against climate-related damage, disruptions, and closures.
Gain a Competitive Advantage
Become a leader in the fight against climate change. Show investors, employees, and customers how you’re adopting ambitious goals.
Enhance Access to Capital
Keep insurance and lending fees affordable and stay attractive to investors by reducing your exposure to climate-related risks.
Grow Your Business and Brand
Become part of a network of like-minded businesses. Gain opportunities to grow your brand and attract new customers.
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