How to begin the business journey to net zero carbon
How are the corporate sustainability leaders tackling the climate crisis and what progress is being made? What do businesses need to be doing? Mark Chadwick, CEO EcoAct UK, explores these questions.
One year ago, the Intergovernmental Panel on Climate Change (IPCC) released its special report into the global impact of temperatures rising at 1.5C degrees above pre-industrial levels.
Propelled by its stark warnings, as well as a rising number of extreme weather events and wildfires, the past year has seen unprecedented action for climate change, including international student strikes, extreme climate protests, and a net zero carbon target written into UK legislation.
As a result, businesses face mounting pressure to address their impact on the climate and demonstrate how they are taking action to their stakeholders. Demands are now coming from consumers, employees, investors and, soon, the government. However, understanding what to do to meet the demands and to aim for net zero is still a challenge.
Is business falling short?
In September, EcoAct released its ninth annual report into the sustainability reporting performance of the FTSE 100 companies. In the context of its net zero target, it is important to understand what progress is being made on climate-related sustainability by large companies.
Only eight per cent of companies in the FTSE 100 are carbon neutral1; 15 per cent have so far made commitments to carbon neutrality. This falls far short of our goals to limit global warming, but it is an encouraging sign given that the research looks at 2018 sustainability disclosures, so these targets are in advance of the new UK legislation.
Here is a summary of some of the other findings in the research, looking at some of the important elements of climate-related sustainability for businesses.
Assessing climate-related risks: 75 per cent of FTSE companies are assessing climate risk. However, fewer than 50 per cent have a clear plan to mitigate these risks.
Target setting: The research shows that 81 per cent of companies have set some kind of emissions reduction target and 29 per cent have set science-based targets (SBTs). The majority of these SBTs are in line with limited global warming to 2C as opposed to 1.5C or well below 2C. From this month, a new SBT will only be such if it is aligned to the latter and, therefore, the latest scientific consensus on relative safe warming levels.
Reductions: 58 per cent of companies are on track to meet their emissions reduction targets and companies are more likely to be on track with their targets if that target is an SBT.
Renewable energy: the growth in renewable energy continues with 77 per cent of companies now using it compared to 74 per cent in 2018 and 65 per cent in 2016.
Offsetting: Offsetting has almost doubled this year from 12 to 27 per cent indicating a growing awareness of the need to compensate for carbon footprints while reducing emissions.
What are the top-ranking companies doing?
This year Unilever topped the rankings in the report for the FTSE 100, but also across the full international research, which includes the DOW 30, CAC 40 and IBEX 35 indices. The company has committed to halving the environmental footprint of the making and use of its products. They are also committed to best practice climate-related reporting, including aligning to the recommendations of the taskforce on climate-related Financial Disclosures (TCFD) , using climate scenario analysis to assess climate risk and have set an internal carbon price.
“Those businesses excelling in our research are those who have recognised the commercial imperative of tackling climate change.”
Consumer-facing companies, particularly fast-moving consumer goods (FMCG), IT and telecommunications, and energy, water and multiutilities companies, have been acknowledged for high performance this year. This is likely to be driven by the growing demand from consumers and the general public.
The companies scoring highly demonstrate that they are assessing and recognising the opportunities in tackling climate change and developing low carbon and even carbon neutral products for their customers.
What should business be doing?
We are in the early stages of the journey to net zero and businesses are trying to navigate the best path forward. Our advice is that businesses should:
- at minimum be looking to assess the climate-related risks across their full value chain
- measure their impacts across all scopes
- set ambitious (science-based) emissions reduction targets alongside a robust strategy for reducing those emissions.
It is also vital to look at the opportunities. Those businesses excelling in our research are those who have recognised the commercial imperative of tackling climate change and are turning this into a commercial positive for their organisations.
EcoAct UK is delighted to be founding members of Business in the Community’s Net Zero Carbon Taskforce, working with others to develop the pathway that will help all businesses to be part of the solution to our climate emergency. Businesses will play a crucial role in developing the low carbon economy and enabling us to reach our goal of net zero by 2050. Although the challenge is huge, we are seeing increasing evidence of the possibility and the opportunities of ambitious climate action in business.
- The Sustainability Reporting Performance of the FTSE 100 (2019); EcoAct; available at info.eco-act.com