Committing to net zero emissions is committing to changing your business, because the current way business operates is incompatible with a sustainable future. Eleni Polychroniadou, commercial director of Sintali, highlights the progress being made and the vital importance of matching ambitions with actions.
[INSERT NAME HERE] commits to net zero target by 2040. Sound familiar?
It seems like every week we hear of a new company making a net zero commitment. New research by the Energy and Climate Intelligence Unit (ECIU) and Oxford Net Zero calculates that at least one fifth of the world’s 2,000 largest public companies, representing sales of nearly $14 trillion, now have net zero commitments.
With initiatives such as EP100, the WGBC Advancing Net Zero initiative, and the Race to Zero campaign, that number is only set to rise. Not to mention, the pressure from the investment community and from government, which is putting market drivers in place to make the transition to net zero more compelling.
Now I am not going to stand and say that it’s bad to see so many commitments for net zero, because I am a big advocate for aiming high and then figuring out how to make it work. But…and yes, there is a but… we can’t just see talk and no action. I am shocked at how many companies I have spoken to that have made commitments and have no idea how to make it happen.
The research by ECIU and Oxford Net Zero shows less than 50% have a published plan. Why is that problematic? Because addressing the net zero target becomes a “future problem”, less of an immediate action item and something that can be put aside for an unspecified date in the future.
This means that the chances of realising net zero ambitions will be diminished, and the exercise will become more costly and challenging for those involved. In addition, we need companies to create actionable plans to avoid the ‘greenwashing’ that will become more and more prevalent if all we hear about are ambitions.
Why do you need a plan now?
Committing to net zero emissions is committing to changing your business, because the current way business operates is incompatible with a sustainable future. Changing an entire business model isn’t something that can be done overnight. It will take years to genuinely transition away from business as usual- and the 2040 target is a lot closer than it looks! Starting now also gives companies the opportunity to iterate and develop the plan, because inherently nothing goes quite according to plan.
Behind the scenes, there are also regulatory changes that will also accelerate the speed at which companies need to take action. In the European Union, a provisional bill passed at the end of April starts the process of making EU climate efforts legally binding and irreversible. That is one of the things that is most missed in the market right now – the acknowledgment that the legislation is coming. And once it’s in law, the cost of switching business operations will be much higher.
Another key reason why preparing the plan now is so important is financing. For many companies, decarbonisation is a significant investment that needs to be financed externally. To be able to access green financing to support the transition, a company needs to prepare an investment strategy. Lenders and investors will not provide support unless there is a clear plan of action.
Where to start?
Reaching net zero emissions is complicated and involves a lot of careful analysis. Companies must start with a carbon footprint calculation to see the split between operational emissions and emissions from its supply chain.
For many companies, particularly those in the services industry, the supply chain carbon footprint will be higher than the operational emissions. But that doesn’t mean operational emissions (industry jargon: scope 1 and scope 2) should be ignored. If every company sorts out their own operations first, they will likely be addressing someone else’s supply chain emissions.
So what does your own operational carbon footprint look like? Well one part will definitely be the buildings you own, operate and/or lease. Whether it’s offices, warehouses, factories, or stores, the built environment you occupy and use will contribute in a big way to your greenhouse gas emissions.
To reduce the footprint of a portfolio of buildings, you first need to evaluate the current building stock and understand where your biggest impact is. Then you need to evaluate what steps you need to take to reach net zero and how much these steps are going to cost. Meeting net zero targets isn’t about offsetting the impact of buildings, but rather using the energy hierarchy to reduce the energy demand of the assets, improve the efficiency of the asset, utilising renewable energy and finally moving towards procurement of renewables and offsetting as the last resort. Once you know your options and the cost needed, you can prepare a plan for your refurbishment strategy and lay out exactly how to get to net zero carbon.
Now companies are probably thinking about the financial investment to do this effectively – the money required to do the initial analysis, the money required to do an in-depth cost analysis, the money required to do the refurbishments, you get the picture. And the reality is, getting to net zero won’t come for free. But it doesn’t have to be such an onerous task. There are tools out there, like the EDGE App, which demystify what it takes to get to net zero and even do the initial calculations for free. The free software tool, developed by the World Bank, democratises access to data and means that every company around the world can develop an action plan to get to zero carbon, with initial costings and estimated carbon savings.
The role of communication, trust and data
Alas, developing an action plan isn’t always enough. With the media full of claims, statements and multiple definitions of what net zero emissions actually entails, grounding claims in validated data is important to build trust and credibility with stakeholders.
For the built environment, the way to do this effectively is through certification. All certifications serve the same purpose. A certification is the commitment to undergo a process and get a third party to validate your achievements. In many cases, you can do the work without getting the piece of paper at the end, but it lacks that credibility that comes with having an independent entity verifying the process and outcome. Certification standardises the playing field and acts as assurance for internal and external stakeholders.
We should be very aware of the concerns expressed by activists, investors and the broader public that “net zero” has created an opportunity for greenwashing. Companies willing to commit to verification help strengthen the broader resolve to move to a net zero future and do it in a transparent way.
The path to zero carbon
The road forward isn’t clear cut. Technology changes, legislation changes and priorities change. What is certain though is that reducing global greenhouse gas emissions is the number one priority and action must start today. Companies must make tangible plans that clearly and transparently show the pathway forward to net zero emissions. It will be an iterative process, but it needs to start today with actions as well as ambitions if we are to stand a chance of making net zero a reality.