Each degree Celsius of warming will erase 1.2% of the United States GDP, according to Solomon Hsiang, a climate scientist and economist at the University of California, Berkeley, and the co-director of the research group Climate Impact Lab. If U.S. companies do not act now to halt climate emissions, Hsiang predicts a loss of up to 10.5% of annual GDP, which equates to approximately $2.2 trillion per year.
Most organizations do not understand the gravity of the need to address emissions now. Businesses across industries and throughout the world are facing an existential threat that can no longer be ignored. It’s time to address the impact of rapidly accelerating climate change in the corporate sector. The effect of harmful emissions on the bottom line can’t be overstated.
Customers are choosing to purchase products from carbon-conscious companies and investors such as BlackRock, Balderton Capital and Alante Capital are considering sustainability in their investment processes. The market has moved beyond good intentions. To ensure an organization is successful in its efforts to measure and reduce emissions, it is imperative that they have a plan and tools in place to take on every component of the company ecosystem.
How do companies get started?
The first and most important step is to admit you have a problem and are emitting more than you think. Acknowledge your carbon footprint. Communicate a desire to learn and do better. Begin education at a strategic level first, then distill it throughout the organization to key stakeholders consistently over time.
In the absence of a universal standard, the C-suite must be knowledgeable about and capable of quantifying sustainability risks threatening their business — and the practices being put into place to ameliorate them.
Assemble a dedicated team and bring in a third-party consultant or software vendor to assess the company’s emissions and make recommendations. Typically, the sustainability team drives the effort. Include the CFO and CTO for data collection and the evaluation of cost and revenue implications. Ensure that your general counsel is also included in the conversation for compliance purposes. Representatives from operations, community relations, HR and communications should take part.
Next, conduct an assessment that provides a deep analysis of the company’s carbon emissions and overall sustainability practices. The assessment should include factors generating direct and indirect emissions, such as vehicle fleets and purchased energy including electricity, heating and cooling.
Host a series of regular meetings between executives, sustainability teams and consultants to discuss the results of the assessment, which actions will be taken, and the timeline for implementation. This will help to enlist missionaries in the efforts, from the top-down and bottom-up.
Once they are organized in their efforts, companies must also look at how they generate carbon emissions beyond their four walls. Start a dialogue with your value chain — this is where enterprise-grade SaaS emission platforms come in.
Scope 3 emissions resulting from assets not owned or controlled by an organization, but that impact their value chain, most often represent the biggest part of a company’s footprint. If you aren’t measuring and reducing scope 3 emissions, then your carbon reduction plan is not credible, even if you have reduced or eliminated scopes 1 and 2. The more you engage your stakeholders, the closer you get to the emissions, the quicker you reduce such emissions.
How might approaches vary?
Whether a small startup or a large enterprise, the approach to reduction is the same: Begin with measurement. Set science-based reduction targets and monitor your footprint on a consistent basis. Leverage fintech-inspired tools to make on-target, granular goals and a climate-positive impact. Map your business by department, brand, business units and geography, while also including the company’s value chain and suppliers.
Data plays an essential role in setting a company’s baseline. Without accurate information that is granular, you cannot determine if the actions you are taking are working, nor whether those you plan to execute in the future will work. In addition to a precise baseline, it’s imperative to be precise with approval workflow to prevent “garbage-in, garbage-out” data. There needs to be a massive amount of trackable and actionable data points — internally and externally — through the value chain.
Next, assign actions and establish deadlines to meet the goals. Ensure that your numbers are precise and utilize sustainability management software and carbon consultants to kick off your reduction journey before shifting to automation.
When it comes to reduction, choose your first battle by identifying where your highest emissions are coming from. Typically, these emissions stem from company transportation — burning fossil fuel for our cars and buses traveling to and from the office, or jetting to other parts of the world for a business meeting. Though they might seem small at the time, they add up to what truly matters.
Investigate each and every component of inside operations and your supply chain and select sustainable partners. You can’t blame your accounting department for not using recycled paper if your company is still doing strategic business with the most important Brazilian soy importer.
Continuously evolve and evaluate your climate progress on a weekly or even daily basis. Ideate, iterate and try again when you stumble. Stay accountable to your company’s emission reduction goals and remain open and transparent with regulators, employees, customers and investors.
What happens if companies don’t follow through?
Companies should begin implementing long-term changes to accommodate eventual green policy. While there may be incentives that companies may benefit from, the cost of energy and fossil fuels has been steadily skyrocketing in recent years.
This, in conjunction with the desire to leave the planet in a better place, should be reason enough to take action. Your company’s low-carbon efforts will pay in the end regardless of how long the wait for subsidies is.
Millennials and Gen Zs evaluate a company’s sustainability practice as part of the decision to accept a job offer. Companies of any size that are driven by climate action goals and efforts and share those transparently and publicly are more likely to attract fresh, intelligent workers who share the same personal philosophies.
Employees that work for organizations focused on net-zero emissions become a company’s biggest ambassadors and advocates in both internal and external conversations, not only helping to attract new hires, but also to maintain longer tenure in the workplace. Companies in industries such as oil and gas are struggling to adapt and having difficulty attracting talent.
What organizations are demonstrating early success?
Companies that are transparent and committed to their journey are recognized winners. They’re willing to acknowledge their carbon impact and have invested resources to tackle their emissions. Microsoft, HP, Orange, Beyond Meat and Bpifrance are succeeding in their climate action goals. When transparency is at the forefront, not only can organizations highlight their areas of improvement, but they can also publicly celebrate their successes.
Existing groups such as Amazon’s Climate Pledge, UNFCCC’s Climate Neutral Now, and The Climate Group’s EP100 allow companies to pledge their climate actions among others in their industry. These established groups allow your executive team to connect with other leaders who share the same climate philosophies as you do. Better yet, companies can form their own climate coalitions to explore emissions measurement solutions and tools with like-minded leaders. Share your progress, including trials and tribulations, regularly and transparently.
After COP26, it’s clear that companies have a big role to play in our journey to tackle climate change. From financing the green transition to supporting other businesses in their reduction efforts, corporations will have a massive impact on getting us closer to our 1.5-degree C target. And who knows, they might even be responsible for tipping the carbon balance.