ambition is growing and the C-suite is trusted to lead the journey to Net Zero - but there is a major disconnect between ambition and action.
The poll of 120 sustainability leaders from key sectors, including industry & manufacturing, consumer goods and services, finance, property and construction, found that - despite the profound challenges of COVID-19 - the momentum to decarbonise is continuing apace in most organisations. The poll found that:
- Most organisations' climate mitigation efforts (65%) have either remained the same through COVID-19 (38%), or even accelerated (27%).
- The drive for decarbonisation accelerated in the financial services (19%) and technology and telecommunications (16%) sectors, which had the largest proportion of respondents stating that their efforts have increased.
- Around a third of respondents (36%) said their climate mitigation efforts have slowed down (20%) or had temporarily paused until there is more economic certainty (16%).
South Pole [1] CEO, Renat Heuberger, said:
"Our survey indicates that the Net Zero ambitions of most organisations are not
only showing some immunity to the COVID-19 crisis, but many are actually using
the major reset to accelerate their responses to the even greater threat of
climate breakdown. Many organisations have realised that they are vulnerable to
external shocks, and are thinking strategically about what could be the next
one - the climate emergency. This new ‘Net Zero-ready' mindset promises to help
organisations break out of old cycles of incrementalism to achieve impact, by
investing in innovation, enhancing supply chain resilience, and collaborating
with industry players to find solutions."
Net Zero Targets Lack Interim Milestones
A staggering 83% of executives polled work for organisations that have either
set a Net Zero target (50%) or are considering setting one (33%). This momentum
behind Net Zero highlights a general trend of increased sustainability action
among private sector companies.
However, the survey also showed that only 11% of organisations have set a
science-based target (SBT), and none of the organisations that have set a Net
Zero target have also set a science-based target.
Companies that set a Net Zero target need to develop a decarbonization strategy
in line with climate science and a 1.5 °C level of ambition in order to meet
their Net Zero commitment. A science-based target is a requirement and the
basis for a long-term decarbonisation journey. The fact that only 11% of
companies polled have set a SBT could be a sign that companies are not ready to
commit fully to a decarbonation strategy.
Along these lines, the research also found that less than half (48%) of those
who had set NZTs had also set milestones to get there. There is a risk that
CEOs and boards have adopted NZTs as a means to drive goodwill and manage
reputational risk, but are not taking the difficult steps to restructure their
business models and decarbonize their supply chains to reach these targets on
time.
Emergence of a Net Zero Mindset
The report reveals that COVID-19 has been a catalyst for innovative thinking
and the importance of building resilience to disruptive events and quickly
changing business models and behaviour.
The survey indicates that COVID-19 has changed attitudes to external shocks and perceived vulnerabilities, including to climate change. This seems to have given rise to an increased focus on innovation and collaboration to prepare for external shocks:
- Openness to innovation: The majority of respondents (69%) indicated their organisations are now more open to adopting transformational innovation.
- Level the playing field: The second highest response (63%) was that organisations are now more open to collaborating with other industry players on climate solutions.
- Supply chain resilience: The third and fourth largest responses showed that COVID-19 has focused minds on the environmental impact of their value chains (58%), plus the resilience of supply chains to environment-related impacts (57%).
The C-Suite is
Trusted to Lead on Net Zero
The research found that C-level executives (including CEOs and CFOs) are the
most trusted job roles to lead the journey to Net Zero. The following
departments ranked most highly as having the knowledge and expertise of climate
risk (outside of sustainability / CSR teams), needed to drive the Net Zero
agenda:
- C-level leadership, plus Operations teams were joint first, receiving 49% of responses.
- Marketing and communications received 38% of responses.
- Innovation / R&D received 32% of responses.
- The lowest ranked job roles were HR / recruitment (17%); sales (14%) and legal (12%).
High levels of confidence in
the C-suite to drive Net Zero is cause for optimism, as climate risk cuts
across entire organisations. However, the low rankings of HR and legal is a key
challenge, since hiring ‘climate-smart' skills, plus managing the legal
obligations of climate-related financial disclosure, are key to managing
climate risk.
Net Zero Drivers and Enablers
The survey explored the key reasons for organisations to fully integrate Net
Zero, showing that the main drivers are related to protecting brand and
reputation. The following were ranked most highly:
- The opportunity to lead and define the climate action space (54%).
- Customer/client/stakeholder demand for low / zero carbon products, goods and services (46%).
- Reputational risk (43%).
Setting concrete milestones
that address carbon-intensive hotspots is crucial for organisations to meet Net
Zero targets, and to determine where and how to invest effort and funds.
Ultimately, it will be the breadth, robustness, and pace of climate action that
will set leaders apart. For this, organisations must cement their aspirations
with accountable milestones.