Increasing numbers of businesses are setting ambitious decarbonisation targets in a bid to achieve net-zero by the middle of the century, according to a new study.
According to Climate Action 100+, there has been a 17% year-on-year increase in the number of large businesses setting such targets.
The report found a variety of methods used by organisations to deliver them with some relying on offsets but others engaging with the concept of “greenhush” – whereby corporates don’t publicly outline decarbonisation efforts.
Another new report from ENGIE Impact suggests progress against decarbonisation targets is mainly by delivering quick wins, such as public targets setting and decarbonisation across Scopes 1 and 2, where they have direct control and influence.
ENGIE Impact’s 2023 Net Zero Report features more than 500 major businesses, each employing more than 10,000 people.
Their study revealed 62% had made a public commitment to ambitiously reduce carbon emissions across the organisation and 98% of companies have made some sort of progress towards these targets.
However, only 12% of companies rate their ongoing sustainability efforts as “extremely successful,” and 75% say they have already achieved the “quick wins” in their decarbonisation plan.
Quick wins range from publicly announcing a net-zero target to implementing operational improvements to help reduce emissions.
But only 12% of the businesses quizzed in the research feel they are “on track to meet or exceed their ambitious decarbonisation goals”, with many facing new challenges now that the quick wins have been achieved.
The report states that “organisations may feel they have exhausted many of the easy fixes around carbon reduction and are starting to be confronted with more challenging barriers to implementation and execution”.
Challenges include the lack of government incentives, the short-term mindset of the corporate investment cycles and a “war for decarbonisation talent within industries”, in addition to longer standing concerns such as a lack of internal, external and cross-functional collaboration.
“Our research reveals signs of progress from corporations around the world, but the process must accelerate, and we’ve learned there are challenges along the way that many leaders don’t anticipate at the beginning of this journey,” ENGIE Impact’s chief executive Mathias Lelievre said.
“Our report identifies the most common barriers to overcome and strategic actions to clear those roadblocks and accelerate decarbonisation.”
The report goes on to outline some tips and strategies for businesses to continue to make progress on their net-zero decarbonisation journey.
1) Maintain long-term focus and belief
The report suggests that organisations should “double down” on decarbonisation resource allocation to create long-term competitive advantages that could negate the short-term volatility caused by things like the energy cost crisis.
“Strong leadership can disrupt the cycle of short-termism when measuring ROI on decarbonisation investment,” the report states, warning that cutting funding for decarbonisation initiatives now would be a “mistake”.
2) Establish governance and accountability
The report notes that there is no silver bullet to building in decarbonisation capabilities, but that some firms are trying to empower decarbonisation actions at local levels. “Every organisation should establish a model that will deliver maximum return on decarbonization investments,” the report adds.
Some 56% of respondents claimed to have implemented opportunities for front-line staff to be involved in net-zero actions. A further 23% will consider introducing such internal collaboration models by 2025.
3) Close the implementation expectation gap
ENGIE Impact notes that there is a “misalignment between the expectations of senior executives and those responsible for implementing decarbonisation initiatives,” which could derail future progress.
Additionally, 54% of executive decision-makers rate their organisation as ‘considerably successful’ or ‘extremely successful’ in executing its sustainability plan, compared with just 41% of respondents in operational roles.
The report notes that executives are more driven by meeting the needs of external stakeholders such as consumers and investors, while operational leaders are more focused on regulation and reducing costs for the business.
The report suggests that successful organisations will need to realign executive visions with the realistic expectations and know-how of operational leaders to find a middle ground that drives decarbonisation.
4) Increase executive accountability
The report highlights the importance of executives being held accountable for the success of their organisation’s decarbonization activities, treating carbon reduction commitments as seriously as financial targets”.
However, around 70% of respondents claimed they lack incentive or ownership of strategies at an executive level in order to drive carbon reduction and actually deliver on targets, with 29% citing this as a “major barrier” to progress.
Almost half say their executives have “clear, personal accountability” for decarbonisation targets and 29% expect a formalised accountability structure for these targets to be introduced by 2025. However, only 36% currently link the remuneration or bonuses paid to executives to decarbonisation targets.
5) Activate the right decarbonisation enablers
ENGIE Impact notes that businesses need to use new and evolving tools to help meet targets, namely innovative finance models, carbon pricing, and “investing in decarbonisation data maturity”.
A common challenge for net-zero targets is that of data, with many corporates struggling to improve the quality of the data they have and collect. This is echoed in the report, which found that 37% of companies have a “single source of truth of decarbonisation data” for the entire organisation, meaning that they have to synthesize different data sources and manually extract relevant data to create better oversight. The report notes that this is “both time-consuming and unreliable”.
6) Collaborate with the supply chains to address Scope 3 emissions
The final point covers the complex issues of supply chains, which can have an emissions footprint far in excess of corporates’ levels.
While 58% have “clearly communicated” their decarbonisation goals to suppliers, only 38% have introduced supplier commitments into formal procurement contracts, although a further 38% plan to do so by 2025.
The report notes that “successful decarbonisation leaders recognise they cannot achieve long-term carbon reduction on their own”, suggesting that decarbonisation needs to be a shared incentive across the value chain.