What is driving companies to go net zero? Hint: It’s not government regulation
In the 2021 South Pole net zero report – based on a survey of over 200 sustainability leaders representing 15 sectors across five continents – it has become abundantly clear that competition and brand position is driving net zero ambition, not government pressure. At least not yet.
Last year, South Pole’s 2020 report on net zero found that COVID-19 had propelled climate ambition to the top of the corporate agenda – and surprisingly, companies had set net zero targets during a year plagued by a pandemic. But few organisations had set concrete milestones on how to get there, prompting the question: Are they serious about their climate goals?
This year we were eager to see what, if anything, had changed.
- More companies with net zero targets have now added science-based targets as milestones. But the urgency to act now is lacking. In last year’s survey, none of the respondents had set both a net zero and a science-based target, an important milestone on a net zero journey; in 2021, 13% had done so. Still, too many companies lack clarity by when they plan to achieve their targets.
- Companies are focusing on lowering their emissions rather than simply offsetting them. Companies are turning to renewable energy, energy efficiency and greening supply chains by addressing scope 3 emissions to achieve net zero targets. These are followed by voluntary offsets and nature-based solutions. While technological carbon removals were overall the least popular net zero enabler, they were ranked high among businesses with a later net zero target date, either 2040 or 2050.
- Government action and regulation is not driving climate commitments. Regulation was trailing surprisingly far behind in the list of forces shaping the net zero landscape, indicating that the pressure to reduce emissions by governments remains low. So what are the drivers pushing companies to achieve net zero emissions?
- The responsibility for net zero emissions in companies has yet to permeate teams beyond the C-suite and sustainability departments. While high level of trust in the C-suite to achieve net zero emissions is cause for optimism, it is clear that the responsibility for climate action is concentrated at the top and not yet a task where ownership is shared among all levels of a company.
Beyond the C-suite, most corporate functions do not feel ownership of net zero
- As climate change rages on, adapting to a warmer world becomes more important for companies. While over half of organisations claimed to be pursuing some form of climate adaptation efforts, only one in five (22%) have a clear strategy on how to adapt to the hazards of a warming planet, and only 7% have actually increased investments towards climate adaptation activities.