COVID-19 is making organisations 'Net Zero Ready' - but few have set concrete milestones
They talk the talk. But do they walk the walk? Survey of sustainability leaders finds climate 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.
Most organisations' climate mitigation efforts have stayed the same - or even accelerated - under COVID-19, according to research commissioned by the global climate change experts, South Pole.
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 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).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.
Claire O'Neill Managing Director Climate & Energy, World Business Council on Sustainable Development (WBCSD) said: “COVID 19 has underlined the urgency for all businesses to build resilience to the risks we face -- the greatest of all remains climate change. Businesses aligning their strategy and products with a net-zero economy will benefit from a range of opportunities: a lower cost of capital, enhanced resilience against future external shocks and a license to operate in a transforming net-zero economy. As boards take stock, restructure their models and revamp their strategies, now is the moment to align COVID-19 recovery plans with pathways to net-zero emissions."
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.
About South Pole
South Pole is a leading global carbon project developer and provider of climate solutions. South Pole currently supports over 1,000 companies and organisations in designing and implementing their sustainability strategies, moving them from ambition to climate action.
Key economies, including China, Japan and the EU, have set targets to reach Net Zero GHG emissions. The UN Race To Zero campaign has mobilised a coalition of leading Net Zero initiatives, representing 452 cities, 22 regions, 1,101 businesses, 45 of the biggest investors, and 549 universities. Also, over 1,000 companies are now working with the Science-Based Targets initiative to develop independently approved decarbonisation strategies in line with climate science.
About the research
The research was conducted via a multiple-choice online poll, with questions focusing on Net Zero, science-based targets and decarbonisation milestones in the context of organisations' current climate ambitions. The research primarily collated the views of executives that attended the world's first Net Zero Festival, a virtual event aimed at CSR and sustainability professionals held between 2 - 4th October 2020 by Incisive Media. The event was attended by 1,100 sustainability-focused executives, and focused on Net Zero action, including leadership, innovation and culture.
120 executives participated in the poll, representing sustainability-focused professionals from a range of sectors, including Industry & Manufacturing; Consumer Goods & Services; Technology & Telecoms; Property & Construction; Finance & Investment and Public Sector & Government. Most respondents (35%) worked in CSR/Sustainability teams. The sample also included other job roles, including C-Suite executives such as CEOs, COOs, etc (17%), as well as Marketing & Communications (22%) and Procurement (8%).