In part one of this two-part series, discover how to deliver real net zero progress by developing the right leadership capability and understanding the specific drivers of change for your organisation and sector.
In many organisations, the responsibility for climate action and net zero used to sit with a specialist sustainability function to the side of the core business. In some organisations it still does.
Given the nature, magnitude and immediacy of the challenge, this is no longer sufficient (if it ever was). The transition to net zero needs to be at the very heart of your business strategy, not only in terms of how your business runs, but also how and where it competes and wins.
Board members don’t have to be climate experts, but they do need enough of an understanding to provide effective, well-informed leadership. An appropriate level of knowledge about climate change and the net zero transition should be a fundamental part of board and senior executive competency frameworks, and appropriately built into recruitment and development processes.
Boards and executive leadership teams also need ready access to specialist expertise to help inform strategic direction and monitor performance, so ensure you are appointing the right people and suppliers, with a proven track record, to provide that support. Key areas of expertise will include emissions measurement and target setting; opportunities for low carbon technologies and innovations in your sector; and climate change and net zero risk assessment.
2. Understand the drivers of change for net zero transition
As with all strategy development, it is vital to understand the key drivers of change for your sector and business. When defining your strategy for climate change and the net zero transition, the following key factors should be considered under a range of temperature scenarios over the short, medium and longer (i.e. 10+ year) timeframe.
To establish potential climate-related opportunities to improve business performance, look at emerging trends, such as low-carbon technology innovation, renewable energy, government funding and incentives, carbon pricing, and stakeholder sentiment.
Consider both efficiency opportunities (e.g. reducing energy consumption) and growth opportunities (e.g. new or different positioning, products, services, propositions and markets).
Conduct analysis to identify, measure and mitigate risk across your end-to-end value chain. These will include:
Physical risks: Risk of losses resulting from climate change, which may be chronic (resulting from sustained, long term effects, such as rising sea levels) or acute (resulting from individual climate-driven events, such as severe storms)
Transition risks: Risks resulting from societal, legislative, technological and economic shifts to a low carbon economy. For example, a company and its products may be rendered obsolete, if it fails failing to respond quickly enough to new demand or technologies.
Understand what changes you will need to make to what your business does, and how it operates, to safeguard your company’s future valuation – as well as its capability to compete, secure investment and attract and retain top talent.
The future viability of your business should be the key driver of change, not compliance. Nevertheless, legislative and regulatory change is accelerating and needs to be understood in the context of your sector and business.