Four steps to business leadership on climate, according to Maria Mendiluce
EXCLUSIVE: With businesses facing pressure from regulators, investors, consumers and their own staff to respond to the climate crisis, the We Mean Business Coalition's chief executive Maria Mendiluce has shared her thoughts on what true leadership looks like.
When reflecting on COP26, many who were on the ground observed that non-state actors including cities, towns and the private sector participated on an unprecedented scale. The COP was the largest to date, with more than 38,000 delegates – most not representing nations.
More than 260 corporate initiatives were signed in Glasgow during the two weeks and existing initiatives including the Race to Zero grew further still, following strong progress during the conference preparations.
This is, undeniably, a clear signal. Businesses are no longer asking whether they should act on climate; they know that ensuring a liveable future – as the Intergovernmental Panel on Climate Change (IPCC) phrases it – is business-critical.
But many have argued that the time for mere signals is too late – that urgent action needs to be taken, investments leveraged, technologies scaled and communities educated in a way that is aligned with climate science and the principles of a just transition. Many of the initiatives to have made headlines at COP26 were scrutinised straight away. For example, the Glasgow Financial Alliance for Net-Zero (GFANZ) announced at COP26 that membership had surpassed a collective £130trn of assets under management, or 40% of the world’s total. Green groups pointed out that members had not, at that point, pledged to align all asset classes with a net-zero-by-2050 roadmap.
Reflecting on this, Mendiluce tells edie: “You cannot expect that, at the moment of the announcement, there is full delivery.
“The announcements were big and bold. Of course, there is the suspicion that they are greenwashing or that they won’t meet commitments. The reality is that we need to give them time to deliver but – of course – we don’t have too much time, so the first actions need to happen now.”
Cutting through greenwashing
Mendiluce is speaking with edie ahead of her appearance at the Sustainability Leaders Forum (scroll down for details), where she will be delivering a keynote talk on the theme “All in for 1.5C: The key ingredients for our climate action cocktail”.
Since the IPCC published its first major report on the different economic, natural and human impacts of 2C of warming and 1.5C of warming in 2018, governments have increasingly pushed for 1.5C to be the new standard of commitment. This step-up in ambition can be seen in the private sector, also. According to Net Zero Tracker, publicly listed businesses representing 75% of global revenues now have a public net-zero target.
Yet, not all targets are created equal. Schemes like the Science-Based Targets Initiative’s (SBTi) net-zero standard are going some way to address what has often been dubbed a “wild west” situation, but the Shangri-La of 100% credible corporate climate commitment is still a way off.
Net-Zero Tracker’s own stocktake revealed that almost seven in ten businesses have not set net-zero targets that cover all of their indirect (Scope 3) emissions. Around four in ten have no Scope 3 targets at all. Given that Scope 3 emissions for large multinationals are typically more than 11 times higher than direct emissions, this means these targets ultimately allow businesses to shirk the majority of their climate responsibilities.
Similar pitfalls have been identified by research from organisations including South Pole, Inspired Energy, the New Climate Institute and Carbon Market Watch.
With this in mind, edie asks Mendiluce what she believes are the key ingredients of a credible corporate approach to climate.
Of course, there are the requirements for We Mean Business coalition members: a net-zero target for 2050 or sooner; a commitment to halve net emissions by 2030 and 1.5C-aligned science-based targets. Just three businesses had verified 1.5C-aligned science-based targets in 2018 – Tesco, BT and Carlsberg. Now, 1,275 firms are striving for 1.5C certification, which will soon become the minimum SBTi requirement.
But targets are just one ingredient – and are ultimately meaningless without action.
Mendiluce explains that the coalition uses a four-point framework for leadership on climate. The points are:
Setting credible and ambitious emissions targets falls into the first point, while ‘action’ relates to the delivery of these targets on the ground. ‘Action’, Mendiluce explains, also covers measures to ensure a just transition and action across the “wider scope of environmental issues, including the protection of nature”.
The latter two points, ‘advocacy’ and ‘accountability’, are the ways in which businesses can – and should – show leadership beyond their own four walls. The coalition’s definition of advocacy covers both policy lobbying and engagement and engaging “peers” (companies in the same sectors or geographical markets).
On policy lobbing, Mendiluce notes: “With more policies, more companies will do what the leaders are already doing.
“I think there is a strong regulatory influence… which is definitely a key driver [of corporate climate action]. Beyond disclosure mandates, we need to create a situation where companies doing better on sustainability do better in the market.”
Even in the absence of mandates, Mendiluce believes that voluntary initiatives like the SBTi can play a key role in influencing policymakers and laggard businesses. She says: “The value of voluntary initiatives is that they are helping companies to prepare for what is to come on a mandatory business.
“This is important because, even if there are a few companies, they can send a signal. They are showing the world what can be done and what should be done.”
Disclosure and collaboration
These points on ‘advocacy’ tie in well with Mendiluce’s thoughts on the fourth and final point, ‘accountability.
The Coalition defines accountability partly as the need to admit when a wrong step has been taken and remedial action is needed. It also covers publicly reporting not only progress towards key environmental goals, but also learnings from the process. In other words, a sustainability report stating that a business has met an emissions target does not go far enough – it should also explain the initiatives it delivered to get there.
In this way, Mendiluce explains, “other companies, perhaps with less resource, can then replicate their journey”.
“Accountability is particularly important because the business community is under many different strains right now,” she adds, alluding to the continued Covid-19 recovery, energy price crisis, so-called “great resignation” and the Russian invasion of Ukraine. Research has repeatedly suggested that these challenges will hit sustainability work at SMEs the hardest.
It is promising, then, that knowledge-sharing and collective de-risking is already a core tenet of collaborative industry initiatives on climate, including the Zero Carbon Forum for restaurants and brewers and the British Retail Consortium’s Climate Action Roadmap.
Maria Mendiluce at edie’s Sustainability Leaders Forum 2022
edie’s biggest event of the year is returning as a live, in-person event for 2022.
The Sustainability Leaders Forum will take place on 7, 8 and 9 March 2022, and will unite hundreds of professionals for inspiring keynotes, dynamic panel discussions, interactive workshops and facilitated networking. There will also be digital tickets.
Taking place at London’s Business Design Centre, the event will feature more than 60 speakers, including experts from Natural England, the Green Finance Institute, the World Economic Forum and the Centre for Climate Repair. We’re planning our most diverse and inspirational programme yet.
Maria Mendiluce is appearing on Day Twp of the Forum (9 March). She will be delivering the day’s opening keynote speech covering the following discussion points:
- Making net-zero real: Setting scientifically sound action plans
- Bringing the entire value chain on your climate journey
- The role of business in achieving a sustainable financial system
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