To answer these questions, edie recently hosted a roundtable convening a dozen business leaders and sustainability directors from a diverse range of sectors including fashion, retail, food and construction.
This lively discussion was hosted in partnership with ENGIE Impact and expertly chaired under Chatham House rules by Ben Kellard, director of business strategy at the Cambridge Institute of Sustainability Leadership (CISL).
Proper planning
ENGIE Impact’s 2024 Net-Zero Report reveals that two-thirds (66%) of organisations say they have some form of public carbon reduction commitment today, but only one-fifth (20%) say they are meeting or exceeding their goals.
Kellard kicked off the conversation by noting this disparity, and explained that more than 3,000 companies have signalled their intention to set net-zero targets to the Science-Based Targets Initiative (SBTi). Yet research has found, time and again, that most are not publishing transition plans including factors such as investment in low-carbon equipment or plans to innovate new products and services.
In that vein, having a robust transition plan is fast becoming a marker of corporate climate leadership.
Kellard commented on how many business leaders want to fully iron out uncertainties around future decarbonisation due to factors such as a lack of mature technologies or supply chain data before publishing a transition plan. As such, properly making use of internal expertise is key.
ENGIE Impact’s UK lead Kirti Rudra agreed, adding: “Those businesses that have cascaded or communicated plans to the market tend to have engaged all stakeholders. They’ve already done quite a lot of work in terms of planning with finance, purchasing and local site teams. They’ve aligned the financial backbone of the company with how they’re going to meet their targets.”
There was a consensus that, even without internal alignment, publishing a target is important. It creates accountability, thereby putting the onus on the business to accelerate actions already underway and to build out transition plans.
Time-bound, numerical emissions targets also “provide clarity” for the terms of engagement with suppliers and/or clients, a sustainability lead in retail noted.
Yet it was agreed that completing this internal engagement and governance work before publishing a transition plan was vital, to increase the chances of its targets being meaningfully delivered.
Targets will only be delivered if staff in all relevant functions understand their role in driving and tracking progress, it was agreed.
Clear communication
Over a quarter (28%) of respondents surveyed in ENGIE Impact’s 2024 Net-Zero Report say slow decision-making about decarbonisation within functional teams is one of the three biggest barriers to implementing decarbonisation at speed within their organisation.
Speakers put forward several ideas for building climate-related knowledge and understanding across different functions of a business, from adding “net-zero champions” to all functions and to each site or region, to providing mandatory online training to all staff, to hosting dedicated forums for training and Q&A.
In any case, the need to “go back to basics” was noted. Sustainability teams will need to be mindful that not all colleagues will understand the jargon and frameworks they use, which can lead to misunderstandings. A recent poll of 1,000 adults found that most are not confident defining terms like ‘carbon offsetting’ or ‘net-zero’.
Sustainability leaders will also need to grasp what the core motivations of each function are, to be able to work with rather than against existing KPIs. This practice is sometimes called ‘green jiu-jitsu’.
Sales teams will want to know how to market a new, low-carbon offering and be reassured that its introduction could boost their success, for example. And any team will want to look not only at the scale of the challenge ahead, but at successes to date, to boost motivation.
Several speakers argued that “blunt instruments” will likely be needed to ensure that the low-carbon transition is high on the executive agenda, because executives are usually motivated by growth. These instruments include internal carbon prices and the linking of environmental KPIs with executive pay.
While some CEOs will really have a handle on climate in a holistic way, this is the exception rather than the norm. Moreover, implementing these processes can help ensure continuity in the event of a change in leadership.
One sustainability leader in the chemicals sector said: “It’s probably an oversimplified way of thinking, but getting things moving is the crux of what we do. I think we have a generational issue…. My generation has been educated into making more money – for myself or someone else. That is the end game.”
He added that those in his profession “have to play the game” of speaking to those with growth-focused, capitalist mindsets. They will likely be motivated by “the language of today, not the language of tomorrow”.
However, he believes this could change as regulations ramp up, and as younger generations of business leaders come through and bring with them new definitions of the purpose of businesses and visions for sustainable growth.
He said: “Future leaders will need to be better – and differently – educated. You can’t separate sustainability from leadership.”
A recent poll of 4,000+ CEOs by PwC found that half believe their business will cease to exist within 10 years without reinvention. And a key motivator for transformative change is the need to properly respond to the climate crisis.
Ripple effects
Another highly effective motivator for executives, a sustainability professional in the entertainment industry noted, is the fear of falling behind competitors and therefore missing out on support from sustainability-minded customers and investors.
He said the prospect “terrifies” his employers’ C-suite. As such, others in the sector moving makes it easier to “sell sustainability as a growth opportunity”.
Another speaker, who works in retail, noted that for the SMEs she works with, seeing peers decarbonise can be helpful in proving that climate action is possible and providing an approachable source of knowledge.
With that in mind, it was agreed that a business leading on net-zero is one which goes beyond its own operations, bringing its competitors, suppliers and clients on the low-carbon journey. Indeed, this will likely be necessary to reach targets that are ambitious rather than incremental.
Kellard, summarising speakers’ sentiments, stated that the biggest challenge to collaborating is identifying who owns responsibility for reducing which emissions. It is often said that one firm’s Scope 3 (indirect) emissions are another firm’s direct emissions. But this clarity is necessary to avoid misunderstandings and loopholes, and to facilitate the collection of better emissions data.
Moreover, it helps to identify areas where certain groups, like SME suppliers, feel unable to act alone due to challenges such as financial constraints or a lack of knowledge.
One participant from the fashion sector said: “For me, leadership is really about collaboration and convening. We operate in a shared supply chain in thousands of locations with multiple raw materials…. We need deep collaboration within our sector and at landscape and value chain level… I think there’s more to be done.”
Examples of leadership cited during the discussion included Unilever’s delivery of a shareholder-approved climate transition action plan with clear supplier engagement priorities, plus Ikea’s vision to deliver a net-positive value chain, which leaves no room for complacency and necessitates transformation across the supply chain and business.
ENGIE Impact’s 2024 Net Zero Report
Download ENGIE Impact’s 2024 Net Zero Report to understand how to overcome barriers and reap the benefits of whole business decarbonisation transformation.
In this report you’ll learn expert insights on:
- The need for a transformative approach to decarbonisation
- The current state of corporate decarbonisation, including year-over-year trends
- The most common inhibitors to decarbonisation, and how a holistic approach helps overcome them
- Actionable steps for building a truly transformational corporate decarbonisation programme
ENGIE Impact’s research spanned 515 senior decision-makers from all business sectors during Q3 2023. Respondents are situated within 21 different markets globally, with representation from EMEA (36%), the Americas (35%) and APAC (30%), and are from organisations that employ more than 10,000 people globally, with 42% from organisations employing at least 50,000 people.