Leadership for net-zero: Engagement strategies to accelerate the clean energy transition

With geopolitical conflicts and extreme weather events continuing to escalate, businesses are having to grapple with an unpredictable and volatile energy marketplace. Here, edie convenes a group of sustainability and net-zero leaders to discuss how they are adapting strategies on the path to net-zero.

Leadership for net-zero: Engagement strategies to accelerate the clean energy transition

Image: Centrica

A recent survey of more than 2,500 businesses in Europe revealed that, although 80% of businesses now have a low-carbon energy strategy – rising to 84% in the UK – only around half have actually begun their clean energy transition.

So, what’s causing this action gap? According to new research from Centrica Business Solutions, the problem lies in the boardroom, with business leaders failing to see the business case for the clean energy transition – exacerbated by fluctuating energy prices, persistent infrastructure bottlenecks, and the growing cost-of-living crisis which is influencing consumer choices and leading to a tightening of the purse strings.

To gain deeper insight into how to get the board back on board with decarbonisation efforts, edie and Centrica Business Solutions convened a high-level roundtable discussion in London earlier this month, with nearly a dozen sustainability leads from large businesses across a variety of industry sectors engaging in a candid discussion.

Here, we summarise the key takeaways from the discussion, outlining the key barriers to the energy transition and the strategies for engaging the leadership on net-zero.

Indeed, the majority of participants agreed that – despite short-term challenges such as rising energy prices – the long-term transition to renewable energy is the only viable solution to reduce both energy costs and carbon emissions at scale and pace, and boards are beginning to recognise this, but more must be done to increase that engagement with leadership teams.

Obstacles to the transition

One of the biggest challenges cited by participants related to communication. Sustainability professionals are finding it increasingly difficult to convince their board to prioritise sustainability as part of the business strategy, especially given the perception that clean energy solutions are currently too expensive upfront.

And, despite decreasing payback periods as clean energy technologies become more viable, many businesses are still struggling to stay afloat amid persistent economic challenges. Bankruptcy rates for businesses in Europe reached a seven-year high last summer and are not expected to decrease until 2025 at the earliest.

Additionally, the lack of green energy supply infrastructure – such as limited grid capacity and delays in project approvals – was another key challenge hindering the transition, according to participants. The group also highlighted the issue of price volatility, which complicates solutions such as power purchase agreements (PPAs). PPAs are long-term commitments, and businesses are uncertain about their future profitability at current signing rates.

“How do you build resilience when businesses are playing catch-up with fluctuating prices?” one participant asked the room.

The consensus was that senior leadership teams are posing similar questions. Participants underscored that uncertainty has highlighted the imperative of increased investment in renewable energy, and boards are taking notice as they want to achieve long-term cost savings.

This presents an opportunity for sustainability professionals to reinforce the argument for transitioning to clean energy when boards are hesitating on their carbon reduction commitments.

“In these times, a sustainability professional is not just a professional, but also an advocate,” another participant said.

Strategies for engaging leaders

As advocacy moves up the agenda for sustainability professionals, the emphasis is shifting to improving communication and simplifying complexities.

The participants stressed the challenge of shifting the C-suite mindset towards net-zero, noting its novelty and complexity compared to other board priorities, thus highlighting the imperative of streamlining communication. They concurred that fostering cross-departmental collaboration, particularly between sustainability and finance, could enhance the efficacy of communicating the benefits of clean energy.

Additionally, leveraging technical support to delineate the practical aspects and operations of clean energy projects can bolster the accuracy of the case, especially in a climate where boards increasingly prioritise data and evidence.

“But you have to understand that it is not simple. It is inherently complicated. You have to accept that and bring the necessary players together to work on it,” a participant commented.

Other incentives discussed during the roundtable to encourage leadership engagement encompassed the escalating disclosure mandates and regulatory pressures, alongside the associated risks to reputation and compliance.

Another participant said: “Our board has its eyes on the sustainability agenda, because the risk for them is existential.”

Sustainability-linked KPIs

Additionally, the participants agreed that implementing sustainability-linked executive compensation as a strategy can help promote leadership engagement in sustainability. This approach involves tying a portion of executives’ compensation directly to the achievement of sustainability targets or Key Performance Indicators (KPIs).

This not only helps align executive interests with the company’s sustainability goals, but also reinforces accountability and commitment to sustainable practices at the highest levels of management.

For example, one participant mentioned that their board has implemented a ‘Sustainability Progress Index,’ which ties each percentage point of every senior executive’s bonus to the corresponding percentage reduction in emissions.

“Since this was implemented across our board, I have never felt so much heat on my work,” the participant said.

Transition plans and data management

The group also concurred that devising a transition plan can help add structure to the conversations between sustainability professionals and the C-suite, making the process less tedious.

Corporate transition plans outline the strategic approach required for a business to meet its climate targets, detailing interim milestones to support long-term goals and specifying the necessary steps to change business models and investments.

The UK Government has previously stated intentions to mandate the disclosure of corporate net-zero transition plans, which could come into force in 2025 at the earliest.

In line with this, the Treasury has established a Transition Plan Taskforce, which has developed a ‘gold standard’ disclosure framework for corporates to develop climate transition plans that are strategic and well-rounded, aligning with globally recognised reporting standards.

Participants also stressed the importance of data-backed and specific transition plans, cautioning that generic strategies could prove inefficient and hinder the transition process.

This sentiment is echoed by nearly three-fifths of energy managers, according to research from Centrica Business Solutions, who express a lack of control over their energy usage until they have access to higher-quality data. Without such data, setting targets and adopting solutions for the clean energy transition becomes challenging, consequently leading to delays in its implementation.

Supply chains

The data management challenges faced by businesses extend beyond their internal operations, impacting emissions within their supply chains as well. The group highlighted that suppliers often lack the means or resources to calculate their data, making it challenging for them to align their operations with the business’ transition goals.

Furthermore, challenges related to supply chain traceability and selecting the appropriate audit methodology to procure data exacerbate the difficulties for businesses.

Participants emphasised the necessity for pre-competitive collaboration within the industry to address these challenges and explore robust methods and techniques for calculating high-integrity data.

One participant said: “The most significant impact a business could have is assisting suppliers with limited resources to decarbonise.”

This presents an opportunity for business leaders not only to champion sustainability within their organisations but also to extend their leadership beyond.

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