Despite the surging number of commitments to these science-based targets by businesses, 33% of the companies that report Green House Gas (GHG) emissions through CDP 2 and had an absolute scope 1 & 2 target expiring in 2021 failed to meet it, Bain’s report, COP27: It will take visionary pragmatism to accelerate decarbonisation in the downturn reveals.
Torsten Lichtenau, senior partner and global lead of Bain & Company’s Carbon Transition Practice comments on the context behind the figures and how companies can adopt a more successful approach to sustainability.
“Setting ambitions is the easy part, but meeting those goals has proven difficult, with 33% of companies missing the absolute scope 1 & 2 targets that expired in 2021 according to the latest CDP disclosures,"
Torsten Lichtenau
He added that there is a very steep rise in the numbers of businesses committing to or setting decarbonisation goals – which he concluded as very positive for the planet.
He cautioned, however, that while ambition is an important and vital first step for businesses to take, true differentiation will come from ambition matched with the commitment and determination to deliver the targets in a consistent as well as a cost-effective way.
“At the same time, companies will need to be able to commercialize and make fully viable their low carbon offering to their customers. This is the essential next step in this journey that most companies are beginning to embark upon,” he added.
Five areas to accelerate decarbonisation efforts
Bain’s findings highlight how leading companies can turn the energy and carbon transition into a competitive advantage.
Strategic adaptation: Companies do not need ever more climate scenarios but, rather, clarity on the relevant ones. Most important, they need to identify the signposts that will indicate what’s coming next.
Investor and lender resonance: Shareholders are sharpening their expectations about decarbonisation, and at the same time, they are often unwilling to compromise on near-term returns.
It will be critical for companies to double down on proof points to clearly demonstrate for capital markets the progress made to date on decarbonisation and explain the flexible pathways available to a more sustainable business in the medium-to-long term.
Customer-back decarbonisation: Companies that are most successful in their climate transitions start decarbonisation with the customer in mind and work backward across offerings, operations, and the supply chain.
More than ever, it will be critical to clearly understand the sustainability priorities of customers who are navigating an economic downturn and are therefore very focused on costs.
Partnerships for results: Carbon transition is a problem too big to be solved by any one organization on their own and companies need to engage the wider ecosystem of customers, suppliers, and peers up and down the value chain.
Creating an empowered ‘green organisation’ from top to bottom: Top management and new recruits may be convinced of the need for aggressive decarbonisation. Yet the task of delivering this has solidly moved into middle management.
Leading companies are empowering middle management to get the job done. It’s critical to integrate decarbonisation delivery into a company performance management, by aligning KPIs and incentives, putting a price on carbon (internal carbon pricing) in decisions – and providing clarity to middle management on resolving trade-offs.
