How business can save our planet.
The Covid-19 pandemic has focused global CEOs, CFOs and investors on risk like never before. And there is no greater risk and threat to companies in the future than climate change.
A risk that CEO/CFOs are very aware of. In 2019, 76% of CEOs surveyed in KPMG’s 2019 Global CEO report, said that climate change was the #1 threat to the businesses in the next 10 years.
Large corporates know that they cannot be caught out again like they were by the pandemic. They saw 50% of the Global Fortune 500 companies disappear during the last 15 years because they didn’t adapt to digital fast enough, and current CEO’s not want to be the ones who disappear for not being able to navigate and plan for climate change and sustainability transformation.
Climate change is real and starting to affect more and more people. This year, with the fires, the Californian and Australian summers set temperature records, but as Cristian Proistosescu, Professor at University of Illinois said in this comprehensive NY Times article:
“Don’t think of it as the warmest month of August in California in the last century,” he wrote. “Think of it as one of the coolest months of August in California in the next century.”
However, despite all the evidence, the fires, the water shortages and ice cap melting, as we know governments in some of our biggest countries — US, UK, Australia, Brazil, have refused to accept climate change, or enact real legislation to stop it. Just this week, the UK Government decided to approve the first deep coalmine for 30 years, so I can’t see
Now China has taken the lead in setting the very ambitious target of being Carbon Neutral by 2060, but the problem is that the West doesn’t want to work with China on anything, let alone climate change.
But corporates cannot be as blind. Some of biggest and most global corporates are stepping up to lead where their governments are failing, with nearly 40% of the Fortune Global 500 companies now setting aggressive carbon emission targets, to actively reduce a product’s carbon footprint in a measurable way, especially through Science based targets, which is the most rigorous approach.
These hard targets are having a far greater global effect on improving our planet than any single government policy.
Supply chains cascade effect
What many people don’t realise, is that 70–80% of emissions for most corporates come from their indirect emissions, what is known as Greenhouse Gas Protocol Scope 3, which includes upstream and downstream supply chains, leased assets, product life cycle, franchises, investments and more.
To hit their carbon emission reduction targets, corporates are putting heavy pressure on their suppliers, because that is where the vast majority of the impact improvement can be found — as illustrated by Microsoft’s pathway to being Carbon Negative by 2030 below.
This pressure from corporate supply chain management and procurement teams on suppliers is generating a cascade effect globally. Suppliers are realising that basic CSR reporting does’t cut it anymore, now you actually have to report real data, and make real reductions or you will find large customers dropping you for more sustainable suppliers.
In 2019, Apple did 1039 supplier audits, up from 770 in 2018. This kind of rigorous reporting and audits, underpinned by strong metric and target driven programs such as those from Unilever and IKEA, is great — but now we need more companies, especially in Asia, setting similar targets. Samsung is leading the way in Asia on this, but we need more!
How can companies plan and hit their targets in the most cost effective way?
Firstly, get started now. Like those companies who left their digital transformation too late and disappeared, those that don’t get started now face the same challenges later as it becomes increasingly more expensive and time consuming to catch up with the early leaders.
Post covid, climate scenario planning, goal setting, reduction planning sustainability automation, risk modelling and simulations are becoming crucial tools for corporates, especially in the US.
Equilibrium World is leading the way on this, with AI Automation software to help companies manage and plan for climate change related disruption and risk by automating their data management, identify key metrics and goals, and make data driven decisions through analytics, benchmarking and scenario simulations.
Companies can select goals from a wide range of metrics linked to materiality frameworks and the UN SDGs, and then link them to simulations and our ecosystem of solutions, enabling them to track, plan and hit their goals cost effectively.
What is especially encouraging is how fast this is now been driven by US corporates. In the last decade, European corporates were leading the way on sustainability and carbon emissions reduction, but the reality was with the exception of a few forward thinkers like IKEA and Unilever, most European corporates produced beautifully designed sustainability reports, but not much in the way of real action and goals.
As always, when the US, and in particular Silicon Valley, wakes up — they suddenly leap forward and drive real change. The superstars of the digital era — Facebook, Google, Microsoft, Apple etc — have set targets across carbon, water, waste and more which is having a knock on effect on other corporates such as GM, Intel, AT&T and others. The fires, literally in their backyards, have woken them up and in complete contrast to the US government, corporates in the US are taking the leadership role for the world in helping to stop climate change. These massive trillion dollar companies are the ones who will make a real difference, more than any Paris accords, to saving our world and making a better place for us all to live in.
