4 ways businesses can take effective climate action
- Companies have the scale, flexibility, resources and expertise to achieve ambitious climate targets.
- Leaders can start by envisioning a net-zero future for their companies.
- Businesses can become climate leaders, building resilience, driving innovation and generating growth at the same time.
Taking action on climate change is good for the planet, good for society and good for corporate bottom lines. It's simple.
It's a simple statement with a complex history and context. But today, the demands of customers, employees, governments, investors and others are clearly changing. They are expecting companies to be climate leaders, and for good reason. Businesses that don't consider climate risks and take action to mitigate them will find it hard to adapt and thrive.
This is evident from recent stances from investors such as Investor AB, a minority investor in Ericsson. Customers are demanding change and shareholder accountability, and future employees are clear that they want to work for companies that take climate action seriously: 88% of millennials say they would be more satisfied with their job if they had the opportunity to make a positive impact on social and environmental issues.
Businesses are some of the world's best-positioned organizations to achieve ambitious goals. They have the scale, flexibility, resources and expertise. Many have global reach or deep knowledge of local markets and societies.
Take the telecommunications industry for example: a large portion of service provider emissions comes from the electricity used to run their networks. By investing in renewable energy and energy efficiency, service providers can have a significant impact globally. The ICT industry is already the largest purchaser of renewable energy.
Beyond the environmental benefits, there are other incentives to operate more efficiently and reduce costs: network operators spend around $25 billion on energy to run their networks, and data traffic over mobile networks is expected to quadruple in the near future.
To address this challenge, Ericsson has developed a network-level approach called “Breaking the energy curve” that helps reduce costs and allows for exponential growth in data traffic without increasing energy consumption.
But the private sector cannot act alone: businesses need to partner with governments, public institutions and civil society movements to create real change.
What actions should companies take?
What's the challenge? We need to limit global warming to a maximum of 1.5°C above pre-industrial temperatures. To reach this goal, global carbon emissions need to peak at the end of this year and then reduce by at least 50% every decade to reach net zero by 2050. At the same time, we need to remove some of the carbon already released into the atmosphere.
According to the World Bank, SMEs account for approximately 90% of the world's businesses and more than 50% of employment. Currently, SMEs have limited maturity and available resources to take climate action. To have even a slight chance of halving global emissions by 2030, SMEs need to join the race to zero.
To help companies of all sizes take climate action, a group of industry and academic partners recently launched the 1.5°C Business Playbook, a framework to help companies identify valuable opportunities in their business and prepare for the transition to this new economy.
Four pillars of climate leadership: A 1.5°C business playbook
For SMEs and large enterprises, it will be useful not only to strengthen their own strategies but also to engage and set requirements for suppliers. Companies with leading climate strategies that are already participating in sector climate initiatives can use this playbook to benchmark their own approach and raise their ambitions. In this role, the playbook will help them establish a clear climate strategy, define science-aligned targets, set requirements for suppliers, and align their supply chains and value propositions to the 1.5°C goal.
The playbook outlines four pillars of climate leadership within a company.
Pillar 1: Reduce your own emissions
Emissions reduction goals must be aligned with climate science and start with reducing carbon emissions from company operations by at least 50% over the next decade. This includes emissions from sources such as furnaces and vehicles, as well as purchases of electricity, heating and cooling. Business travel must be included in this pillar. One way to effectively reduce emissions from business travel is to make virtual meetings a permanent feature of work. The work-from-home culture that has developed due to the COVID-19 pandemic shows that the need for many types of business travel can be effectively reduced.
Key actions for Pillar 1 include:
- Map your own greenhouse gas emissions.
- Determine the base year for your reduction commitments and set formal targets.
- Determine the sequence in which you will reduce your emissions and create a plan to reach your goals. Start with easy-to-achieve goals that are financially beneficial and create positive momentum for your organization.
- Be transparent. Disclose your carbon footprint, emissions reduction plans and emissions reductions as part of your annual public reporting.
Pillar 2: Reducing emissions in the value chain
Value chain emissions include all emissions outside a company's walls, including upstream activities such as suppliers and downstream activities such as sold products. Value chain emissions typically make up the largest percentage of a company's total footprint.
Companies need to take proactive steps to reduce emissions in their value chain. There are many ways to do this. Examples include sourcing guidelines and supplier code of conduct standards, product design changes, and collaboration with suppliers and customers.
Key actions under Pillar 2 include:
- Map the carbon emissions associated with your value chain to understand which ones are the largest and start tracking them systematically.
- In the first year, we will set a target to halve absolute emissions from our value chain for the first time.
- Decide the order in which you will reduce your carbon footprint and create a plan to reach your goals.
- Again, be transparent here: disclose your value chain emissions and your plans to reduce them as part of your annual public reporting.
Pillar 3: Integrating climate into business strategy
Achieving the 1.5°C target will require a fundamental redesign of many industries, requiring business model transformations that can unlock new revenue streams and drive innovation. Business leaders can start by envisioning their company's net-zero future: what will it look like and what will it take to get there?
Examples include developing new materials that do not use fossil fuels, adopting renewable energy solutions and electric vehicles, etc. Companies can also contribute to shifting consumer behavior patterns through car sharing, the circular economy and local tourism.
Key actions for Pillar 3 include:
- Review and update your vision, mission statement, strategy and processes to reflect your climate commitments.
- We will shift our portfolio towards solutions that help our customers avoid emissions and exponentially expand these solutions.
- We will integrate our climate strategy into our service and product roadmaps, and require all new solutions to be aligned with the 1.5°C target.
- Consider taking into account a carbon price to make climate issues an integral part of your investment process.
Pillar 4: Influencing climate action in society
Climate Leaders use their companies' networks and influence to support and accelerate climate action by influencing and collaborating with a wide range of customers, suppliers, governments and NGOs.
One example is the Race to Zero campaign, which has formed a coalition representing over 2,000 cities, regions, companies, some of the world's largest investors and universities. These “real economy” actors have joined the largest alliance in history to commit to reaching net-zero carbon emissions by 2050 no later.
Key actions under Pillar 4 include:
- We work with suppliers and customers to deliver innovative technologies and the sustainable transformation of value chains.
- Influence local and national policymakers to strengthen climate action and policies aligned with the 1.5°C target.
- Integrate 1.5°C climate change commitments into overall public and corporate policies, including those related to finance and financial investments.
Next steps towards climate change leadership
There is a Chinese proverb attributed to Laozi that says, “The journey of a thousand miles begins with a single step.”
By building on the playbook's four pillars, companies can become climate leaders, increase resilience, drive innovation and grow their business at the same time.
Many companies already have some measures in place, but some don't. Some have more resources than others. You just have to decide to get started today. After all, our society and environment are in a position where there can only be a few leaders. We need everyone to be leaders.
This article was originally published by the World Economic Forum.
