The Climate Of Business #84: What are the main challenges for the business net zero transition?

Climate Change Reality

• Can regenerative agriculture alleviate California’s almond problem? (GreenBiz)
• How Floating Farms Are Helping Bangladesh Adapt to Climate Change (Bloomberg)
• Fish rescued from drought-struck river in Girona as Spain bakes under heatwave (Euronews)
• A Caribbean island's quest to become the world's first climate-resilient nation (BBC Future)

• Climate change thaws world’s northernmost research station (CNBC)
• UK failing to honour net zero farming pledges, report finds (The Guardian)
• Spain is Europe’s ‘ground zero’ of climate change, says WWF CEO (Euractiv)
• ‘Deep wounds’: Lake Garda just over a third full as Italy braces for second year of drought (Euronews)

Business Climate Reality

• VCs come together to tackle net-zero emissions by 2050 (GreenBiz)
• EU lawmakers back human rights, environmental checks for big companies (Reuters)
• EU agrees rules to boost use of sustainable fuels in aviation (Financial Times)
• Oil major BP braces itself for shareholder revolt after scaling back its climate targets (CNBC)

• Supreme Court deals blow to oil companies by turning away climate cases (CNBC)
• Orbiting Methane ‘Speed Cameras’ Are Catching Polluters in the Act (Bloomberg)
• A leading private equity firm claimed to be a climate leader – while increasing emissions (The Guardian)

• One in five cars sold in 2023 will be electric, says IEA (Financial Times)
• Six countries call for ambitious measures to stop microplastics pollution (Euractiv)
• ECB: Banks Not Ready for Climate Disclosure Rules (ESG Today)

Reality Check

Increasing awareness around how the implementation of a decarbonisation strategy can mitigate climate and regulatory risk, enhance competitiveness and optimise business’ supply chains has thus subsequently been accompanied by a vast array of corporate net-zero commitments. However, as the number of businesses making net-zero pledges grows, so does the number of challenges associated with this transition.

Accordingly, this week’s newsletter provides an overview of what net-zero actually means for businesses, and how businesses’ should undertake this transition. Additionally, the challenges associated with this transition will be touched upon; accompanied by a range of solutions businesses’ must closely consider to ensure they can effectively align their resources to ensure they are fully prepared.

What is net-zero, and how do businesses achieve it?

The term net-zero refers to cutting greenhouse gas (GHG) emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere by oceans and forests, for instance. Net-zero is reached when a business has eliminated all possible carbon emissions and then compensated the remaining emissions through beyond value chain mitigation. As touched upon last week, the net-zero process starts with calculating scope 1,2 and 3 emissions, setting science-based targets, developing decarbonisation pathways until 2030, and gradually moving towards long-term carbon capture, storage, and sequestration for those emissions which cannot be reduced.

Businesses can achieve net-zero through taking the following steps:

1. Firstly, companies must define and set clear net-zero targets, consistent with emission cuts (abatement) required to meet the 1.5 degree warming carbon budget.
2. Next, companies need to take action to start dramatically reducing their emissions through decarbonisation to meet set targets. 
3. Following the implementation of these activities, and only then, companies should neutralise residual emissions through removal projects, thus permanently removing carbon dioxide from the atmosphere. However, it must be noted that traditional offsetting is not recognised as climate action by the SBTi or Plan A, and is therefore not counted towards a company’s Net-Zero target. 
4. Finally, companies must report on their net-zero progress whilst utilising this data to enhance their sustainability strategy.

What are the key challenges within the low-carbon transition?

Some of the general challenges within the transition to net-zero include:

• Vast upfront investment costs and a lack of resources
• A lack of expertise regarding decarbonisation and net-zero
• A lack of awareness among stakeholders, such as consumers, customers, suppliers, and employees
• A resistance to change

More specifically, there are many challenges related to carbon accounting - which is vital to achieving net-zero. For example:

• Carbon accounting being an unfamiliar territory for many businesses.
• Inconsistencies in the carbon accounting methodologies chosen by companies
• Incomplete scopes measurement - In most cases, companies are missing scope 3 categories, which account for 90% of a businesses total carbon footprint
• Difficulty explaining or defending results internally

How can businesses identify and overcome these challenges?

While the net-zero journey is a significant multi-decade commitment that comes with a range of challenges, it is important to remember that alongside climate protection it brings a multitude of business co-benefits. Businesses should closely consider the following actions to ensure they can efficiently overcome the challenges associated when sustainably transitioning towards net-zero. 

In response to major upfront investment costs; businesses can:

• Budget wisely – particularly for investments relating to the compensation of remaining emissions (beyond value chain mitigation)
• Start with ‘low-hanging fruit’ carbon reduction actions

In response to a lack of awareness among stakeholders, whether it be consumers, customers, suppliers or employees, businesses can:

• Educate and communicate with stakeholders
• Start with ‘low-hanging fruit’ carbon reduction actions

To overcome a lack of expertise in relation to decarbonisation and the net-zero transition, businesses can:

• Learn by doing; however this is an inefficient and expensive approach. 
• Therefore it is recommended that companies engage external expertise and tools - such as Plan A

To overcome a resistance to decarbonisation and the net-zero transition, businesses can:

• Select like-minded business partners within their wider supply chain - thus easing the process of reducing scope 3 emissions
• Educate and communicate with the concerned stakeholders 
• Start with ‘low-hanging fruit’ carbon reduction actions

Ultimately, in order to develop and implement a comprehensive decarbonisation strategy whilst overcoming additional challenges such as a lack of expertise and resources within the areas of data collection, carbon accounting, reporting and regulations - it is essential that businesses utilise a decarbonisation platform such as Plan A to efficiently undergo decarbonisation. 

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