Insight

Without a robust Net Zero strategy, climate commitments are worth zero

By Mikel Santos

Nov 09, 2022

The case for Net Zero is clear. Organisations that pursue Net Zero mitigate climate breakdown while demonstrating a clear commitment to sustainability. It is both a moral and business imperative.

Organisations are setting high sustainability standards in response to increasing pressures from customers, shareholders, governments, and regulators to reduce their environmental impact and contribute to a better future. Now, they are faced with addressing scope one and two emissions from their direct operations and energy purchases respectively, and scope three emissions relating to the broader value chain.

As organisations embark on their decarbonisation journey and pick the low hanging fruit, they soon struggle to take their ambitions one step further and deliver against sustainability targets in a profitable way. A robust, actionable, science-led Net Zero strategy can bend the carbon curve, delivering growth as well as decarbonisation.

Four steps to develop a robust and credible Net Zero strategy and roadmap

Understand

  • Assess your baseline and your hotspots
  • Analyse your value chain and competitors
  • Assess external factors: policies, regulations, and market changes

Prioritise

  • Explore opportunities and build marginal abatement curves
  • Determine your ambition, strategy, and targets
  • Prioritise your initiatives and build the roadmap

Prepare

  • Develop a case for change and communicate your intent
  • Define the high-level target operating model
  • Create a tracking dashboard to monitor progress

Implement

  • Set governance and coordinate delivery
  • Track progress and benefit realisation, being flexible to change
  • Monitor context changes and manage risks

To achieve and unlock the power of Net Zero, we recommend four key steps:

Step one: understand current hotspots and anticipate the future challenges

The first step to develop a solid Net Zero strategy is to understand your carbon footprint across your end-to-end value chain, identifying key sources – your hotspots – and their characteristics. Typical corporate level accounting, including CDP reporting and global environmental impact disclosure, is often high-level and unable to identify tangible opportunities at a site, factory, product, or service level.

For some large businesses, scope three emissions account up to 99 percent of their carbon footprint, so it’s important to understand the role suppliers and customers play. Start by researching what your suppliers and customers think about sustainability and decarbonisation, and what targets they’re working toward. Consider what competitors are doing to meet sustainability goals and how you can work together toward mutual benefits.

Sustainability policies and regulations have a significant impact on business and influence everything from materials, transportation, and energy, all the way through to waste generation. As legislation evolves and varies across different geographies, keep up-to-date and respond to policies in your strategy.

Step two: prioritise the most impactful opportunities but be bold and think creatively

Explore potential solutions to drive down emissions across key hotspots, assessing them in terms of value, impact, cost, and strategic alignment. This will help you prioritise the initiatives on your Net Zero roadmap.

Look for quick wins, such as reducing energy consumption, switching to renewable energy sources, or investing in more energy-efficient assets. That will bring some positive outcomes in the short-term, however, you will need to be bold and think creatively to reach your targets. Consider developing innovative and transformational solutions to longer-term priority areas like:

  • Redesigning products and services to increase resource efficiency and reduce carbon footprint
  • Reinventing manufacturing and optimising operations to reduce emissions, waste, and water use
  • Creating new solutions to realise business value from waste across products and packaging
  • Building strategic partnerships with key stakeholders to drive circular business models
  • Incentivising the supply chain to take action through sustainable procurement and sourcing
  • Bridging sustainable and digital transformations (the Twin Transition) to enable decarbonisation
  • Considering other options to compensate for emissions such as carbon capture or offsetting.

Once you identify potential solutions, assess direct and indirect impacts. Ensure alignment to the overall company strategy, and project expected costs and savings using a fact-based understanding of your ability to reduce emissions.

Step three: prepare for successful implementation and get key stakeholders on board

Delivering Net Zero requires commitment from board level to drive internal buy-in from affected areas and business units across the organisation, and gain external endorsement from key suppliers, customers, shareholders, and stakeholders. Create a compelling case for change that describes the vision and rationale. Clearly articulating the proposed changes, rationale, and their benefits is the cornerstone of a strong Net Zero roadmap.

Communicate your strategy clearly to support successful implementation. Within this, look at existing operating models to identify the processes, technologies, tools, skills, and capacity needed to deliver against your targets. Set up a performance management dashboard to monitor each initiative. While many carbon accounting platforms already exist to make this easier, partnering with specialist providers or building your own dashboard provides more flexibility while better integrating with organisational data strategy.

As part of this process, we recommend sharing your targets and commitments through the Science Based Targets initiative (SBTi) and commit to their "Net-Zero Standard". Disclose progress to customers, shareholders, and value chain stakeholders openly, for example via your website and annual reports, to maintain transparency and encourage support.

Step four: implement, track, disclose, and adapt

Finally, establish a governance structure and engagement strategy to monitor progress and drive change both inside and outside of your organisation. Create performance indicators to track progress towards Net Zero, measuring success using appropriate data sources – such as distance travelled, or fuel combusted – and calculation mechanisms.

Net Zero is a long-term commitment. To ensure success, follow an iterative and incremental approach, track progress, and react to internal and external changes as they happen. Embrace uncertainty, be flexible, and adapt your plans as you go. Only then can you create a powerful actionable, science-led plan to realise your Net Zero ambitions and deliver business growth.

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