Decarbonising is an economic imperative. Indeed, according to Schneider Electric’s Sustainability Index 2022, a survey of 500 business decision-makers in Australia, climate change and its associated impacts are the primary risk to companies today.
Furthermore, Deloitte Access Economics has estimated that climate change-related disasters will cost Australia $73 billion per year by 2060 – even if action to reduce emissions is taken now. The cost of natural disasters over the next 40 years is expected to be at least $1.2 trillion in present value terms.
Despite the accepted imperative and drivers, companies continue to struggle to make meaningful progress on decarbonisation.
In order to make real progress on decarbonising, you need to align three important elements: ambitions (what you are trying to achieve and why are you trying to achieve it), directions (the specific means by which you will achieve your ambitions), and you need to take action.
If you’re missing any one of these three elements, your decarbonisation ‘hat trick’, you will fall short of making meaningful progress.
Let’s take a closer look at each of the three:
- Affirm your ambitions. Understand your motives and set very clear targets that align with those motives. For some companies, a shift in consumer preferences will drive ambitious goals. For others, ambition will be driven by the need to access capital markets, limit the risk of stranded assets, or insure facilities. Maybe the aim is to keep up with competitors. The motivation will vary by industry, geography, and company, but anything less than net zero by 2050 is not ambitious enough. Be ambitious.
- Map out your directions. They can’t be conceptual. You need step-by-step directions with a timeline - a strategy isn’t enough. We’re talking a Gantt chart-worthy set of directions that have considered the interconnectedness of activities, and that tell you clearly what you should be doing and when, in an optimised way. The directions must be implementable.
- Take action. Go. Start now. You need to act swiftly.
A perfect score of 3/3 is the only way to go: the hat trick is mandatory
If you have ambitious goals and take action without a holistic set of specific and clear directions, your implementation is going to be sub-optimal. You will take action at the wrong time, in the wrong way: your effort will end up costing the company more than necessary.
This scenario, where companies take action to meet their ambition without a detailed adventure map results in sinking rather than smooth sailing and, although highly commendable, is a frequent and taxing occurrence. In a recent Schneider Electric project regarding a company’s energy portfolio this sub-optimal approach was identified in time and improved with a new set of directions that will help the company to achieve its ambitious ESG impact goals and save more than $200m through the actions that will be taken.
Companies that have produced a conceptual and informative renewable energy strategy that can’t be implemented will confuse key stakeholders and the action phase collapses because the strategy lacks clarity, nuance, and reference to market realities. Success relies on a very clear and implementable decarbonisation strategy.
Alternatively, if you act on a detailed strategic plan that lacks ambition, this reflects a compliance mindset and you simply won’t achieve meaningful progress towards decarbonisation. It is very difficult to get stakeholders to buy into taking action without clear targets or drivers for those targets.
Here, companies will also struggle to attract the future talent, which overwhelmingly favours companies with ambition behind their strategy and action. Companies should recognise the long-term advantages of ambitious goals, relative to a mindset of compliance and following minimum standards.
Finally, and worst of all, if you have ambition and clear directions: “We’re going to be at net zero by 2050 and here’s how and what we are doing,” but then fail to act, you are just paying lip service to one of the most critical challenges of our time. This is greenwashing and there is no surer way to be judged as being insincere by your stakeholders.
Companies that are, or even just perceived as, greenwashing will face an uphill battle to repair their reputation and may also attract legal risk – especially if they’ve made public statements. It’s exceedingly important that action to decarbonise begins the moment you talk about your intention and plans, especially if you’re doing so publicly. Otherwise, it is only a matter of time before the economic and reputation consequences catch up with you.
The reality is this…
You need a hat trick to have meaningful impact for your organisation and the communities in which you operate. Moreover, as a leading organisation you will be inspiring others to follow. Two out of three is incoherent, inhibitive, or inauthentic.
There is no escaping the diligence required to act on the decarbonisation imperative. However, the economic and reputational benefits make it worthwhile for every organisation that does.
Also published in EcoGeneration: Going green: Realising company ambitions for net zero
There are three essential elements Australian companies must address if they are to make meaningful progress on decarbonisation, writes Principal & Senior Director Sustainability Business Lisa Zembrodt. Decarbonising Australia is an economic imperative. According to Schneider Electric’s Sustainability Index 2022 – a survey of 500 business decision-makers in Australia – climate change and its associated impact is the primary risk to companies today.