Corporate leaders recognize that climate change is the most significant opportunity for wealth creation in human history. As a result, it is no wonder that investors are rewarding low-carbon business models like Tesla and Beyond Meat with record values.
Corporate leaders must navigate a developing field of voluntary efforts meant to address various environmental, social, and governance (ESG) challenges, including climate change, in the absence of overarching climate legislation and regulation. The rapid development speed in ESG can take much work for company leaders.
This blog will explain the most recent advancement in ESG, Net-Zero, and why it is so important in any corporate strategy.
Net-Science Zero’s
According to landmark research issued in 2018 by the Intergovernmental Panel on Climate Change, global greenhouse gas emissions must be divided in half by 2030 and achieve net zero by 2050. (IPCC). Achieving net-zero emissions will be a colossal challenge; human activities produce 55 GT of CO2 per year for a total carbon budget of 580 GT of CO2 before exceeding the 1.5°C thresholds.
Developing a Net-Zero Goal
During the net-zero transition, a science-based target (SBT) determines whether the present rate of emission reduction is consistent with a 1.5°C trajectory. Setting a net-zero goal (NZT) represents a commitment to the complete decarbonization of a business model and the resulting future emissions rate.
Deep decarbonization is a difficult task that necessitates a diversified combination of regulatory, legal, technological, and market solutions, all of which are still in the works as detailed by different net-zero roadmaps, such as the IEA Net-Zero by 2050 and the BNEF New Energy Outlook.
Different Routes to Net-Zero
The journey to net zero is crucial to corporate strategy because it necessitates a fundamental transformation across all sectors of the global economy for business models to work in harmony with the environment. Regrettably, not all net-zero modifications are equal. The challenge of decarbonizing business models has not discouraged the private sector, which has now adopted science-based targets encompassing 20% of total global market capitalization.
Starting the Net-Zero Journey
Any company’s climate policy must follow a mitigation ladder from carbon neutral to net-zero and climate positive. A mitigation hierarchy will tell you whether a mitigation strategy effectively neutralizes a company’s climate impact, mitigates climate risk, and incentivizes low-carbon capital allocation.
The four fundamental points align with the interventions.
- Tracking and reporting emissions by using internationally recognized frameworks like GHG Protocol, the Climate Disclosure Project, and the Task Force on Climate-related Financial Disclosure (TCFD),
- Reduce value-chain emissions
- Quantify a financial commitment by pricing remaining emissions using an internal carbon price;
- Invest in the financial commitment to climate and natural impact to reduce emissions further, uncover climate solutions, and source high-quality carbon credits.
Net-Zero within a COVID
Global emissions must reduce by 7.6% annually between 2020 and 2030, nearly the same as the COVID-19 lockdowns. As a result, extreme weather and the failure of climate action have remained the most likely long-term hazards among World Economic Forum members.
However, COVID-19 has increased stakeholder pressure to transition to a low-carbon growth path, which might result in a direct economic gain of US $26 trillion by 2030 compared to business as usual.
Author : Swastika Jha
