The Business Benefits of a Low-Carbon Future
A movement is in motion, with more than 3,000 companies coming together to lead the fight against climate change.
The need for a low-carbon future has become undeniable, a conclusion reinforced by the latest round of IPCC special reports on the impacts of global warming of 1.5°C above pre-industrial levels. Gone are the days when the Paris Accord’s 2°C goal was enough. Action is needed now and is recommended by the IPCC to be accomplished in less than10 short years to curb the worst outcomes.
This call to action spurred organizations and businesses to gain a better understanding and a more defined plan to mitigate climate change, and leading companies are now factoring climate change into corporate risk assessments.
The IPCC reports give us a common target and urgency to act based on clear science. The corporate world can now transition to the next phase in the quest for a healthier planet.
The Litmus Test of Carbon Credibility: Science-based Targets
The time has come for businesses to move beyond the question, “What can we do to improve our carbon footprint?” and to answer:
- Exactly how much greenhouse gas emissions does our organization need to reduce in order to meet the targets outlined by IPCC?
- How quickly does our organization need to accomplish that reduction?
Answering these questions is the first step toward creating SBTs. In other words, SBTs align your company with the objectives of the 1.5C scenario and act as a mechanism for your company to deliver consistent and meaningful emission reductions year-over-year.
The Science Based Target initiative (SBTi) has delivered a unified, measurable standard for corporations to determine their role in this critical mission. SBTs are the litmus test when it comes to carbon credibility and legitimate net-zero goals, and will be greatly beneficial in driving better approaches to climate risk management. Companies that are interested in aligning sustainability and carbon-reduction targets with climate science need to follow a structured, well-mapped approach and begin asking the right questions so that they can not only construct a convincing business case for SBTs, but also build a viable route map for how to deliver on such ambition.
Answering the Call for a Low-Carbon Future: Ensuring Success with Science-Based Targets
4 Business Benefits of Science-based Targets
Leading companies have recognized that environmental responsibility is a boon to the bottom line. For example, companies setting climate-related targets are viewed more favorably in the eyes of stakeholders – investors and consumers alike. The economy of the future is low carbon, and companies that prepare for that future will quickly gain a competitive advantage and benefit in these 4 areas:
- Increased profitability — Evidence shows that companies demonstrating leadership on climate action are more profitable. A CDP study of 500 S&P industry leaders found that organizations disclosing climate change management generate 67% higher return on equity than non-responding companies.
- Improved efficiency — Making a clear and bold commitment to reducing carbon emissions often gives rise to greater efficiency as companies find ways to improve processes, reduce raw material inputs and lower energy consumption.
- Greater innovation — Beyond operational improvements, companies should view undertaking a
commitment to set an SBT as a hugely beneficial exercise for innovation and risk management. A robust target setting exercise can uncover potential carbon risks in supply chains, identify key areas for innovation like low-carbon product development and elevate key partnerships necessary to achieve more complex goals.
- Access to capital — Importantly, SBTs can improve access to capital as targets give investors greater visibility and assurance of what a company is trying to achieve. Investors and financial institutions continue to demand more disclosure on sustainability reporting and assess carbon risks in portfolios. As companies with approved SBTs are required to report their emissions annually, they benefit from greater transparency and the enhanced reputation it brings.
With new companies joining SBTi weekly, setting an SBT will become more of an expectation and traditional emission reduction targets may be viewed as relatively weak in comparison.
Having a successful strategy for SBTs requires a range of measures around emissions abatement. Companies should first look to optimize their energy efficiency programs when starting out on their SBT journey. And implementing renewables and other clean technologies will almost certainly be necessary to decarbonize energy sources further in line with SBTs.
Access our whitepaper to learn the “why” behind setting SBTs and 6 steps for companies starting their SBTs journey and energy essentials needed to achieve these targets.