Following the adoption of the Paris Agreement in 2015, global progress on addressing climate change appeared to slow for a number of years. In the absence of strong and coordinated political action, companies came to realize that they could take climate action substantially faster than political systems. With the world’s largest corporations having as much economic influence as many sovereign countries, the ability of the business sector to push society in a more sustainable direction is hard to match.
At the same time, companies are under increasing pressure to not only maximize shareholder value but take a broader role in society. Consumers are demanding high standards of sustainability, watchdogs are making emissions reductions mandatory by law, while the investor community has been integrating environmental, social and governance (ESG) factors into mainstream investment processes. Pressure for transparency and disclosure has also been mounting.
Against this backdrop, companies have quickly seized the opportunity to strengthen their credentials by acknowledging climate action, SDGs and social responsibility in their corporate reporting. More businesses are making public commitments on climate change, ranging from mild carbon reductions all the way to going carbon negative and making up for all their historical emissions.
However, given the lack of standardization, verification and comparability of those pledges, regulators and civil society have quickly noticed that many companies engage in self-serving tactics, use vague language and set unambitious or empty goals. To fight this “greenwashing,” many governments and supervisory authorities are beginning to require more rigorous climate risk disclosures. In the EU, the regulators are planning this year to go a step further: make environmental due diligence mandatory and impose a common methodology to substantiate green claims.
Here are three strategic steps companies should take to stand out enhance their reputations and establish credibility on climate.
- Make a bold, science-based, and verifiable commitment
Corporations need to acknowledge the undeniable need to decarbonize and be transparent about how they are preparing for a “net zero” world by 2050. Making a public commitment on climate action that goes beyond what is required by law is a first step, but on its own is not sufficient.
To be bullet-proof, your sustainability goals need to be based on science and verified by an independent, authoritative third party. Your pledges need to be backed by concrete actions and full transparency is required to track progress and achievements. A clear timeframe, aligned with the political action, is a must. Incorporating several interlinked issues, such as circular economy, biodiversity, renewable energy and energy efficiency into your sustainability strategy will also be recognized as a proof of a holistic and bold approach.
- Carry out due diligence of your supply chain
Focusing on only positive impacts while downplaying risks and trade-offs can, however, be sign of short sightedness. Climate change is, by its very nature, a problem that affects everyone, and corporate initiatives to tackle it should recognize this by reaching beyond your own operations. For many businesses, the vast majority of carbon emissions come from the value chain or the downstream use of goods and services—a meaningful and considered sustainability strategy will identify, report on and address these emissions as well.
Working together with the companies in your supply chain is an essential step to reduce your direct and indirect footprint. Setting targets together with your suppliers and customers can substantially increase the odds of success and provide new business opportunities as you move towards a business model with sustainability at its root.
- Build alliances with local and global communities
As a global problem, climate change will require global solutions. Even with the best intentions, companies have begun to recognize that building alliances across industries and countries is a critical part of looking beyond a specific sector to mitigate the climate crisis. Corporate action is a central element of some of the most high-profile climate initiatives, such as the Race to Zero campaign or Mission Innovation, which unite business leadership to advance action and demonstrate to policymakers that the business community is fully committed to ambitious climate action. Voluntary initiatives at the regional level, like the EU’s European Climate Pact, are being introduced to build on this concept and create an ongoing dialogue between business, governments and the public. The takeaway is clear: environmental action from business can no longer exist in a silo. Showing up at the headline events and participating in these expanding networks is how to make a climate strategy that looks great on paper truly resonate with the public and policymakers.
Developing a strong sustainability strategy, at the end of the day, must be about assuming your responsibilities and building your credibility rather than as a pure marketing exercise. By taking climate change seriously, implementing bold commitments, working closely with your supply chain, and building alliances with local and global communities, companies can make a meaningful difference in the fight against climate change, while reaping the rewards for their action—an enhanced reputation and an authoritative voice in public conversations.