|Author Name:||Katrin Scholz-Barth|
|Date:||May 20 2021|
Companies and countries hardly make headlines anymore when they commit to carbon neutrality. That’s how essential climate actions and carbon neutrality have become. However, when, in September of 2018, California Governor Jerry Brown signed into law that California, the World’s 5th largest economy, would reach economy-wide carbon neutrality by 2045, that was news!
"Economy-wide zero is a clear, … target that would … spark an immediate explosion of innovation in sectors that don’t get enough attention in climate policy, like buildings, industry, and freight. It would spur new technologies like hydrogen fuels made from sunlight and virtual power plants."
What is Carbon Neutrality?
Going Carbon Neutral is about how a company must decarbonize its operations and move the sum of all greenhouse gas (GHG) emissions, emitted and absorbed (sequestered) and/or offset, to become zero to stabilize carbon dioxide levels and subsequent temperature rise in the atmosphere.
A company’s operation or a country’s economy generate emissions. Globally, the biggest sources of carbon emissions originate from energy production (25%), food and agriculture (24%), industry (21%) and transportation, buildings, and other energy related activities (30%) expressed in carbon dioxide equivalent (CO2e).
Transformative innovations, the use of new materials, renewable energy and construction processes can eliminate or reduce carbon emissions and offer new ways for sustained value creation in a fast-changing world. Unavoidable GHG emissions need to be offset with carbon credits to reach a zero balance. Nature and functional ecosystems play an important role because forests, mangroves, seagrass beds as well as soils and oceans and algae sequester carbon emissions.
To review, in the strategic sustainability blog series, we have discussed how sustainability informed innovations hold the potential for creating a new regenerative, integrated and circular economy. We’ve learned a new language and vocabulary to better understand how to decarbonize and reduce carbon emissions.
Why Carbon Neutrality?
To achieve the Paris Agreement of keeping the global temperature rise to 1.5°C and the planet livable for humans to survive is a massive joint effort, which requires every enterprise, big and small, to reduce emissions and meet the goals of each country that signed the Paris Agreement. Starting in 2020 for the next decade, global emissions will have to be cut in half every year to stay on target of a maximum 1.5C temperature rise to become carbon-neutral. Eventually, the goal for the global economy is to become carbon-positive and regenerative to draw down the legacy load of carbon emissions already in the atmosphere.
The investment community has taken note and is directing investments away from fossil-fuel dependent industries that contribute to climate change toward renewables with reduced risks to protect financial assets and the global economy. Hence, in his 2021 letter to CEOs, Larry Fink, CEO of BlackRock, the world’s largest investment corporation with $8.6 Trillion Assets Under Management (AUM), does not mince words: “I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives.”
He calls the new normal, urgently imposed by global warming and the global pandemic, an opportunity for a “tectonic shift” that requires and demands “a global and ambitious response.” Decoupling economic activities from the carbon footprint is one of the most important responses to reduce greenhouse gas emissions and manage and reduce risks.
Emission reduction starts with and requires genuine commitment and concrete actions toward measuring, reporting, and managing greenhouse gas emissions. What gets measured gets done. Furthermore, it requires a willingness to understand the complex interactions between a company’s impact on the environment and the environment’s impact on the company.
5 Steps toward Carbon Neutrality
Leadership and engagement will rapidly identify risks and opportunities for responsive actions to strengthen a company’s financial and non-financial performances, including environmental, social, governance (ESG).
Following are five steps toward carbon neutrality, as recommended by ecochain:
1. Establish a Baseline
Measure all direct and indirect emissions (Scope 1–own production, 2–logistics and transport, and 3–supply chain) to determine the sources of the carbon footprint.
2. Reduction Scenarios
Consider the various options for reducing carbon emissions. What are the options? Where are the opportunities to reduce, eliminate, and offset. Efficiencies are first but are limited. How can nature-based innovations or business model iterations be implemented?
3. Reduction Targets
Define reduction targets that make financial sense and drive transformative change from a linear supply chain toward a circular value cycle, designing out waste and taking full accountability and responsibility for caused externalities, negative impact on the environment.
4. Execute and Monitor
Execute emission reduction portfolio, monitor, report to track improvements in carbon footprint reduction through integrated reporting which discloses financial and non-financial performances.
Chose off-setting options and projects locally, instead of external mechanisms, to encourage carbon trading with local businesses and meaningful carbon offsets that also leave a positive legacy for a growing local low-carbon economy.
It is no longer novel or optional for executives to lead companies towards carbon neutrality. While it may still appear like a daunting task, all it takes is to get started and get sustainability literate to become sustainability intelligent. Candid discussions between executives and the board must result in a company purpose statement expressing carbon neutrality as a clear goal to review operations, establish a greenhouse gas emissions baseline, take actions to reduce emissions to reach the ambitious goal of carbon neutrality built into the profit equation for sustained value-creation while profitable, resilient and future-fit.
May 07 2021
How many times have you gone to a strategy meeting and had people listlessly sit there, unfocused or distracted?
Professor Rajneesh Narula, Andre Pineli Alves- Henley Business School
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We summarize the key empirical evidence on the nexus between MNEs and development, focusing on issues that are relevant for the formulation, implementation and assessment of policies by host developing countries.