In the words of the COP26 The Glasgow Climate Pact, “…1.5 degrees C remains in sight, but it will only be achieved if every country delivers on what they have pledged.” Nation after nation is instilling net-zero targets, with policies and strategies to achieve these targets, and embarking on ambitious clean-technology projects to reduce and, ultimately, negate the current levels of carbon emissions. So much so that net-zero targets and commitments cover over 90% of the world’s GDP today. And nations can only deliver on these commitments with the active participation of private-sector corporations. Climate change does not discriminate between those who reduce greenhouse gas emissions and those who do not. The negative, and often fatal, repercussions of climate change impact everyone agnostically. Climate change-triggered natural calamities – like rampant forest fires, cloudbursts, rising sea levels, and unbearable temperature highs and lows – will have the same impact on the greenhouse gas emitters as on net-zero ones. As is wont with the human race, there will always be the naysayers and the laggards, who even today are either ignorant of, or are barely taking any action to reduce their own impact on climate change.
Therefore, it becomes incumbent on the leaders and the front-runners to take even more action than they currently intend to. By and large, corporations are major contributors to greenhouse gas emissions by virtue of not only their own utility and resource consumptions but also the influence they have on their supply chain and the contributions made by their employees.
Therefore, irrespective of the industry that a corporation is involved in, it will invariably have a carbon footprint. More often than not, it is possible for the corporation to quantify its carbon footprint, at least of that arising directly from its daily operations. Once its carbon footprint has been quantified, the journey to decarbonise could be strategised and implemented. However, in most cases, a corporation may not be aware of how to plan and implement a sustainable and structured journey that will allow it to transition from being a carbon emitter to a decarbonised corporation.
So, how should a corporation navigate the journey from being a net-carbon emitter to at least a near-zero-carbon emitter? A corporation would be well advised to understand that while reaching near-zero-carbon emission may be a concrete milestone, maintaining such a status is a dynamic process, especially with business functions evolving perpetually.
To begin with, every corporation desirous of such a journey needs to instil a “corporation specific Sustainable Development Policy”. Such a policy needs to identify the corporation-specific material aspects that are the root causes of the carbon footprint, set SMART goals for their mitigation, assign ownerships of this initiative, identify stakeholders, define KPIs and, most important, support this policy with a robust and flexible “Implementation Plan”. Truth be told, a corporation’s sustainable development journey needs appropriate and constant stewardship with sincere support from the top management. De-carbonisation of a corporation is not simply a set of ad hoc projects put together but rather is an ongoing programme. This is where the time-tested governance framework becomes essential, effective and efficacious for any type of corporation in order to ensure successful pre-determined outcomes of this journey.
Recognising that de-carbonisation is not necessarily a zero-cost programme, the COP26 placed special emphasis on mobilising trillions of US Dollars in financing. To quote, “private financial institutions and central banks are moving to realign trillions towards global net-zero”. The cost – Capex and Opex – component of de-carbonisation makes the necessity of a corporation-specific sustainable development strategy even more imperative. While some corporations may be cash surplus due to the nature of their business, others may not have the funds readily available in-house for the de-carbonisation programme. In both cases, it is really up to the corporation to develop a sustainable strategy for financing. With several funding options being available for “green projects/ services”, corporations may be well advised to look outside for the source of such funds.
Of course, conservative corporations may be equally interested in the “virtual cycle of energy conservation” to create a perpetual motion machine of inhouse funding, where the entire sustainable development programme may operate on a positive cash flow basis from an early stage of this journey. In this framework, a corporation initiates the de-carbonising programme with a reasonable seed capital, inhouse, and reaches positive cash flow quickly, wherein the surplus cash can be further injected into the programme in order to scale up the positive cash flow and the de-carbonisation process. This is made possible because in most cases, a de-carbonisation process is also associated with operating cost reductions through initiatives like energy conservation, water conservation and solar PV.
A corporation’s sustainable development strategy would also involve a new set of supply chains specialising in “green products/ services”. This automatically implies a unique procurement process as well as unique service contracts, including potentially Power Purchase Agreements. Different skillsets of both Procurement and Legal are essential for procuring such products or services and managing such contracts. Such issues also require to be addressed within the framework of the sustainable development strategy.
Above all, de-carbonisation is a transition from business-as-usual for a corporation. Such transitions need skilled change management strategies. Stakeholder engagement and empowerment become crucial elements for the short- and long-term success of such a strategy. All of these cannot be coordinated or managed by the usual organisation structures and require different skillsets and specialisations. Thus, at the apex of the sustainable development strategy sits the stewardship of the programme.
It is, therefore, vital for corporations to appreciate the need for a professional sustainable development strategy with the right foundational blocks, in order to deliver the long-term goals of net-zero or near-zero operations