Together, these forces are injecting not only greater urgency into the climate change conversation but also greater sophistication. Setting environmental targets once drew applause; now even the most ambitious targets aligned with net zero are becoming commonplace. Almost 1,400 businesses—including many in the most carbon intensive industries, such as cement—have joined the UN Race to Zero, aligning their entire value chains with a 1.5 degree world.
In the inaugural edition of the Brunswick Social Value Review, published at the start of 2020, we described a three-pronged approach to corporate leadership on climate. By the end of 2020, we’ve seen more companies embody it.
1. Business Transformation
This entails a business becoming net zero through its products, portfolios, operations and procurement. A net-zero ambition is often the place this all starts. Today’s best practice is setting a science-based target—which more than 1,000 businesses have now done—with the ambition to reach it in the 2040s, supported by near-term targets this decade.
Leadership consists not merely of setting that ambition but a clear transition plan for how the entire business is aligning to deliver it—including across the value chain, which is on average five-and-a-half times larger than the business itself.
Standalone actions like powering operations with 100 percent renewable energy are important but not sufficient. Influential stakeholder coalitions such as the Climate Action100+ want to see a strategy that outlines climate-related risk, and articulates how the company is changing to play a successful part in a net-zero world. Increasingly, that means how it is realigning capital, assigning explicit board-level oversight, linking executive pay to climate targets, accounting for the impact on workers and communities, and ensuring its policy advocacy is consistent with its public commitments.
2. Systems Change
The next stage of leadership is going beyond the business, considering the unique levers the company has to drive progress on systemwide challenges. Global logistics firm Brambles was praised by the UN and COP26 Presidency for its plan to pioneer the world’s first regenerative supply chains that enable customers to deliver on their net-zero targets; a commercial and societal win-win that also responds to a pandemic-induced reappraisal of resilience as a global strategic priority.
We are seeing more companies deploy strategic philanthropy alongside partnerships. Transform to Net Zero, for example, is an alliance between Microsoft, Nike, Mercedes-Benz and Maersk, where members share best practices for achieving net-zero emissions across their value chains.
Coalitions are also tackling both the supply and demand side of the equation. For electric vehicles, the EV100 coalition, whose members range from Heath-row Airport to IKEA, are pledging to transition their huge fleets to electric vehicles by 2030. On the supply side, we saw the launch of the “green hydrogen catapult,” a coalition of the world’s largest hydrogen producers working to drive down costs so green hydrogen can become an economically viable alternative energy source for industries like cement and steel.
We expect collaboration to drive sector-level transition to deepen and accelerate in the first half of 2021. At the Davos Dialogues in January, the UN Climate Champions in partnership with the UK COP26 President Alok Sharma launched the “Race to Zero Breakthroughs,” a masterplan based around specific sectoral tipping points the world must achieve, and business can contribute to, across more than 20 sectors to achieve a resilient, zero-carbon future.
As well as aligning their businesses to net-zero emissions and working to create systems change, businesses also have a role in creating an enabling policy environment for action on climate.
Climate-focused investors and nonprofits are calling out businesses when they spot a gap between a business’ public statements and its private lobbying. In 2019, more than 200 institutional investors, with a combined $6.5 trillion in assets under management, called on publicly traded companies to align their climate lobbying with the goals of the Paris Agreement. In October 2020, those investors wrote to CEOs reminding them of that expectation.
Here too we’ve seen companies take bold action. bp, for instance, has made advocacy an explicit component of its net ambition (“Aim 6”) and redirected money from advertising toward climate advocacy. Meanwhile more than 1,000 companies have joined The Business Ambition for 1.5°C, which is working to create a mandate for greater policy leadership, completing the so-called “ambition loop” required to make net zero a reality.