The need to achieve real gains in climate action is no longer a “nice to do” but a “need to have” for companies both big and small. As study after study shows, customers, consumers, stakeholders, and even investors and major lenders are sizing up companies’ efforts toward climate protection as a key indicator of the organization’s overall strength. Within that discussion, the topic of becoming carbon neutral — or reaching net zero emissions — is one of the ultimate goals.
What is “net zero”?
Net zero refers to a state in which the greenhouse gases (carbon dioxide emissions) going into the atmosphere are balanced by the removal of emissions from the atmosphere.
Underlying the urgency of achieving net zero is global warming. According to the United Nations Net Zero Coalition, “in order to avert the worst impacts of climate change and preserve a livable planet, global temperature increase needs to be limited to 1.5°C above pre-industrial levels.”
In order to achieve that goal, the world needs to reach net-zero carbon emissions by 2050. Many companies have already accepted the challenge and taken their commitments a step further, vowing to become carbon neutral even before the 2050 deadline. By looking at recent numbers, threats to organizations, as well as consumer and investor behavior, let’s take a look at why achieving net zero now is imperative for today’s enterprises.
The Current Focus on ESG Initiatives
Despite being a part of our global consciousness for decades, sustainability — and more broadly, environmental, social, and corporate governance (ESG) initiatives — have seen a recent surge in popularity among companies looking to foster innovation and gain loyalty with investors, employees, and the general public. A few recent numbers point to the urgency of investing in sustainability and why companies are prioritizing their net zero commitments:
- Greenhouse gas concentrations are at their highest levels in 2 million years and continue to rise. As a result, our planet is about 1.1°C warmer than it was during the 19th century. In fact, the 2010s was the warmest decade on record.
- In May 2020, CO2 levels in the atmosphere reached record levels, hitting 417 parts per million. For reference, CO2 levels last exceeded 400 parts per million approximately four million years ago.
- Along with global warming, the consequences of climate change now include, among others, intense droughts, water scarcity, severe fires, rising sea levels, flooding, melting polar ice, catastrophic storms, and declining biodiversity.
While these statistics paint a somber picture and contribute to growing corporate concern about environmental sustainability, another factor is also at play: financial risk. With floods, wildfires, heat waves, and other extreme environmental events occurring around the globe, corporations face increasing asset risk due to climate impacts.
A recent study found that “over 90% of the world’s largest companies will have at least one asset highly exposed to the physical impacts of climate change by the 2050s,” according to the report by S&P Global, an index and ratings provider. Another report by CDP, a nonprofit overseeing a global disclosure system on environmental impacts, found that “215 of the biggest global companies report almost $1 trillion at risk from climate impacts, with many likely to hit within the next 5 years,” underscoring the importance of corporate climate change action now.
The Power of Purchasing: Consumer Preference for Green Companies
Those that act are also more likely to win over long-term customers. Several studies indicate the growing public interest in understanding companies’ sustainability practices — and a willingness among consumers to reward those that behave in an environmentally-conscious manner with their business.
The Global Sustainability Study 2021, a major 2021 sustainability study of more than 10,000 people across 17 countries, found that “85% of consumers have become ‘greener’ in their purchasing in recent years.” The study also revealed that more than one-third of respondents said they are willing to pay more for sustainable products or services,
Another report, the 2021 ESG study by PricewaterhouseCoopers (PwC), which looked at ESG more broadly, including social issues such as diversity, inclusion, and human rights, along with sustainability, found that 76% of consumers said they will discontinue relations with companies that treat employees, communities, and the environment poorly.
The study, which polled 5,005 consumers, 2,510 employees, and 1,257 business leaders in the United States, Brazil, the United Kingdom, Germany, and India, also demonstrated age-related differences in attitudes toward ESG goals. Young people are particularly attuned to ESG concerns, according to the PwC report, with Millennials and Gen-Z significantly more likely to consider ESG in relation to trust, advocacy, and purchasing decisions.
The Rising Interest in ESG-Focused Organizations in the Financial Sector
Investors are displaying increasing interest in companies with strong commitments to ESG as well. Referred to as ESG investing, this form of socially responsible investing gained traction following the COVID-19 market turbulence during which many companies with strong ESG track records showed lower volatility than their non-ESG counterparts.
For example, investors poured $51 billion into ESG-impact funds in 2020, more than doubling such investments within a year.
Along with more stability, ESG-focused companies fare better in financial results than non-ESG-focused organizations, according to emerging research.
A Greener Road Ahead
The importance of sustainability and other ESG issues has not fallen on deaf ears in the corporate world.
According to a 2020 ESG survey by NAVEX Global, 88% of publicly traded companies have ESG initiatives in place followed by 79% of venture and private equity-backed companies and 67% of privately-owned companies, according to respondents. The survey included responses from 1,250 management and senior level executives in the US, UK, France, and Germany — all of whom work at companies with 500 or more employees.
And in a recent Google survey looking at the IT sector, IT leaders were increasingly interested in sustainability issues; 90% of respondents said sustainability is a priority and/or a performance metric for their IT departments. Another 67% have already put sustainability targets in place.
While these statistics offer hopeful news for the environment and social issues, other studies reveal that many executives don’t feel their organizations are doing enough. For instance, only 50% of respondents believe their company performs very effectively on sustainability metrics, according to the NAVEX ESG Global survey.
Where to Go From Here
It’s clear that a significant paradigm shift is occurring globally regarding the importance of carbon neutrality and other ESG goals. Companies are making inroads, but the path to reaching those goals isn’t easy.
However, the stakes for reaching net zero by 2050 remain high. Evidence shows that our planet has been getting hotter. Global average temperatures are now 1.2°C (2.16°F) higher than in the pre-industrial era.
Worldwide concern continues to grow as evidenced by the historic Paris Agreement in 2015, whereby 196 countries adopted the plan to reduce global warming and build resilience to climate change. Its overall goal: limit warming to no more than 1.5 degrees Celsius.
A number of major organizations have made carbon reduction a priority, setting aggressive sustainability goals. Among these are Delta Airlines, General Motors, Disney, Honeywell, and Google to name a few. Google was an early leader in sustainability efforts, having achieved net zero in 2007 through renewable energy purchases. Most recently, the company set an ambitious goal to operate on 24/7 carbon-free energy at all of its data centers by 2030.
When it comes to sustainability, Maven Wave and Atos are also well known for their exemplary carbon-neutral efforts. In fact, Atos leads the IT industry in decarbonization efforts, ranking #1 in the digital sector worldwide by the Dow Jones Sustainability Index.
In addition, Atos, a Google Cloud partner, is working with Google on several sustainability programs. This includes Carbon Footprint, a part of Google’s Carbon Sense Suite, which brings together features from multiple Google products to help users accurately measure carbon emissions from their Google Cloud usage. The tool, which Atos helped to develop, provides information that helps users take action to reduce their carbon impact.
You can read more about Google Cloud’s carbon reduction tools in our recent white paper “The Road to Net Zero With Google Cloud.” And to learn how these tools can help your business enterprise achieve its sustainability goals, contact Maven Wave today.
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