450 of the world’s biggest financial companies – controlling 40% of total global assets, worth $130 trillion – pledged to achieve Net Zero by 2050 at the COP26 summit. But what does that mean in practice? What lessons are there for other businesses to learn from this?
And what practical actions can you take now to make sure that your business is making a contribution to achieving net zero?
That’s what we’re going to explore in this blog.
What have they pledged to do?
The list of businesses making the pledge includes banks, insurers, pension funds, asset managers, stock exchanges, credit rating agencies, index providers, and audit firms, through a high-level initiative called the Glasgow Financial Alliance for Net Zero (GFANZ), which brings together multiple sector-specific groups under a single umbrella.
What they have agreed to is:
- Use science-based guidelines to reach Net Zero emissions across all emissions “scopes” by 2050
- Set interim targets aiming for 50% decarbonisation by 2030, which experts argue is essential for hitting the 2050 goal
- Publish Net Zero transition strategies, explaining how it will be achieved
- Commit to transparent reporting and accounting on progress against those targets
- Adhere to “strict restrictions” on carbon offsetting
Many of the companies are massive global businesses, including Morgan Stanley, AXA, Swiss Re, Nationwide, HSBC, PWC, Deloitte, and more.
And these commitments apply not just to direct emissions from their own activities: they will also filter down to their supply chains and the companies they invest in.
That’s why – in spite of the criticisms already voiced – this is such an important announcement. Change in the financial sector will make change across the whole global economy far easier to bring about.
What can my business learn from this?
Perhaps all this discussion of trillions of dollars, global financial brands, and international summits makes Net Zero sound like a very distant, abstract prospect, with little relevance to the vast majority of businesses?
But if you think that, you’d be very wrong:
- Also speaking at COP26, chancellor Rishi Sunak announced plans for all financial institutions and listed companies to be required to publish their Net Zero transition plans by 2023
- Since September this year, bidders for all public procurement projects worth more than £5 million have been required to have Carbon Reduction Plans committing them to reach Net Zero by 2050 in place
A recent survey found that 72% of British people believe businesses have “a legal responsibility to the planet and people”.
Carbon reduction is a priority that’s not going away. Smart businesses will be doing what they can now to ensure their place in the low-carbon future is secure.
So, taking what these 450 corporate giants are promising to do as a model, let’s look at what your business can do today.
#1 Use science-based guidelines to set targets across emissions scope
The Greenhouse Gas Protocol divides emissions into three scopes:
- Scope 1 – direct emissions from a company’s activities or property
- Scope 2 – indirect emissions from the generation of energy used by a company
- Scope 3 – indirect upstream and downstream emissions across a company’s value chain
Scope 3 emissions are particularly tricky to benchmark and measure, as they often concern other businesses. But there are lots of free tools that can help your business assess what your emissions across these categories are. For example:
- Greenhouse Gas Protocol’s Many Calculator Tools
- The Carbon Trust’s Carbon Footprint Calculator
- SME Climate Hub’s Cool Climate Calculator
While there is still debate about the extent to which Scope 3 emissions can or should be included in official definitions of Net Zero, earlier this month the Science Based Targets Initiative (SBTi) launched a process for testing, validating, and certifying commitments and targets, designed explicitly for businesses.
#2. Aim for 50% decarbonisation by 2030
In practice, that means prioritise the quick wins:
- Switch to a green or renewable energy provider
- Look at improving building insulation and energy efficiency
- Move your fleet to electric vehicles
- Minimise business travel, especially air travel
- Stop using disposable items, like paper cups and plastic bags
- Keep printing to a minimum or move to a paper-free office
- Set up recycling bins around your premises
- Make sure your suppliers are committed to Net Zero too
- Engage your employees and get them contributing
- Review lighting and HVAC systems, as these are massive energy users
All small things, but over the course of the 29 years left until 2050 their impact will add up!
#3 Publish Net Zero transition Strategies
Be open about what you’re doing and you’ll find others are willing to help. Celebrate your wins and publicise what you’re doing in your annual report and CSR reports.
Not only is this required for a growing number of public procurement projects, but it’s great PR when you show that you take Net Zero just as seriously as other business goals.
#4 Commit to transparent reporting
It’s also vital to keep proper track of what you’re doing, so you and your stakeholders can assess the progress that’s being made.
And that’s where Thrive comes in. Not only can we provide consultancy to help you develop your targets and processes, but our software platform helps you to capture, analyse and showcase the impact your efforts are having.
Our methodology is based on the Impact Evaluation Standard, a framework that includes combating climate change as one of its five central pillars – which makes it ideal for integrating with Net Zero planning and tracking.
#5 Minimise offsetting
Of course, Net Zero isn’t the same as absolute zero. That’s where offsetting comes in.
Offsetting activities can include:
- Tree planting, reforestation, and conversation
- Converting waste to energy
- Investing in community energy efficient projects, beyond the scope of your own direct impact
- Trading in emissions credits (effectively, paying for the carbon removal carried out by others)
However, offsetting should be seen as a last resort – as a way to compensate for unavoidable emissions that can’t be eliminated.
Do you have a carbon reduction or net zero plan in place? We would love to hear what you are doing and share your story with others. You can contact us at firstname.lastname@example.org.
Read more about how BBI use their Green Thursday initiative to help the environment.