The journey to net zero is a difficult one

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

Business owe the world-ImResizer

The journey to net zero is a difficult one

What does business owe the world? After all, getting to net zero and getting businesses to become decarbonized and by extension the economy is a significant challenge. To put things into perspective: In order to meet the objectives outlined in the UNFCC Paris Agreement, according to the OECD, around EUR 6.3 trillion will be needed annually for the next decade. Various business sectors will need to contribute significantly to the necessary investments and efforts toward a low-carbon future. It’s clear that businesses committed to going the sustainable path are in for the long haul considering disclosure, reporting, and transparency espousing critical importance in monitoring sustainable progress. To get a closer look at how the key narratives that are impacting ESG, you can check out the SDG Summit. 

Businesses today emphasize on sustainability because it also leads to profitability, growth, and innovation despite the aforementioned challenges.  Based on insights from EY, let’s take a closer look.

How are businesses reducing emissions?

 A distinct trend is present. The past few years have demonstrated how vulnerable our world is, along with the pandemic, of course. The effects of climate change are becoming more and more apparent. Companies are beginning to understand that they, too, can and must contribute significantly to the decarbonization process. Governments are encouraging decarbonization through new rules like the EU’s “Green Deal” and the associated carbon taxes and investment commitments. Companies are also learning that innovative business models might help them preserve and enhance shareholder value.

How can a business increase or enhance value? Is this just limited to the shareholder price?

Today, businesses are just limited to shareholder valuation alone. There is a realization that are multiple stakeholders involved: The environment, people and other businesses. There is a broader realization that sustainability is a win-win for everyone involved, including investors and employees. Thus, in their quest for tenable decarbonization projects, a greater priority must be placed upon ideas that make economic and sustainable sense with newer business models that emphasize on sustainability.  What this means is that businesses are focussing more on the long-term instead of a myopic short-term and immediate optimization of shareholder interests. This translates into  serving customer needs, treating employees with respect and allowing them to grow, and producing social value—which, of course, also includes the effect of company activities on the environment—are other considerations in addition to financial ones.

 What strategies are businesses adopting towards decarbonization?

Depending on the sector. It is crucial for a business to determine the possibilities for lowering the emissions and assess if it is either directly or indirectly  a consequence of its business operations. Businesses can then optimize their operations or processes accordingly.

What are the forces driving sustainable change?

 Making a case for business being socially and environmentally responsible requires very little moral justification. The forces that are pushing us in this direction are strong and unavoidable. Consider the following three broad kinds of drivers: tectonic shifts in the nature of the world (globalisation, technology, the emergence of the global consumer, desires for equity and freedom), natural causes (climate change, water scarcity, resource limitations), and pressure from stakeholders (new questions from employees, customers and consumers, and governments).

A sustainable business imperative today is about survival. This is the stark reality that we are living in today.  Join the SDG Summit to be a part of the discussion shaping sustainable businesses today.

Authored by: Lionel Alva

Concept: Lionel Alva; Queenie Nair

Edited by: Queenie Nair

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members