Chief execs can’t hide behind not knowing their carbon footprint anymore
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Short-term plans from CEOs only in the job for five years mean too many companies with “pledges” to go net zero are still digging their heads in the sand, writes Freddie Evans
Companies are famous for their animal imagery. We’re all familiar with unicorn businesses; elusive, mythical, technological creatures valued at over $1bn. Then there are “zebra” organisations, defined by their combination of profitability (black) and impact on society (white). And, according to Harvard Business Review, we’re now entering the era of the “camel”; companies well-suited to the current macroeconomic climate through their ability to “survive for long periods without sustenance”. Cheery stuff.
I want to add another animal to this corporate menagerie: the ostrich. Working in the climate space, I’ve come across my fair share of ostriches — organisations who, often through no fault of their own, have their heads stuck in the sand.
The UN’s IPCC just published its first comprehensive report since the 2015 Paris Agreement and, in short, we’re not on track. An urgent course correction is needed if we are to limit global warming to 1.5 degrees Celsius. With around 100 companies responsible for 71 per cent of global greenhouse emissions since 1988, state and private enterprise has caused much of the damage. It’s only fair they play an outsized role in the recovery.
A big part of the problem is the net zero pledge. Though these may grab headlines, too little is being done to make such commitments realistic. I see many British businesses with ambitious 2030 net zero targets that haven’t created the infrastructure to meet them.
One cause of this is our bias towards short-term action. According to the 2022 Spencer Stuart Board Index, UK chief exectuvies have an average tenure of 5.4 years and are usually around 56 years old. The leaders making net zero pledges today aren’t the ones held accountable tomorrow. We encounter this kind of bias in all forms of decision-making, including policy; because long-term planning often requires short-term sacrifice, it rarely wins hearts, minds, or votes.
But the more pervasive reason corporates won’t hit their net zero targets is their ostrich-like tendencies. Historically, it was impossible for large organisations to fully understand their carbon footprints. The data simply wasn’t available, particularly at scale or in real-time. Companies knew there was a problem but lacked the toolkit to understand where and to what extent. There is a difference between knowing you are sick and going to the doctor, getting scanned, and then opting for treatment for a specific illness.
Technology means this is no longer the case. Companies do not need to live in data ignorance anymore. They can understand their carbon footprints on a granular level, before taking steps to reduce emissions. They can shake their feathers, crane their necks, and pull their heads out of the sand.
This is especially important for businesses with complicated, international supply chains, where data can be hard to synthesise. The same for financial organisations such as venture capital or private equity firms, whose own emissions might be straightforward to calculate (staff, office, equipment etc.) but their portfolios are another question. This is also about analysing the emissions not just of a company itself but of all organisations it is indirectly responsible for. Think of it like due diligence in supply chains, but for emissions. It’s no longer acceptable to see third-party emissions as “out of sight out of mind”; they’re the rest of the iceberg.
If firms want to decarbonise by up to 90 per cent, as many have pledged, they must have visibility over their emissions. Sophisticated and digestible data delivered in real-time empowers organisations to limit their carbon output and hold leaders to account if they’re not delivering.
Green credentials are becoming more than just a competitive advantage — they are a prerequisite for commercial viability, whether you are a consumer or shareholder, and will soon hold as much weight as traditional success metrics like quarterly profits. The ‘ostriches’ are headed for extinction. The sooner the better.