In leadup to the 2021 United Nations climate change conference, COP26, countries announced their plans to decarbonize their economies in order to help mitigate the impacts of climate change – net-zero. These net-zero goals involve reaching a balance where the greenhouse gasses produced by an action are cancelled out by the amount of gasses it removes from the atmosphere. These pledges involve large investments into infrastructure and a general shift in economic priorities for many governments, but several major companies have also pledged to decarbonize their operations. Some, like PwC, have set ambitious targets that would see them reach the mark by the end of this decade [1, 2]. Scepticism from the public is rife however, as consumers are wary of greenwashing claims and inaction from both governments and companies – but net zero is the future of sustainable businesses, and opportunities exist for them to thrive using such a business model.

Net-Zero & Businesses

In an analysis of Fortune 500 companies with net-zero plans, the World Wildlife Foundation (WWF) found that only 20% had science-based plans. “A lot of businesses and investors are setting these kinds of targets, and they’re doing it, arguably, for PR reasons,” explains Oxford University professor Thomas Hale [3]. Companies like Walmart highlight the issues of greenwashing. Walmart, who have pledged to reach net-zero operations, do so without incorporating the emissions produced by their supply chains – which are the largest source of emissions for the company [3, 4]. 

PwC on the other hand has committed to the United Nations’ science-based targets for companies, joining other financial companies like AIA in transitioning their operations, investment portfolios, and that of their partners to align with net-zero goals. But what does this look like [5]?  For PwC it means reducing their amount of corporate flights, transitioning their fleet of work vehicles to electric models, refitting their buildings to become more energy efficient, reducing waste and investment into emerging technologies [1]. Investing giant AIA went a step further and divested from coal and indicated that it would not carry out new investments related to fossil fuel, choosing to finance renewable power and sustainable development projects, and ensuring that its partners did the same [2]. 

Importance of Net-Zero

Net-zero and sustainable business models are not just good for the planet, but they are also a financial opportunity [6, 7]. Several CDP reports highlight that the cost of not adapting to climate change-driven market demands will lead to trillions in stranded assets, and while implementing a sustainable business model may not be cheap, the long-term benefits far outweigh short-term, non-sustainable approaches [5, 7]. Consumers want their products and services to be sustainable, they are ready to spend more for them – and they are becoming more adept at identifying greenwashing. Have you thought about implementing a net-zero or sustainable business model?

Key Takeaways

References

[1] PriceWaterhouseCooper, 2022, “Towards net zero”, PriceWaterhouseCooper.
[2] Yvonne Lau, 2021, “7 years ahead of schedule, AIA becomes the first major Asian insurer to end coal exposure”, Fortune.
[3] Eloise Barry, 2021, “As More Companies Make Net-Zero Pledges, Some Aren’t as Good as They Sound”, Time Magazine.
[4] Net Zero Tracker, 2022, “Companies”, Net Zero Tracker.
[5] CDP, 2022, “Data”, CDP.
[6] Vincent Diringer, 2022, “The Importance of Sustainable Business Models”, LEAD-WiSE.
[7] Zameer, H., Wang, Y., & Saeed, M. R. (2021). Net‐zero emission targets and the role of managerial environmental awareness, customer pressure, and regulatory control toward environmental performance. Business Strategy and the Environment.