There are three essential elements Australian companies must address if they are to make meaningful progress on decarbonisation, writes Lisa Zembrodt, principal and senior director, Schneider Electric.
Decarbonising Australia is an economic imperative. According to Schneider Electric’s Sustainability Index 2022 – a survey of 500 business decision-makers in Australia – climate change and its associated impact is the primary risk to companies today.
Deloitte Access Economics estimates climate change-related disasters will cost Australia $73 billion per year by 2060, even if action to reduce greenhouse gas emissions is taken now. The cost of natural disasters during the next 40 years is expected to be at least $1.2 trillion in present value terms.
Despite the accepted imperative and drivers for change, companies continue to struggle to make meaningful progress on decarbonisation. To make genuine progress in this area, companies need to align three essential elements:
- Ambition: What you are trying to achieve and why are you trying to achieve it.
- Direction: The specific means by which you will achieve your ambition.
- Taking action.
If any of the three elements of the “decarbonisation hat-trick” are missing, companies will fall short of making meaningful progress.
Affirm your ambitions
A company needs to understand its motives and set very clear targets that align with them. For some organisations, a shift in consumer preferences will drive ambitious goals. For others, ambition will be driven by the need to access capital markets, limit the risk of stranded assets, or insure facilities. Perhaps the aim is to keep up with competitors.
Motivation will vary by industry, geography and specific companies, but anything less than net zero by 2050 is not ambitious enough.
Map out company directions
The specific means by which decarbonisation ambition will be achieved can’t be conceptual. Step-by-step directions with a timeline are a necessity – a strategy alone isn’t sufficient. We’re talking a Gantt chart-worthy set of directions that have considered the interconnectedness of activities, and clearly state what should be done and by when in an optimised way.
The directions must be implementable. From there, take swift action.
A holistic approach
If you have ambitious goals and take action without a holistic set of specific, clear directions, your implementation is going to be suboptimal. You will take action at the wrong time, or in the wrong way, and your effort will end up costing the company more than necessary.
In a recent Schneider Electric project involving a company’s energy portfolio, a suboptimal approach without a clear adventure map was identified. Through new and improved directions, the company could achieve its ambitious ESG (environmental, social and governance) goals, saving more than $200 million in the process.
Conversely, companies that produce a conceptual and informative renewable energy strategy that can’t be implemented will confuse key stakeholders, and the action phase will collapse because the strategy lacks clarity, nuance and reference to market realities.
Success relies on a very clear and implementable decarbonisation strategy.
If a company acts on a detailed strategic plan that lacks ambition, it reflects a compliance mindset that simply won’t achieve meaningful progress towards decarbonisation. It is very difficult to get stakeholders to buy into taking action without clear targets or drivers for those targets.
Companies that lack ambition struggle to attract future talent, which overwhelmingly favours companies with significant ambition behind their strategy and action.
Backing up words with action
Any company that publicly states its ambition – such as, “We’re going to be net zero by 2050 and here’s how” – but then fails to act is simply greenwashing, and there is no surer way to be judged as being insincere by stakeholders.
Companies accused of greenwashing face an uphill battle to repair their reputation, and may attract legal ramifications if they’ve made public statements. It’s exceedingly important that action to decarbonise begins the moment you talk about your intentions, otherwise it is only a matter of time before the economic and reputational consequences take hold.
Companies need to address the “decarbonisation hat-trick” to have meaningful impact in the communities in which they operate, and inspire others to follow. There is no escaping the diligence required to act on the decarbonisation imperative. However, the economic and reputational benefits make it worthwhile for every organisation that adheres to them.