What Does it Mean to be a Climate Leader Post-2020?

A new decade calls for a new approach to climate leadership. The year 2020 was an inflection point for climate action. It was a year in which many companies seek to achieve interim carbon reduction goals in line with the Paris Agreement, and are looking to chart a course for even more ambitious goals over the coming decade.

Increased urgency around climate change, as a result of the most recent scientific evidence from the Intergovernmental Panel on Climate Change (IPCC), is evolving what it means to be a climate leader. At the same time, the minimum requirements for basic climate action will continue to rise due to consumer, investor and stakeholder demands for increased sustainability and transparency. Actions taken that used to firmly secure a business the position as ‘climate leader’ are now inadequate; business and governments are being called to step it up.

To get a better understanding of this shift, what it takes to be considered a climate leader, and the long-term planning companies can do to remain ahead of the pack, we spoke with Elin Olson, Senior Sustainability Specialist at Schneider Electric Energy & Sustainability Services.

Q: What is the climate situation that led the IPCC to recommend more ambitious climate action?

A: The report published by the IPCC looks at the impacts of global warming of 1.5°C above pre-industrial levels and calls on governments and business alike to aim for more aggressive cuts to carbon emissions. The science showed that the world is already feeling the consequences of 1°C of warming through more extreme weather, rising sea levels, loss of coral reefs and longer droughts, among other changes.

The difference of just a half a degree seems small, but every bit of warming matters. Limiting global warming below this new threshold is critical for avoiding irreversible changes, but there’s good news too. Although actions must accelerate, it is possible and some of the recommended actions are already underway. The leading edge of this evolution is an initiative called science-based targets (SBTs).

What should companies be doing today to keep pace with peers on climate action?

In the past, traditional emission reduction goals tended to be theoretical in nature; targets were not based on scientific evidence or aligned with any global climate agenda. To keep pace with today’s leaders, companies should seek to align company objectives with actions that science deems necessary to avoid the worst impacts of climate change. Companies that set and approve SBTs, for example, can demonstrate to stakeholders and investors that their sustainability programs are both ambitious and results-oriented.

Leadership with SBTs moves beyond the mentality of companies just doing their "fair share" to combat climate change. A company must now look beyond the impact of its own operations by engaging the entire value chain that feeds its business, to embed this mindset across companies globally. There’s a path to leadership for companies at all stages of target-setting:

• If your company is setting goals for the first time, set yourself up for long term results by beginning with SBTs.
• If you company already has climate goals that are not science-based, reassess how your current goals can be adapted to the SBT framework. If your goals are short-term in nature, consider showing ambition by setting longer-term SBTs in parallel.  
• And if you already set an SBT under the original 2 °C warming scenario, consider reviewing (and, if necessary, re-validating) your target to bring it in line with the most recent climate science.

Companies should also consider how their climate goals intersect with other globally recognized initiatives. Many companies find that by setting SBTs, for example, they gain a strategic advantage on overlapping sustainable development goals (SDGs). Climate issues and social issues, such as poverty and education, are inter-connected—thinking about them in tandem can accelerate progress in both.

Companies leading the way on climate action are also thinking critically about how climate risks will materially affect their business both now and in the future. Using tools like scenario analysis and internal prices on carbon, organizations gain insight into key elements of potential future states of their business and can develop strategies to mitigate uncertainty about how climate change will affect them. They can then use this information to update stakeholders and investors about how the they intend to prepare, adapt and position their company to thrive in this future environment.

What should companies be planning now to remain a climate leader in the future?

In the coming years, many of today’s actions that earn a company leadership status will come to be expectations for companies around the world. These include, but are not limited to: setting science-based targets, putting a price on carbon, procuring renewable electricity, mapping and assessing climate-related risks, engaging in climate policy, engaging the supply chain on climate action, etc. To remain a leader in the future, companies will need to go above and beyond what it takes to be a leader today.

One major shift will be to accelerate carbon reduction goals to achieve carbon neutrality. Companies committing to SBTs have a head start, with access to methodologies that provide useful frameworks for moving towards carbon neutrality and even carbon positivity.

Companies will also need to turn their focus to carbon reduction from Scope 3, or indirect emissions in a company’s supply chain. Tackling supply chain emissions is audacious for companies of any size, but the impacts that can be achieved are exponential compared to focusing only on emissions from your company’s own operations. This can range from engaging supply chain partners on renewable energy procurement to switching fuel sources to cut out carbon-intensive technologies where possible. Work in tandem with your key supply chain partners to address their own Scope 1 and 2 emissions to contribute in part to your own Scope 3 goals.

Finally, companies that want to stay ahead will need to begin thinking about their strategy around technologies that do not yet exist or markets that are still emerging. For long-term renewable energy goals, for example, this may be planning for procurement in Asia where markets are still immature. Or for goals around electric vehicle adoption, this could be thinking about how to electrify fleet and cargo transportation. To meet the longest-term climate goals, companies will almost certainly need to plan to implement products and solutions that are not yet viable.

I hear your next question already, so I'll just ask it - “How do I plan for solutions that are not available today?”

One way is to be proactive about identifying and working with the right partners. Leading companies will seek to partner with organizations to develop the right tech capabilities and bring solutions to new markets that will get them to their goals. So, if you’re looking for renewable energy options in market where they are not readily available, begin engaging the local governments and partner with the NGOs who are already working on it. This way, you’ll be well-positioned to favorably influence the development of innovative solutions and can be a first-mover to adopt them. Companies can also participate in pilot programs. Not only will participation in pilots accelerate development and market demand of new technologies, but also will prepare your organization internally to accommodate new processes and tools once they become available.

The face of climate leadership is changing – no doubt. But the end goal of a safer, healthier planet for many generations to come stands still as the central pillar in an ever-changing environment. And though it can feel daunting to plan into a future where solutions and technologies are unknown, there are tools and resources available today that companies can use to break down the work into manageable projects.

We welcome you to reach out to our team if you have any questions, and explore Schneider Electric's suite of Climate Change Advisory Services.