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Sustainability

Closing the Gap: Navigating the Ambition-Action Gap in Sustainability

Over the last several years, we have seen great momentum in global companies setting increasingly aggressive targets and this movement continues to accelerate in 2024. Recent data shows that nearly 60% of industrial companies have set public targets. That’s good news!

Yet, recent research from 2022 also tells us that only 12% of Fortune Global 500 companies are delivering on their ESG targets despite having a clear roadmap on the steps to decarbonize.

This blog reveals the reasons behind this concerning trend, and provides actionable steps that businesses can take to drive their sustainability goals from strategy to impact..

The ambition gap: a common story

building skyline with green treesToday, most companies set targets at the enterprise level without thinking through the operational implications and associated costs, only to find out their plan is a non-starter. This siloed approach to implementation rarely moves the needle, and we find it often creates a compounding gap between goals and what can be accomplished.

Below in the visual graph depicted, we can see a company that set a 24% decarbonization goal for 2022. The program had a strong start but ran into some of those common obstacles. Ultimately, they fell short of their 2016 target of a 10% reduction because they couldn’t implement projects fast enough.

A closer look at the project pipeline revealed another potential gap in 2020 targets. Because most of the low-hanging fruit was implemented in the first year, the projects remaining had up to a two-year payback. While these were still within the hurdle rate, not all sites had the requisite bandwidth, expertise, or budget to develop an implementation plan on their own – let alone execute it.

Reaching the 2020 milestone target would require a significant capital investment and CFO approval, but individual sites had not planned for these projects, mostly because of competing business priorities, which resulted in capital allocation falling short, and an even bigger gap created. Ultimately, in this scenario, the company missed its 2022 target by a significant amount, achieving only slightly more than half of the goal it had announced publicly.

This situation is not uncommon, but why is it happening? What’s driving this gap between corporate objectives and individual site priorities? Today, we see two prevailing trends:

1. First, sites are not being measured adequately for achievement of goals. Plant and facility management have many priorities competing for attention and budget. Furthermore, sometimes energy efficiency and sustainability are perceived as conflicting priorities to site KPIs such as productivity and quality.

2. The second trend we’re seeing is that projects are getting implemented in silos with little collaboration or knowledge-sharing between sites, and limited coordination with corporate teams. Lack of a cohesive plan means missed opportunities for efficiencies and economies of scale and slow progress towards corporate goals.

Barriers to Sustainability Success

A significant number of our global clients approach us while grappling with moving from ambition to actionable strategy. Our experience with clients reveals that the hurdles are often more organizational than technical. We identify the four most challenging obstacles as comprehensive data transparency, governance alignment, financial enablement, and enterprise-wide execution.

1. Governance Alignment

Enterprise and site-level alignment is vital to the success of a sustainability program, and therefore proper governance cannot be overlooked. Aligning corporate- and site-level stakeholders ensures that sustainability ambitions support operational performance goals. A business case for sustainability will only be successful if it addresses the needs of all stakeholders. Discover how good governance can be achieved in our blog, The road to success: The crucial role of governance in sustainability programs.

2. Financial Enablement

Financial constraints often present a significant barrier to sustainability initiatives. Innovative funding models, tailored to suit each client's unique financial circumstances, can help tackle this challenge. Whether mitigating financial risk, safeguarding cash flow, or divesting assets from balance sheets, flexibility is furnished to pursue sustainability objectives without undue financial strain. Discover how to overcome the barrier and achieve more than just low-hanging fruit on our blog, Funding the Future: Financial Enablement for Sustainability Initiatives.

3. Data Transparency

Transparency in data is imperative for informed decision-making in sustainability endeavors. Clients are aided in surmounting data transparency challenges by furnishing a comprehensive view of enterprise-wide data with shared KPIs. Through platforms like EcoStruxure and Resource Advisor, clients gain access to real-time insights that inform procurement strategies, track progress toward sustainability goals, and optimize efficiency performance across their portfolios.

4. Enterprise-Wide Execution

Scaling sustainability initiatives across complex portfolios necessitates a strategic and programmatic approach. Opportunities for energy reduction, electrification, and renewables implementation are identified, crafting unique solution playbooks tailored to each client's requirements. By orchestrating the entire process from planning to execution, performance, quality, and continuous optimization are expected to sustain progress over time.

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Paving the Way for Success with Schneider Electric

At Schneider Electric, we are dedicated to our clients in making a significant impact that distinguishes them as industry leaders. Our clients often describe us as the “easy button” for sustainability and infrastructure projects, and we take great pride in our global and integrated approach to driving sustainability success across all industries and sectors.

To guide our clients from strategy to action, we employ a highly collaborative and consultative approach deeply engaging with a wide array of client stakeholders and C-level sponsors. Beginning with strategy, where we seek to understand their current performance and their growth plans, forming a strategy and targets in conjunction with inputs from both the corporate and site levels., Subsequently, we establish a “one truth” data platform to support their investment decisions and progress tracking.

This consulting work evolves into a strategy roadmap with an integrated approach to decarbonization. This roadmap encompasses Scopes 1 – 3, using efficiency and electrification solutions, planning for their transition to low-carbon energy, and fostering similar change through their entire supply chain.

With over 20 years of experience, our team of more than 2,700 in-house sustainability experts is committed to helping our clients strategize, digitize, and decarbonize. You can trust that you have the right partner to overcome these obstacles and achieve your sustainability goals!

Sustainability Pays

With our extensive experience, we understand that when sustainability is approached correctly, it pays off, and success extends far beyond decarbonization goals. For instance, companies committed to sustainability:

  • Outperform their competitors, demonstrating superior returns and corporate longevity. (Source: Global 100, Corporate Knights)
  • Adopt more innovative solutions. (Source: 2020 Corporate Energy & Sustainability Progress Report, GreenBiz)
  • Experience greater ease in attracting investors and talent. (Source: A Fundamental Reshaping of Finance, BlackRock)

Contact us today to start making sustainability work for you by partnering with Schneider Electric.

Contributor:

For a deep dive into other obstacles within this series, check out our on-demand webinar with James Potach, Senior Vice President Sustainability Business.  

Sources

Climate Impact Partners. (2022). Reality Check: Climate Action & Commitments of the Fortune Global 500.