August 23, 2022
This article is part of our article series about integrating climate management into business models to ensure long-term corporate success & resilience and achieve our global net zero goals. Carbon accounting is crucial to climate management. Net0 is an emissions management platform that enables accurate emissions measurement, reduction planning, offsetting solutions, stakeholder reporting and certification. We believe that carbon management is the most practical method to approach a company’s climate impact, helping to reveal, track and correct those fields of action (e.g. energy efficiency) with the most significant potential for positive change. However, an asymmetric implementation of climate management can hinder your company from achieving its climate goals. For that reason, we dedicate this article series to elaborating what it really means to integrate climate thinking so that you harness most of its benefits for sustainable growth.
A shift in human mindsets leads to a change in organisational and industrial structures and their respective governance, and so does climate thinking. In our last article, we looked at the need to redefine values and corporate priorities for effective and profitable climate management. The profitability of sustainability measurements has already been widely proven. But it is also the resilience factor that convinces investors that seek ensured and consistent long-term returns.
As David Pitt-Watson, Leader of the Climate Accounting Project and a Fellow at Cambridge University’s Judge Business School, states:
“Institutional investors have been clear that they want the companies they own to commit to a business model which is compatible with climate sustainability.”
He further explains that carbon accounting would be a crucial component of climate management and needs to be part of how we calculate financial success. The reporting guidelines from the TCFD (Task Force on Climate-Related Financial Disclosures) provide a helpful framework for what investors, regulators and other stakeholders expect regarding the organisational incorporation of climate management. The disclosure recommendations of the Task Force consider the following core areas of a company’s business operations:
The TCFD Implementation Guide and the Good Practice Handbook help companies to put the recommendations into practice and to communicate with investors. Though the practical application for reduction measurements is left to the companies, and exactly that is where we face the challenges.
Suppose the top management does not fully understand the value and benefit of social responsibility and climate management nor does it consider them worth thinking about. Then it is very likely that the implementation will fail due to a lack of leadership. Executives must anchor climate thinking in the company's corporate strategy. Thus, climate management affects all departments, including corporate finance, production, quality management, sales, R&D, HR & training, remuneration, etc. Furthermore, it must be layered into any other stakeholder activities such as reporting, marketing and partnerships.
A business owner who values the image of his business model more than its integrity is most likely one that only considers the company’s corporate carbon footprint for compliance and marketing purposes. That one also may want to jump right ahead to announce publicly what projects and measurements they have initiated in the company. But as Lise Kingo, Independent Board Director from net zero pledging Covestro (German producer of raw materials for construction and agriculture) and Aker Horizons (Norwegian company holding assets in renewable energy and carbon capture), points out:
Effective carbon reduction and ESG measurements start with strategy, not with reporting.
Achieving ESG and climate goals need real action through respective work systems that are effective and keep the company and its teams constantly accountable. A smart strategy, however, requires an initial assessment with intelligent analysis tools that help to shape that strategy.
The SDG Implementation Framework gives a good overview of the departments and processes that such an assessment should consider if a corporation plans to implement ESG and carbon reduction measurements. The framework has been developed by the UN Global Compact, the world’s largest corporate sustainability initiative. It has been published with the report SDG Ambition which introduces the same-named accelerator programme that supports participating companies in integrating the SDGs into business strategy, operations, and stakeholder engagement.
Quick recap: SDGs are global Sustainable Development Goals shaped by the United Nations, whereas ESG are quantifiable and measurable factors that refer to a company’s sustainability practices. ESG strategies look at a company’s relationships with the environment (E) and society (S = stakeholders), as well as at the governance standards (G) that shall ensure accurate and transparent accounting and disclosure methods, integrity and diversity. Ultimately, ESG criteria shape methods and processes to achieve the Sustainability goals.
Climate leadership needs to be approached from all three angles, encompassing all ESG criteria and leaning on the SDG Implementation Framework. If climate thinking is incorporated into the entire organisation and considers all stakeholders, executives can set a foundation for fruitful climate management. Anything else would mean to plant a seed that a) may never germinate or die, or b) whose growth is heavily compromised and its fruits will never taste as well as they could so that you may question why you have planted it in the first place. That said, taking a few steps back and looking at the entire business ecosystem from various angles is the premise for any successful project implementation - and so it is for climate management.
We conclude that climate management can lead to a considerable improvement of corporate health and resilience, sustainably, if:
If executives implement climate management smartly, it significantly increases the likelihood of harvesting its full potential.
So what else can we do to ensure that integrating climate management yields the highest amount of fruits possible? What else is necessary to build and cultivate nutrient-rich soil for its successful growth? What are business ecosystems & effective work systems?
You will find the answers in our next article of this series, where we look at the benefits of “Considering Business Ecosystems For Effective & Profitable Climate Management”. Stay tuned & climate-smart with Net0.
Other articles in this series:
If you would like to expand your knowledge about the successful integration of climate management, please refer to our following content:
• Are Net Zero Business Models The Future of Responsible Leadership?
• Redefining Value & Corporate Priorities For Successful Net Zero Climate Management
• Next article: Considering Business Ecosystems For Effective & Profitable Climate Management
This article is authored by Julia Ruff - Founder & Lead Trainer of JR | Regenerative Leadership, a consultancy agency & knowledge hub for Conscious Business & Leadership Development.