Climate change and Net Zero

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Climate change debate hits the news

If you’ve been watching the news, you will have seen that Donald Trump and Greta Thunberg both stood up and voiced their opinions on Climate Change at the World Economic Forum (WEF) in Davos earlier this week. 

In this week’s article, I’m putting myself between the two to give a more balanced approach to the issue of Climate Change and introduce the notion of Net-Zero. My argument is that Climate Change is real (sorry Donald), that our challenge is to both adapt and commit to stabilizing and reducing carbon emissions. 

If you are turning away from this article right now, think again. There are opportunities in this. Companies are making real gains and this article explores some of those opportunities that companies are benefitting from. 

What is Net-Zero? 

Despite protestations by some, the body of scientific evidence shows that human activities are adding too much of these gases into the atmosphere accelerating the natural climate change processes. For example, the Intergovernmental Panel on Climate Change (IPCC) claims there is no doubt that the climate system is warming, and that it is extremely likely, over 95% certain, that human influence has been the primary cause. Research shows that global warming is likely to reach 1.5°C between 2030 and 2052 if it continues to increase at the current rate.

The challenge for humans is how to adapt and survive to these changing conditions, and where possible, what can be done to slow down the change.

‘Net-zero’, also referred to as ‘carbon-neutral’ is the term used to achieve an overall balance between carbon and other greenhouse gases produced into the atmosphere, and those taken out of it.  Activities such as tree-planting and carbon capture can help offset emissions produced, so organisations that can identify and quantify their emissions can invest in carbon offset schemes as a measure of balancing their carbon footprints. 

What are the opportunities for my business? 

The World Economic Forum is not a ‘green’ movement as such. It’s driven by hard-nosed economics and takes risks to business seriously. It has been publishing annual reports on threats to business and in the 2020 Global Risks Reports, identifies Climate Change and associated issues at the top of all risks. That’s above Conflict, Terrorism, Cyber Attacks and Population Migrations. Supporting this report is the ‘The Net-Zero Challenge: Fast-Forward to Decisive Climate Action’ which examines the current state of global climate action by companies and governments with the aim of seeking clear actions and plans that organisations can subscribe to. 

With risk comes opportunity and as the WEF is primarily focused on economic growth, it has recognised the opportunities for businesses to build a competitive advantage in the markets associated to climate action, such as carbon technologies, low-carbon products, and more carbon-sensitive services.  
Many companies have set net-zero carbon targets to demonstrate their commitment to environmental improvement and in doing so, are benefiting from direct financial savings associated with equipment use, and also improved brand and market positioning. Simple steps such as servicing and maintenance contracts, switching to renewable energy sources, and implementing energy saving measures can all reduce carbon emissions as well as improve a financial bottom line so form part of any strategy. 

An initial step for any organisation is to identify their sources of carbon emissions. There are techniques and strategies laid out in ISO Standards and by using a risk-based approach (as described in ISO 14001 and ISO 50001) an organisation can begin to effectively reduce their emissions. The lower the volume of carbon emissions that an organisation creates, the less they will need to offset. 

Since the mid-1800s, scientists have known that CO₂ and other greenhouse gases influence the earth’s energy balance. In 2018, global average CO₂ concentration levels were over 43% higher than pre-industrial levels. If fossil fuels continue to be burned at the current rate, CO₂ levels will rise even higher. Only half of the CO₂ emitted into the atmosphere by human activities is absorbed by natural CO₂ sinks, such as the ocean, forests and vegetation, so damage to these sinks exacerbates the problem. 

Is there any legislation? 

In terms of legislation, organisations should be fully aware of the growing legislative framework on carbon emissions. In November 2016, the UK signed up to the Paris Agreement, whose central aim is to strengthen the global response to the climate change threat. Its target is to keep a global temperature rise this century to well below 2^oC above pre-industrial levels, ideally just 1.5^oC above.

In June 2019, the UK became the first world major economy to pass laws to end its contribution to global warming by 2050. It is an ambitious target, particularly if it is to be achieved in just a few decades. It has fully committed to the target, which is now legally binding as an amendment to the Climate Change Act 2008. 

Currently, the impact of legislation is within taxes, levies, and a ‘cap and trade’ scheme under the EU Emissions Trading Scheme (ETS), where organisations can trade in carbon offsets. In addition, there is a need to declare energy performance of some products (e.g. Cars, White Goods). These legal tools could be extended in the future to tax products based on their ‘embodied’ carbon i.e. how much carbon is used in their manufacture. 

What are the potential benefits of committing to Net-Zero? 

A forward thinking organisation should consider the opportunities that are starting to reveal themselves. The WEF report identifies that investments designed to save around 15% of energy consumption yield an average internal rate of return of 48%. If the return on ‘green’ procurement wasn’t enough, the report identifies eight companies that have re-aligned their product and service offer to serve a green agenda and seen significant returns.

For example, Tesla cars who switched from a niche sports car producer to a mass-manufacturer and now market leader in electric cars. This may be beyond the ambition of many small organisations, but no-one can deny the opportunities that exist. Imagine if yours was the organisation that owns the technology to capture carbon efficiently. Someone has to do it. 

As the WEF report states:

In the wake of growing global consciousness about the climate crisis and consumers’ desire to limit the impact of their consumption footprint, new markets for lower-carbon products are taking shape.

The question is – will you be prepared for it?

 

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