Climate change is a key political issue in much of the global north, and increasingly important in the Asia Pacific. Amid debates in social, business and political spheres, it’s easy to lose sight of its corporate relevance, and why it's important to connect climate objectives with your corporate strategy.
Consider the scientific authority - the IPCC, or Intergovernmental Panel on Climate Change. IPCC reports authored by leading climate scientists emerge once or twice a year, and they consistently have the same message - we must act now. So what does that mean for CFOs?
When it comes to mitigation (reducing our footprint) and adaptation (building resilience), the IPCC reports notes that change must come from every level of society and there must be synergies between those different levels. That means you need to be aware of emerging standards like the ISSB (International Sustainability Standards Board) to ensure your compliance with emissions reporting schemes. You need to ensure there are no discrepancies between your climate and ESG commitments. You cannot claim to be a sustainable organisation, or produce sustainable products, unless you have a firm grasp on the impact from your entire business and supply chain.
Transparent and accurate sustainability reporting is essential in achieving net zero carbon emissions - you can’t manage what you don’t measure. Downstream business customers in your value-chain will require auditable reporting to track the impact on their own Scope 3 emission targets.They are acutely aware of litigation risks against directors. Meanwhile corporate watchdogs like the ACCC in Australia are increasingly targeting greenwashing. We’ve already seen examples of companies rebranding products after being called out for falsely advertising as environmentally-friendly, which can cost millions.
The IPCC also reaffirms that as individuals we need to be taking responsibility as well, and pushes for enhanced climate literacy. Climate literacy means understanding the effects of climate change on us - and how our actions affect climate change. This means that consumers and potential employees are going to be more aware, and will start to avoid organisations not proactively addressing sustainability.
In this context, you need to rise to the challenge and deliver change within your organisation, or risk competitive disadvantage. You will face increasing financial pressure from your consumers, your employees, and your investors.
Let’s take a final lesson from the IPCC as an opportunity. The report shows that key countries have managed to decouple financial growth from emissions growth - this is what every CFO must aim for to accelerate net zero transition.
It’s an opportunity for your business - and your finance team - to lead. A recent report showed that less than half a percent (0.4%) of businesses disclosing to the CDP (Carbon Disclosure Project) currently have a feasible plan with comprehensive sustainability reporting and necessary oversight to track progress (and these are firms leading the way!) One of the biggest barriers? Many companies simply do not have the data and technical capabilities needed to accurately assess costs & benefits to transition to net-zero.
“The need for companies to develop a credible climate transition plan is not an additional element but an essential part of any future planning”
- Amir Sokolowski, Global Director, Climate at CDP.
You may have begun steps towards a more sustainable vision of your organisation. But to decouple financial growth from emissions growth you need to connect the drivers for value-creation with your emissions footprint. With a comprehensive and granular view of your organisation’s activities and value-chain you can align assets, operations, and your business model to better allocate capital and achieve transition.
