As Antonio Guterres, Secretary-General of the UN emphasized at the World Economic Forum’s annual meeting in Davos “The battle to keep the 1.5C limit alive will be won or lost in this decade…our climate goals need the full engagement of the private sector.” There is a clear sense of urgency for action today. However, slow progress and commitments on National Determined Contributions to cut down greenhouse gas emissions (GHGs) have made it increasingly evident that the current level of government investment is simply not enough to bring us closer to 1.5°C with 2030 targets.
It’s an imperative not just for the planet, but for businesses too. Private sector investment backed by ‘The Alliance of CEO Climate Leaders’ (among many others like it) has signaled both the intent and ability of corporations to step up and deploy swift measures, funding and resources to address our climate ambition. Consumers, investors, regulators, and employees are all demanding that companies do more to address their environmental and social impact. They're not just asking for pledges and commitments – they want tangible action. While we’ve seen progress with many companies looking at sustainability roadmaps and embedding sustainability into operations, there’s still more we can do. In 2023, five critical sustainability themes are drivers to progress, signaling leading, urgent actions from the private sector.
1. Net Zero: Taking real action
Net zero has been discussed since the Paris Agreement in 2015, but the discussion has been amplified with recent scientific evidence suggesting that current pledges and actions to reduce GHGs are insufficient. Momentum toward urgent action is accelerating. While many companies have set ambitious targets for reducing emissions, the reality is that achieving net zero requires significant investment and action in the years to come. And, with an evolving sustainability landscape – considering guidelines like the recent European Union (EU) deal for issuing green bonds, or the US Green Deal – a roadmap for achieving these targets can be complex.
Achieving net zero isn’t purely about reducing GHG emissions. It also entails protecting and preserving our planet – our communities, natural ecosystems and biodiversity. Investments in nature-based solutions, circularity and low carbon processes must be prioritized when we look at developing net zero roadmaps and implementation plans. We're partnering with clients to chart what these steps look like, as they look at reducing their own operational footprint and value chain impacts. This involves everything from developing carbon reduction strategies to identifying new technologies and innovations that can help to reduce emissions; and navigating complex carbon markets, new and emerging regulatory requirements, and increasing stakeholder demands.”
2. Climate Risk: An urgent need for transition plans
Extreme weather events and subsequent supply chain disruptions have increased the risk companies are facing due to climate change. It is no longer a distant threat – it’s affecting businesses today. In 2022, heavy rains and flooding in U.S. Midwest caused significant damage to agricultural crops, impacting the supply chain of many food and beverage companies. Technology companies too were impacted by wildfires in California, leading to power outages and disruptions across the value chain. These challenges call for effective mitigation plans to de-risk operations and the supply chain. Adding to this, businesses are facing increasing pressure to develop climate transition plans in response to increasing scrutiny through regulatory frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Securities and Exchange Commission’s (SEC) recent rule on climate risk disclosure.
For these very reasons, we’re seeing a surge in demand for climate risk assessments, scenario planning, and transition planning. Companies are taking climate risk seriously – from both a de-risking and impact perspective – to develop robust transition plans to address it. We're helping them identify and prioritize the risks and opportunities associated with climate change, and develop strategies to mitigate those risks and capitalize on opportunities in a sustainable way.
3. Biodiversity: A key solution to net zero
A report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) shared that the restoration and protection of ecosystems could contribute to over one-third of the total climate change mitigation needed by 2030 to keep global temperature rise under 2°C. Protecting and restoring natural ecosystems can also support adaptation efforts and promote social and economic resilience.
Following COP15 in Montreal last year, it’s clear there needs to be increased and sustained public and private sector financial support toward biodiversity conservation efforts, with a focus on scaling up nature-based solutions.
Investing in biodiversity is essential for reducing business risks due to ecosystem degradation as well as for achieving decarbonization and reaching net zero. The finance sector and private corporations have a critical role to play in supporting nature-based solutions that not only protect biodiversity, but also contribute to the reduction of greenhouse gas emissions and help mitigate climate change. To accelerate action in this space, Arcadis is working with clients to bring biodiversity considerations into strategic thinking and concrete projects, as well as with organizations like the WBCSD, the Taskforce for Nature-related Financial Disclosures and the European Commission to develop pragmatic approaches for measuring and disclosing biodiversity performance. We’re also involved in a series of dialogues aimed at creating a shared understanding of the contributions that businesses can make towards a nature-positive, net-zero, and equitable future. The direction of travel is: net positive by 2030; full recovery by 2050.
4. Low Carbon Growth: Getting it right
As we continue to move from strategy to action, low carbon growth is a key area that is gaining momentum in the public sector as a tangible measure for sustainable operations. It’s not just a ‘tick box’ exercise, but rather a complex process that requires rigorous accounting, monitoring, and reporting. Companies claiming to be low carbon need to back this up with solid data and evidence, with increasing scrutiny from investors, regulators and society.
Carbon accounting and verification therefore are seeing growing demand, particularly as governing bodies like the U.S. government proposing new regulations aimed at reducing emissions, and the UK government setting net-zero carbon emissions targets by 2050.
5. Sustainability Reporting: Transparency and confidence through insights
Sustainability reporting is key to helping businesses communicate their sustainability strategy and progress to stakeholders, including investors, customers, employees, and regulators. It can also help companies measure how they’re performing against strategic targets and look at corrective action and investment to drive change.
With frameworks such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Boards (SASB), there’s been a steady shift towards more standardized and consistent sustainability reporting. While this provides a common language for sustainability reporting, it also means that there’s an ever-changing barometer and evolving evaluation requirements for businesses to report against.
Further, as regulatory authorities like the SEC in the U.S. are catching up with the legislation needed to drive forward net zero commitments, we’re seeing new rules that require mandatory disclosure of climate-related risks and reporting of greenhouse gas emissions. The European Commission too has proposed a new regulation, the Corporate Sustainability Reporting Directive (CSRD), that will require companies with significant operations in the EU, meaning large companies with more than 250 employees, to disclose information on their sustainability impacts and impact from 2024.
2023: A momentous time to act on sustainability
From the IPCC’s most recent ‘code red’ for humanity, to rising social expectations and increasing regulatory activity and environmental, social, governance (ESG) standards; organizations need to transform the way they do business and report on progress to continue thriving in the world of tomorrow. But with so many changing and rapidly emerging regulations and frameworks, new technologies, increasing stakeholder maturity, and customer demand - the right sustainability path for organizations may not always be clear.
Getting this right not only provides strong commercial opportunities but is also an obligation – to develop smarter, more sustainable ways of doing business. For stronger communities, a healthier planet, and improved quality of life. The time to act is now.
Authors
Kealy Herman
Net Zero Strategy Lead
