As Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” This sentiment rings especially true for business leaders tasked with future-proofing their companies against climate change. Once seen as optional, having a strong Environmental, Social and Governance (ESG) strategy is now essential for companies to ensure long-term sustainability and profitability.
Committing to sustainable operations and reducing emissions is only one piece of the puzzle, however. Companies will need to take decisive action now to decarbonize operations and create lasting financial success. While tackling these issues can seem challenging, with the right tools and expertise, success is achievable.
Over 400 attendees, including over 80 CEOs and executive leaders, gathered in London, on June 8-9, 2022, to discuss these challenges at the Reuters Responsible Business Europe event. We caught up with Sandy Smith, PhD, Sphera’s vice president of EMEA / APAC EHS&S sales, who spoke on a panel about decarbonizing the supply chain.
Below, we discuss Dr. Smith’s takeaways and observations from the panel, and the event overall.
Takeaway #1: Companies Need Better Data for Scope 3 Reporting
Having high quality data is essential, as both regulators and investors are demanding more transparent reporting on companies’ carbon footprints. Scope 3 emissions often reflect up to 80% of an organization’s greenhouse gas (GHG) footprint and include emissions from a company’s supply chain. Having the best data possible is key to accurately track and report Scope 3 emissions.
However, many companies are using spend-based data to report their Scope 3 emissions, which is inaccurate and doesn’t show the full picture of a company’s carbon impact. Dr. Smith said spend-based data should only be used to identify hotspots within a company’s Scope 3 emissions. While it can seem difficult to track and report this data, the process can be simplified through the right tools and processes.
For example, conducting a life cycle assessment (LCA) on a company’s full portfolio of products and tracking supplier-based data can paint a more accurate picture of a company’s Scope 3 emissions. According to Dr. Smith, it’s not a question of difficulty, but getting the necessary funding to accurately report Scope 3 emissions.
Takeaway #2: Companies are Leading by Example and Focusing on Sustainability
Companies that turn the challenges posed by climate change into opportunities for innovation will achieve success in the long run. An example is The Body Shop, an ESG-focused cosmetics company whose CEO David Boynton spoke at the event. In 2021, The Body Shop introduced refillable bottles to combat plastic waste in their stores and expanded the program to U.S. stores in April of this year. The Body Shop’s initiative has already saved 3.7 tons of plastic and aims to save 25 tons of plastic this year.
Another example of a business focusing on sustainability is Interface, a carpet tile manufacturer. Interface’s President of Europe, Africa, Asia and Australia Nigel Stansfield urged CEOs and other leaders in attendance to do more and follow in the company’s footsteps to become sustainability leaders, emphasizing that being a company known for sustainable practices should be the norm, not the exception.
However, even as companies make strides to achieve more sustainable and environmentally friendly practices, there is still much work to be done.
Takeaway #3: The Understanding of ESG and Sustainability is Growing
As the climate changes, the conversation is changing along with it. With the timeframe to slow the progress of climate change getting shorter, Dr. Smith said that he saw a greater sense of urgency and anger at this year’s conference compared to previous years. There were more CEOs and other C-suite executives being brought into the conversation than ever before, with the level of understanding of sustainability issues reaching a new high as well.
“Everyone is doing more, but there’s still so much to do. We’re all running on a treadmill, right? And as soon as we think we’re fine, someone increases the speed, and we’re going faster and faster,” Dr. Smith said. “Everyone is ramping up the rhetoric in terms of what needs to be done and when it needs to be done by.”
If companies are to ensure long-term profitability, achieving greater sustainability across a company’s operations is moving from being a nice-to-have to a must-have. Companies have the power to be a force for meaningful change in the effort to mitigate the worst effects of climate change – if they act decisively.
In order to avoid a climate catastrophe, the Intergovernmental Panel on Climate Change (IPCC) recommends that global warming be capped at 1.5 degrees Celsius (2.7 degrees Fahrenheit). To meet that target, total GHG emissions will need to be reduced by approximately 43% by 2030, and the world will need to reach net-zero emissions by 2050.
Dr. Smith added: “We’re not going to turn around the environmental metrics short-term. And therefore, the pressure will continue to build until we start making more significant actions to make the reductions that are required. The sense of urgency and the sense of frustration and anger at the C-level is growing and is new.”
Preparing for the Net-Zero Future
While this new sense of urgency is encouraging, words are not enough. To make real progress toward achieving net-zero emissions globally by 2050 now is the time for meaningful action. Tackling Scope 3 emissions is going to play a critical role in meeting carbon-reduction goals, but for these efforts to be effective, data must be accurate and include the full picture of a company’s carbon footprint.
Having an accurate and auditable picture of Scope 3 emissions will also be essential to comply with new regulations coming from the U.S. Securities and Exchange Commission (SEC) and others as stakeholders stand by to scrutinize the data that companies report. Companies can tackle this challenge by conducting LCAs on their products and tracking supplier-based data, which paints a more accurate picture of a company’s Scope 3 emissions than tracking spend-based data alone.
After all, with greater transparency and accuracy comes greater understanding, which leads to more opportunities to create meaningful change and achieve long–term sustainability and profitability. And with the right tools and expertise, companies can prepare for the net–zero future and become leaders in the fight against climate change.