Promises can be hard to keep. As we near the end of February, many of us are likely to confess failure in sticking to our new year’s resolutions. Businesses can struggle to fulfill the pledges they make too, particularly where climate commitments are concerned.
Companies are publicly committing to decarbonizing and mitigating their impact on the climate in increasing numbers, and many are setting decarbonization targets through the Science Based Targets initiative (SBTi). The SBTi reports that 2,279 companies and financial institutions (as of February 21) have set science-based targets, which provide a “clearly defined pathway” toward reduced greenhouse gas (GHG) emissions. And The Climate Pledge has 400 signatories from 35 countries (as of February 21), including Uber, Heineken and Unilever. The participants have committed to regular reporting of their GHG emissions, as well as decarbonizing their operations and offsetting their emissions in a credible way.
Are Companies Hitting Their Decarbonization Targets?
Companies need tailored roadmaps to help them reach the decarbonization targets they’ve set. But a review of the corporate plans developed to meet these goals indicates that progress may be slow. The CDP recently issued its report on corporate disclosures from more than 18,600 businesses in 135 countries. The report uses 21 key indicators from the CDP’s climate change questionnaire to assess the strength of corporate climate transition plan disclosures. With only 81 companies (.4%) disclosing against all relevant indicators in 2022, the CDP concluded that “… the majority of disclosing companies don’t have a credible plan to transition to net-zero.” This means that most of these companies have not determined how they will adapt their assets, operations and business models to achieve a 50% reduction in GHG emissions by 2030 and reach net zero by 2050.
The CDP’s 2021 assessment showed better results, with 135 companies disclosing against all relevant indicators in that year. But to be fair, the CDP’s definition of a credible climate transition plan is now based on more stringent criteria, so a drop in the number of companies disclosing against all relevant indicators is not surprising.
The Inside Story: Net-Zero Plans Through the Eyes of Operations Managers
Some smaller businesses and private companies have developed decarbonization and climate-related goals and strategies with the assumption that climate-related disclosure regulations will eventually apply to them. But whether a business uses targets that were established independently or through an organization such as the SBTi, it still needs a strategy to reach them.
To get a better sense for how companies are executing their net-zero or sustainability strategies—if they indeed have them—Sphera surveyed 300 operations managers across the U.S., U.K. and Germany – the three Western economies with the largest carbon footprints. Analysis of the survey results is presented in Sphera’s report, Operational Landscape: The Inside View on Industrial Decarbonization from Operations Managers.
An Encouraging Start
According to our findings, 85% of U.K., U.S. and German companies have net-zero strategies, with just under half of them available to the public. Additionally, 78% of respondents reported that their company had allocated extra budget for their sustainability and net-zero initiatives, with 42% of these companies designating budget increases that exceeded 20%. We were also encouraged by reports that 73% of companies are actively exploring or addressing Scope 3 emissions, which account for roughly 75% of corporate GHG emissions in “high-impact” sectors, according to the CDP.
So, things look good from a high level. Strategies have been developed, budget has been allocated and nearly three-fourths of the companies represented in our survey are looking at their Scope 3 emissions. But have these strategies and budget increases resulted in visible progress toward net zero?
Bumps in the Road to Net Zero
Our survey suggests that while many companies have set net zero as their destination, they haven’t yet figured out how to get there.
Only 41% of operations managers reported that their company’s net-zero targets had produced significant changes in daily practices. And 42% said that they receive little or no encouragement from their company to suggest changes that would improve the sustainability of business operations. This finding, in particular, represents a missed opportunity, given that operations managers are in a strong position to suggest changes in practices or processes that could help reduce GHG emissions.
Nearly all survey respondents (95%) said that accountability for their company’s net-zero / sustainability strategy rests with the C-suite and board of directors. But company leaders could make great gains by engaging operations managers in identifying and implementing tactics that could support their net-zero strategy and then holding them accountable for the results.
A Resource That’s Ready and Willing
Do operations managers want this responsibility? Our survey indicates that they do—to the extent that 40% said that the alignment of their own performance targets with their company’s net-zero goals would give them more confidence in their company’s commitment to net zero. Seventy-six percent of operations managers are concerned about the climate crisis and see the need for change. And many of them believe they can and should play a role in creating this change.
Look No Further Than the Front Lines
When it comes to sustainability and net zero, a variety of factors can break the thread that connects corporate ambition to action. A lack of buy-in across an organization or a poorly crafted vision for sustainability may be at fault. But limited resources can no longer be used as an excuse for poor progress, at least according to our survey. Operations managers constitute a valuable resource that could contribute energy, influence and expertise to corporate net-zero efforts, and they are ready to get started.
Read our Operational Landscape report for more on why operations managers are so well suited to help businesses navigate their way to net zero.