The Business Imperative for Net Zero

As sustainability leaders and advocates, we live in a very challenging time: on one side it’s never been more evident that urgent action on Climate is needed; it’s never been more clear how business can contribute by setting a Net- Zer pathway; but it also seems like it’s never been as hard as today to keep believing and working on our shared future.

The erosion of the absolute fundamentals of our societal fabric (democracy, peace, freedom, science) are deeply disturbing and put additional hurdles for much needed progress. But there is no choice but to keep pushing, to be relentless on climate action – because it’s the right thing to do and giving up is not an option. And I know that we can have confidence: taking action on climate ?makes business sense because going Net Zero is a contribution to resilience, supply diversification and energy independence.

Let’s remind ourselves of some basic facts: Climate failure leads to nature failure: more water shortages, soil erosion, biodiversity loss undermine the basic conditions for humans to thrive. People will first suffer and then they will move and then they will fight. So climate failure ultimately leads to societal failure. And it is common sense to know that no business is sailing through chaos untouched. It is in the utter interest of self-preservation that industry needs to engage on Climate action.

?We don’t have to look far to see this already playing out in the financials: Last year alone, the reassurance industry reported combined losses from climate related events at around $250bn (of which only $120bn were insured). Looking forward to the next 25 years, 18% of global GDP could be hit by climate related impacts; that’s a bit less than the combined GDP of the G7 today. It is estimated that, on average, more than 3% of a company’s asset value could be at risk – per year. So, there is a lot of economic value on the line!

The risk-side of the business case is clear; so let’s look at the opportunities:

• Most of the necessary technologies for a low carbon economy are already ?invented today – solar, wind, sea, geothermal - storage, grids, fuel cells, hydrogen, carbon capture etc. ?It’s now a question of scaling, rolling out and commercialization. The short term ROI still not stack up but increasing carbon prices, scarcity of supply and market demand will change the game. And quickly. Some countries are already massively investing to get a head start and to shape their future economic powerhouses.
• Regulators are on a mission: Europe is seen as the champion of regulation, but it isn’t alone. Across the world, the cost of doing business are going up: for emitting carbon, for producing waste, for using energy, for operating in water stressed areas. Plus: With the transparency and disclosure? regulations, the connect between sustainability and the capital markets between sustainability action and capital allocation is going to accelerate.
• And it’s also about competitiveness . Customers require us already today to contribute to their scope 3 emission targets, disclose climate action through CDP, fullfil the Ecovadis assessment and ?measure and report the product carbon footprints. And of course they will be making choices about who they want to work with.

So the question is not any more ‘Why’ but ‘How’ - How do we get to Net Zero? Obviously, there is not one approach for a Net Zero pathway. At my cpmpany, Henkel, our opportunity is in the duality of a consumer business and an industrial technologies business – combined in one company. We can drive and we can enable. We can influence and we can innovate. We are customer and we are supplier. We are global and we are local. We are 50k employees, plus a family. Our story is unique and so are our opportunities to shape our Net Zero pathway.

At the end of the day, what unites us is to be accountable for our commitments, to be part of the collective action and to want to make our actions count for climate. That’s why we have had climate targets in place since 2010 and SBTI targets since 2019. We have focused on action in the near-term and to make an impact this decade. Just publishing our 2023 Sustainability report, we reduced CO2 emissions in production by -67% per ton of product since 2010; we use 89% of electricity from renewable sources in our operations and have helped avoid 89 million tons of customer’s CO2 emissions.

But we know that’s not enough and we need to step up. That’s why we worked to define a Net Zero pathway for Henkel. It’s the next frontier we are going to take, and it’s a new challenge: Many business leaders are struggling with the uncertainty and poor visibility of what the future will look like. It’s also a bold move to take commitments 20 years out, on behalf of the next generation of leaders. And it’s a challenge to commit new investments in times of economic crisis.

And yet, we have to make it happen – together and through collective action.? By being part of the sbti committed companies, we are in a club with thousands of companies; we will inspire more to join and we will give a signal to the market to get moving.

So let’s keep moving.