The Climate Of Business #136: Winners and losers in the race to net-zero - how companies are leveraging decarbonisation to gain a competitive edge?

Climate Change Reality

• Florida braced for Hurricane Milton to make landfall (Financial Times )
• Politicians flying less or cutting out meat is ‘missing link’ in climate action (The Guardian )
• Hurricane Milton Roars Toward Florida as Residents Flee (Bloomberg )
• Countries least to blame for climate change but suffering the most could finally be helped in 2025 (Euronews )
• Global forest loss exceeds targets in 2023, report warns (Al Jazeera )

• Nature in England at risk as amount of land ‘effectively protected’ falls to 2.93% (The Guardian )
• Portugal to launch new €20 monthly rail pass by end of 2024 (Euronews )
• Moo Deng: The shrinking habitat of the world's most celebrated hippo (BBC )
• Scientists have issued a red alert for the health of the planet, seven of nine planetary boundaries have been breached (World Economic Forum )
• Rainforest research needs local scientists (Science )
• Water demand will soar because of wars and tech, says utility boss (Financial Times )
• World’s rivers faced driest year in three decades in 2023, UN report says (Al Jazeera )

Business Climate Reality

• ‘You only go to the party if everyone is going’: finance bosses to skip COP29 (Financial Times )
• Understanding the biodiversity COP: COP16 and why it matters to investors (Institutional Investors Group on Climate Change )
• UK pledges ￡22bn in funding for carbon capture and storage projects (Financial Times )
• EU needs long-term climate investment plan aligned with just transition (Euronews )
• Inside the industrial heartland where France wants to build a €1 billion lithium project (Euronews )

• Large French Alpine ski resort to close in face of shrinking snow season (The Guardian )
• Fitch says decarbonisation of world economy progressing far too slowly (Reuters )
• In charts: Worst cases of corporate greenwashing up by nearly a third (Sustainable Views )
• An overlooked solution for climate-friendly buildings: Better floor plans (Anthropocene )
• COP of finance – and peace? Reporting on the COP29 climate talks in Azerbaijan (Clean Energy Wire )

Join Plan A's exclusive Live Product Tour on October 10. Register here

Reality Check?

In sustainable business practices, two key terms stand out: decarbonisation and return on investment (ROI). Decarbonisation, as defined by Plan A , focuses on reducing or eliminating human-made carbon emissions from the atmosphere. This process requires rigorous measures to reduce emissions generated by an organisation’s activities. Accordingly, this week’s newsletter will deep dive into the significant financial implications of decarbonisation and how many companies are leveraging sustainability as a strategic tool to gain a competitive edge.?

The market potential of decarbonisation

Before we dive into the strategic business benefits of decarbonisation, it is worth highlighting the anticipated market growth of decarbonisation. The global decarbonisation market is poised for exponential growth, projected to expand at a CAGR of 12.7% between 2021 and 2026, reaching multi-billion-dollar valuations by 2032 with an even steeper CAGR of 14.27% from 2022 to 2032. Driven by the pressing demands of climate change, and under the larger umbrella of ESG considerations, businesses are accordingly zeroing in on decarbonisation.?

Understanding the role of decarbonisation as a strategic tool for competitive advantage

As sustainability becomes inherently interlinked with digital transformation strategies, a new corporate ethos that views sustainability as both a lucrative business opportunity and a pivotal risk mitigation strategy has emerged. Three key examples which cement the business case for sustainability include:

1. Financial resilience

Transitioning to sustainable practices may require an initial investment. However, the long-term financial returns are undeniable. In 2021, ESG leaders saw 8% higher returns than the broader U.S. market, while in 2020, ESG leaders beat laggards by 23.4%. Additionally, companies with high ESG scores receive discounts on the cost of capital, 10% on average, compared to those with lower scores. Meanwhile, these returns come not only in the form of positive growth but also in the avoidance of potential risks like regulatory fines and the loss of trust from both consumers and potential employees.

2. Energy savings and efficiency gains

Fostering energy efficiency stands central to reaping the financial benefits of decarbonisation. Companies are exploring solutions to adopt cutting-edge technologies and streamline operations, aiming to curtail energy usage and, subsequently, lower operational costs. Companies adopting such strategies have witnessed up to a 60% enhancement in operating profits, underscoring the tangible financial gains achievable through resource cost reduction.

3. Improved stakeholder and investor relations?

The ramifications of decarbonisation extend beyond operational efficiency, influencing stakeholder and investor relations. A study by Oxford University depicts a scenario where more than 80% of mainstream investors incorporate ESG considerations into their investment decisions, resulting in a preferential inclination towards companies exhibiting strong sustainability practices. This shift in investor mindset facilitates easier capital access for such companies and can lead to a notable reduction of up to 10% in the cost of capital.

Decarbonisation in practice: Real reductions, real results

Many companies are leveraging their net-zero commitments to outpace competitors, attract customers, and secure market leadership. One prominent example within the Fashion and apparel industry is Ganni. Since 2021,?Plan A has been assisting GANNI ?to gain a granular understanding of its carbon footprint and set up a comprehensive decarbonisation strategy. In doing so, Ganni has set ambitious yet achievable targets to achieve a?50% emissions reduction by 2027.

Having gone to rigorous measures to build a comprehensive decarbonisation strategy, Danish fashion brand GANNI is now a leading voice for sustainability within the fashion industry. Three key impacts of Ganni’s decarbonisation efforts are listed below:

• 7% absolute emissions reduction on 2021 baseline (despite an 18% AAGR since 2021)
• 50% target kg CO2 reduction by 2027
• 20% value-chain wide emissions reduction in 2023 (vs 2022)

As businesses stand at the forefront of mitigating climate change, grasping the multifaceted dimensions of decarbonisation is indispensable for making informed and strategic decisions that align with both environmental and economic imperatives. Businesses that adopt innovative digital solutions, such as decarbonisation software, to streamline their emissions reduction efforts will ultimately be able to outpace competitors, attract customers, and secure market leadership.

Schedule a call with Plan A. Our experts are ready to discuss how your company can leverage ambitious decarbonisation strategies to gain a competitive edge.?

Carbon Price