It’s time to move from ‘greenwishing’ to concrete action: how companies can help to drive rapid decarbonization of the global economy

What more can we do to accelerate our decarbonization process? I believe that’s the question every organization should be asking itself. Every single day.

Because despite our good intentions, the reality is that, right now, we are losing the battle against climate change. Global temperatures keep rising and carbon dioxide emissions are at a record high .

Unless we reduce emissions quickly and sharply, we will not achieve the Paris Agreement’s ultimate ambition of limiting the global temperature increase this century to 1.5 °C above pre-industrial levels. Instead, on our current pathway, we could see temperatures soar by twice that amount – with all the catastrophic consequences that would bring to our planet.

The latest Intergovernmental Panel on Climate Change report highlights the scale of the effort needed to limit global warming to 1.5 °C. We need global greenhouse gas emissions to peak before 2025 at the latest, and to fall 43% by 2030. Limiting warming to around 2°C requires emissions to peak before 2025 and fall by a quarter by 2030.

Disconnect between disclosures and decarbonization

The way we will achieve either of these targets is through the rapid decarbonization of the global economy. Numerous countries and companies have set themselves net zero targets, but the deadline for these targets is often significantly into the future, typically 2050. As a result, there is a temptation to delay the actions that will facilitate the transition to a low-carbon economy, including making much-needed investments in data and technology.

The recent EY Global Climate Risk Disclosure Barometer reveals the extent to which companies are wrestling with the climate issue. Companies around the world are increasingly disclosing climate-related financial information, based on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). But their reporting often lacks detail; and it is not translating into the concrete action needed to tackle the climate problem.

Less than half of companies (49%) featured in the Barometer had conducted scenario analysis – which would help them to better understand the potential impact of climate-related risks and opportunities on their businesses. And just 29% mentioned the impact of climate change in their financial statements - suggesting that companies are still struggling to understand the financially material impact of global warming.

With emissions continuing to rise, it is clear there is a major disconnect between the disclosures that companies are making under the TCFD framework and their real-life decarbonization journeys. We’re seeing a growing trend for ‘greenwishing’ where businesses are setting ambitious targets, without knowing how they’ll hit them.

Action for change

Something needs to change – and fast – if we are to break the impasse. Fortunately, investors are emerging as a powerful force when it comes to driving action. They understand the policy imperative to move to a lower-carbon economy – and they know it will present both risks and opportunities to the businesses they invest in.

The latest EY Global Corporate Reporting and Institutional Investor Survey found that 78% of investors believe that companies should make investments that address environmental, social and governance issues relevant to their business – even if it reduces profits in the short term.

What can companies do to step up their efforts? In its Global Climate Risk Barometer, EY outlines seven key steps companies can take to accelerate both their own decarbonization efforts and the decarbonization of the global economy:

1.?????Treat disclosure as a means to an end rather than an end in itself. Companies should use disclosure as a way to hold themselves to account on progress relating to their carbon footprint, while creating long term value for their stakeholders.

2.?????Set meaningful targets. These should reflect scientific forecasts and relate not only to a company’s own operations, but also to its entire value chain.

3.?????Assess strategy. Climate strategy should be disclosed and comprehensively assessed on an ongoing basis.

4.?????Perform scenario analysis. Looking in detail at the scenarios a company might face can highlight opportunities to adjust business strategy and boost resilience.

5.?????Explore the opportunity. Climate change is not all about risks. It also gives companies the chance to make some big strategic decisions, which can help them reduce their emissions.

6.?????Collaborate to succeed. It is important to work with other organizations, as well as national authorities, to innovate, ensuring that finance is directed towards the projects most likely to drive change.

7.?????Track performance in real time. Companies should put in place real-time tracking of climate performance so that it’s part of their organizational risk management practices and operations.

?

Ultimately, if we are to speed up the transition to a low-carbon economy, companies need to be more transparent about the process they’re following to achieve their emissions targets.

If companies can grasp this opportunity and move towards more meaningful reporting, and more tangible action, we might start to see the progress towards decarbonization that our planet so badly needs.?