This guest article by Daniel Wiegand, Scientific Project Manager R&D at the DFGE, EcoVadis’ consulting partner for the German-speaking region, was originally published in the CSR Risk and Performance Index 2018.
Climate change is a fact and it is happening right now – this message has recently been reinforced by new findings showing that the Antarctic ice sheet is melting faster, which leads to higher sea level rise than previously expected. The implications for life and business across the world are devastating to contemplate. However, while they highlight the scale and urgency of the problem, they should not lead to despair: There is still time to mitigate the most severe consequences of climate change, and the 2015 Paris Agreement has laid the foundation for a global and concerted action.
The endeavor to keep the temperature rise well below two degrees is ambitious, to say the least, given the gap between what has to be done and governmental commitments. Governments, customers, employees, communities and stakeholders across the value chain are all looking at the private sector as the key player responsible for closing the gap. Setting Science Based Targets (SBTs) – emission reduction targets based on the two-degree scenario – is the first step in the strategic transformation required.
Although the famous letter from Larry Fink, head of the world’s largest investor, Blackrock, signaled the beginning of a significant shift seeing companies serve a social purpose, there is no doubt that a business must be profitable. This begs a fundamental question: Is it possible to tie Science Based Targets to a business case? The short answer is yes – provided your strategic view is long-term. The Science Based Targets Initiative (SBTi) identifies four ways setting SBTs can pay off:
- Strengthen long-term business resilience and competitiveness: Adopting SBTs enables a company to go beyond reaping the financial benefits of the “low hanging fruit” of incremental cost savings from direct energy use reduction and capitalize on opportunities that are uniquely aligned with a low- to zero-carbon economy of the future;
- Drive innovation and transform business practices: Setting targets sends a clear signal of a company’s strategic ambition to stimulate innovation that leads to truly transformational change. This goes beyond tactical adjustments and incremental changes to how a company delivers on its existing business model, toward for example collaboration among value chain partners on new “circular” models for how they engage;
- One very visible advantage of a successful SBT engagement lies in boosting credibility and reputation in the eyes of a company’s stakeholders. Aligning emission reduction measures with an established standard based on scientific findings is becoming a powerful differentiator compared with competitors, and unmistakably signals that a company is a transformational leader in its industry;
- A further advantage of setting science-based targets lies in the anticipation of regulatory measures, which enables a company to proceed at its own pace instead of just being driven and constrained by legislation. Being a climate leader rather than a laggard also ensures greater public attention and influence on policy, as a company is more likely to be considered as a role model in this field.
As stated above, there is no one catch-all answer to the question of how individual companies will benefit from setting science-based emission targets. Some of the advantages can be realized only in the long-term or cannot be planned with certainty. But SBTs make perfect sense for companies that take a proactive and holistic approach to corporate sustainability, as these targets become an essential puzzle piece in a consistent sustainability strategy. Seen from this angle, SBTs provide a link between emission reduction activities and a business transformation strategy founded on a credible climate science-based story, which brings advantages in terms of credibility, reputation and resilience.
To summarize, climate change is a fact, and further emission reduction measures are unavoidable. Setting SBTs may not always pay off when seen as a standalone measure; in the context of a holistic and proactive approach to corporate sustainability that aims for strategic transformation of the company and its value chain. However, SBTs are an essential puzzle piece in a company’s approach to sustainability. Besides advantages in terms of transformation credibility, reputation and resilience, this narrative also pays off in terms of better ratings on platforms like EcoVadis or CDP.
by Daniel Wiegand, Scientific Project Manager R&D at the DFGE
For more insightful articles and an analysis of sustainability practices in global supply chains check out the full CSR Risk and Performance Index.
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