Written by By Amit Kadam, Assistant Vice President – Banking & Financial Services at Hexaware Technologies.
According to the UN, businesses have a crucial role to play if the world is to reach net zero CO2 emissions by 2050. This assertion won’t come as a surprise to enterprises, as the pressure seems to be continuously ramping up on them to become more sustainable. Of course, most businesses want to do this, but they need to ensure pledges and plans are practical and realistic. Striking this balance between environmental and business needs is easier said than done.
Navigating the challenges
At a high level, it’s important to remember how new the concept of net zero is – the UK only introduced the term into official guidance two years ago. It’s such a new development that businesses need to take a step back to check everybody is on the same page on what the definition means, and how it fits in with their previous ESG targets.
Organisations may have already been working towards becoming carbon neutral, which means making sure the enterprise does not emit more CO2 into the atmosphere than it removes. Net zero takes things to the next level by accounting for all greenhouse gas emissions, not just CO2. Net zero also requires firms review their entire supply chain: they must now account for ‘Scope 1’ direct emissions (e.g., such as burning natural gas), ‘Scope 2’ indirect emissions (e.g., consuming electricity), and ‘Scope 3’ emissions. Scope 3 emissions cover activity that the business is indirectly responsible for up and down the value chain – for instance, customers using their products, or the organisation’s use of data centres and cloud services.
Three steps to success
Companies have a lot more ground to cover across these three scopes – and with the clock ticking, they need to ensure they are moving in the right direction. Breaking the process down into manageable steps can help the journey to net zero feel less overwhelming and more realistic. Here are three key steps businesses need to complete:
1. Lay the data pipework
Firstly, organisations should ensure they have access to all the necessary data needed to track emissions. Businesses must ensure relevant data points are automatically captured, so they can guarantee access to a complete, high-quality bank of information to help them calculate Scope 1, 2, and 3 emissions estimates. This can take time to pull together – enterprises will need to unite data from a range of sources such as IoT devices, sensors, enterprise systems, Excel-based templates, and semi-manual processes.
2. Set clear targets
It’s important for businesses to set key targets for the move to net zero. As well as meeting regulatory and market requirements, they also need to ensure there is no room for confusion internally. Most of them will have existing ESG goals, so they must ensure these are updated and aligned to avoid creating unnecessary extra work or doubling up on similar tasks. All stakeholders must be given standardised, comparable and complete information.
3. Adopt solutions and frameworks
Finally, businesses need to develop or adopt solutions that track and optimise energy consumption, forecast demand and supply, and transition to low-carbon solutions. They should also integrate climate risk frameworks, which can play an invaluable role in leading companies through the steps of identifying, analysing, and prioritising climate risks. By combining all information into a single platform, enterprises can gain a comprehensive overview to streamline further climate action.
Unlocking the opportunities of net zero
The UK’s adoption of net zero regulations has cranked up the pressure on businesses. There are a lot of obligations to meet, however, if businesses follow the above steps, they will be on track to deliver on environmental pledges.
In conforming with emission targets and improving climate resilience, firms can unlock significant opportunities to build a competitive advantage among their peers. As well as saving costs through energy reduction, waste management, and internal carbon pricing measures, companies can also find sustainability efforts are rewarded by tax incentives and benefit programmes. Moving towards net zero can also improve perceptions and help win new business, since vendor and supplier sustainability are becoming increasingly important factors when deals are put out to tender. However, most crucially, achieving net zero means businesses can play an invaluable role in the planet’s move towards a greener and more sustainable future.
