The state of play: Where are companies on their net-zero journey?

Despite the urgent need to cut carbon emissions, companies are not taking the action needed to transition.

Companies must move faster

Given the scale of the challenge, now is the time to take action. The next 10 years will be critical in reaching the Paris Agreement target of net-zero carbon emissions by
2050. Governments across the world have made ambitious commitments to reduce emissions (see appendix 1). However, more than half of senior executives (55 per cent) acknowledge that their organisation is not transitioning to net zero fast enough, while seven in 10 investors believe that companies are transitioning too slowly.

Without decisive action now the chances of reaching net zero by 2050 are slim; it is estimated that net carbon emissions need to fall by about 45 per cent from 2010 levels by 2030 to hit that target.⁵ However, despite the urgency, many companies are deferring action by at least a decade: 71 per cent plan to make the most progress towards net zero between 2030 and 2050.Why are corporates delaying action? Business leaders appear to be overwhelmed by the scale of the challenge, with most companies requiring extensive transformation.

The Paris Agreement

The Paris Agreement is a landmark global pact on climate change, drafted in 2015 and signed by more than 190 nations. The aim of the agreement is to keep the global temperature rise this century well below 2°C (above pre-industrial levels) and to try to limit the temperature increase to 1.5°C. Scientists estimate that global greenhouse gas emissions will need to be reduced to net zero by around 2050 to meet the 1.5°C target.

_{The world needs corporate leaders to be climate leaders. Governments, investors, companies, and consumers need to rapidly scale renewables as a source of power, put ESG at the heart of their business and investment plans, and develop low carbon alternatives for emission intensive businesses.

We need to catalyse, standardise and democratise access to sustainable finance to drive greater capital to those facing the greatest risk from climate change and the regions where there is the greatest opportunity to leapfrog to low carbon technology and business models.}

Daniel Hanna, Global Head of Sustainable Finance,
Standard Chartered

^_POLL

When will your organisation
make the most progress in transitioning to net zero?

Early action - 2020-2030
Medium-term action - 2030-2040
Late action - 2040-2050
Action spread evenly
No action

^{By delaying their transition journey companies are risking much more than missing net-zero targets – the longer action is deferred, the greater the disruption. This will play out in the form of the more obvious physical risks brought by climate change, but also the effects of a more disorderly transition, which could impact financial markets and the provision of capital at a time when companies need it most. It’s never been more important to act now; the consequences of inaction could be dire.}

Adityadeb Mukherjee
Head of Climate Risk Management,
Standard Chartered

Business leaders are failing to act
Investors view leadership as crucial to progress, but more than three-quarters (78 per cent) believe most business leaders are failing to take sufficiently bold action to transition their company to net zero by 2050.

Fewer than half of companies (47 per cent) fully support the aims of the Paris Agreement, falling to 41 per cent of emerging market companies.
Where are companies on their transition journey?
Investors view leadership as crucial to progress, but more than three-quarters (78 per cent) believe most business leaders are failing to take sufficiently bold action to transition their company to net zero by 2050.

Fewer than half of companies (47 per cent) fully support the aims of the Paris Agreement, falling to 41 per cent of emerging market companies.

_{⁵ https://www.ipcc.ch/2018/10/08/summary-for-policymakers-of-ipcc-special-report-on-global-warming-of-1-5c-approved-by-governments/}