World leaders came together last November at the recent Global Climate Conference, COP26 in Glasgow to negotiate an updated global plan to fight climate change. The United Nations launched a campaign to "Race to Net Zero" and many companies, cities and countries made net zero pledges. In the end, the big message from COP26 was - We are trusting big business, not states, to fix the climate crisis. Many were disappointed with governments, while global business emerged as the unexpected solution to climate change.
But what does this mean for your small and medium business (SMB)? Here's a quick read to demystify "net zero" and show practical actions your business can take to join the movement.
To avoid the worst impacts of climate change, the world needs to limit the average global temperature rise to 1.5°C. To do this, the latest reports from climate scientists say that we have to halve CO2 emissions by 2030 and reach "net zero" by 2050. Last year we saw some unprecedented extreme weather events around the world, from a little town in Canada becoming the hottest place on earth to disastrous flashfloods with a real human toll in Indonesia and Germany. So the urgency is clear. But what does net zero really mean?
Companies are making net zero pledges, explained as a commitment to "stop adding any more carbon emissions to the atmosphere than they remove." This pledge requires action in three areas:
But mind you - a lot of these technologies do not reliably exist right now. So the hard truth is that "net zero", for now, is an aspirational goal.
What's interesting is how quickly the "net zero" pledge is spreading across the business community. In 2019, companies with net zero pledges covered just 16% of the global economy. In 2021, that increased to companies responsible for 70% of the global economy.
And while net zero may have started as more buzz than substance, clear standards are emerging on exactly what businesses need to do. A milestone was reached with the November 2021 release of the Net Zero Standard by the Science-based Targets Initiative - the world's first framework for corporate net-zero setting in line with climate science.
With all this momentum, net zero is now a “need to know” concept for nearly every business out there - small or large. The pledges will have an impact across economies. It's mainly governments, investors and big companies making these pledges for now. But to achieve their goals, they know they will need to find, support and invest in SMBs willing to join their commitment. SMBs that commit to net zero now can immediately get noticed and gain a competitive advantage.
SMBs are the missing piece of the puzzle in climate action.
Climate action has been seen as the responsibility of big businesses - but we're seeing a revolution with a new focus on getting SMBs involved. Big companies realize that up to 90% of corporate carbon footprints come from their supply chain. Up to now, most businesses just calculate the carbon footprint of their direct operations - but pressure is mounting for big companies to engage suppliers in their carbon reduction efforts.
SMBs are starting to see this top-down pressure to join the climate movement. Every day more government grants, investment financing, startup and accelerator programs are launched looking for climate-smart companies. And the pressure is also coming bottom-up from customers and staff. Consumers are more conscious about climate change and expect companies to act. And one of the reasons that’s being cited for the “Great Resignation” - people leaving their jobs - is that people want to work for a company that does good in the world.
Taking climate action is becoming a business imperative and important market differentiator for small and medium businesses.
First off, let's face head on the fact that there's a lot of criticism of "net zero" as just green or climate-washing. Right now it's true that businesses can make the commitment and do very little. But this can also be seen positively from a business perspective, as a learning period to set ambition and start learning before the real scrutiny begins. Here’s what we know so far. SMBs (and all companies) can make credible net zero commitments in three steps:
Several initiatives are popping up to support and recognize SMBs willing to take the pledge. Your company can join a global network of net zero companies through the SME Climate Commitment initiative. And net zero pledges from SMBs can be officially recognized through a simplified route created by the Science Based Target Initiative.
We recommend this pathway to net zero for SMBs:
Ultimately the concept of net zero is about reversing the way we used to do things. Before, companies launched small initiatives to green their operations - like reducing paper use or turning off computers at the end of the day. But we've now realized that that approach is not enough - we'll never achieve the change needed with incremental little steps.
Businesses are now encouraged to make the big commitments first. Then once those commitments exist, the impetus for action is there and you realize it's not actually that hard because a) you're already making progress (they say the first 50% of emission reductions are the easiest), b) you've got partners to work with and c) technologies are emerging every day to help.
Achieving net zero is going to raise challenges for companies, but inaction will also come with a significant cost.
Here at Impacti, we've developed a SaaS technology solution designed especially for small and medium businesses to make climate action simple. Sign up now to get instant access or book a demo with our CARBON experts to learn more.