Credibility and Climate Action: A Corporate Blueprint
Posted on December, 12 2020
Why companies striving for credible climate change strategies need to follow a robust mitigation hierarchy – focused on real and Paris-aligned reductions first – and invest for climate and nature impact to address remaining emissions.
Climate change is firmly on the business agenda, with barely a week passing without a new climate commitment from a large company. It’s exciting to see this surge in corporate support for ambitious climate action. But these commitments are taking place in an emerging and fast-evolving space and, without careful consideration, they risk being at best inadequate to truly tackle the climate crisis, and at worst misleading to corporate stakeholders.
At the same time, many companies are justifiably concerned with – and starting to take action on – the crisis of nature loss, and questioning the role of so-called ‘nature-based solutions’ in their climate strategies.
Crucially, many of these commitments rely on the company offsetting the carbon emissions it cannot easily or cost-effectively reduce or avoid. However, offsetting remaining emissions based on their volume, rather than based on the long-term cost of those emissions to society and the environment, will certainly not get us to a net-zero future.
To help companies take the steps needed to truly address the climate crisis and help stop nature loss, WWF and Boston Consulting Group have produced what we are calling ‘Beyond Science-Based Targets: A Blueprint for Corporate Action on Climate and Nature’. This corporate climate mitigation blueprint aims to help companies develop a holistic approach that prioritizes Paris-aligned reductions and unlocks future opportunities for innovation.
The path to credible climate action
Initially, the blueprint draws on and further settles well-established practice. It requires companies to account for and disclose their emissions, using internationally recognised standards, as well as their climate-related risks, opportunities and strategies.
Companies should then reduce emissions in line with science and the goals of the Paris Agreement on climate change, both their own direct emissions and those within their value chain.
Some companies do not follow these steps. For those who do, this is where the path gets muddier.
At this point, many corporate commitments involve the next step of buying carbon credits to balance out those residual emissions. We believe that an approach that focuses solely on the volume of emissions to identify remaining credits to arrive at a net-zero target encourages the wrong behaviour for two reasons.
First, an emphasis on quantity can drive companies to seek the cheapest carbon credits possible. This creates a risk, as these credits could support projects that don’t have many – or any – benefits for climate, nature and people. For example, a company could support projects that plant monoculture trees – which may store carbon, but do not build biodiversity or resilience, and if not properly embedded in the needs of the community, will most likely fail.
Second, the search for immediate reductions from the purchased carbon credits to compensate for the remaining emissions will do little to advance the pipeline for the more impactful climate solutions that we will need to achieve a global net-zero economy. To do so, there will be a need to invest in activities such as landscape finance and research for finding and funding innovative climate solutions. These investments, however, do not generate immediately verifiable carbon reductions.
Properly pricing carbon
Companies should therefore put a price on their remaining carbon emissions (beyond their Paris-aligned reductions) based on the social and environmental costs of those emissions. There are numerous methods that can be used, but they typically generate a price on carbon that is significantly above current market prices – prices which reflect our current failure to decarbonise the global economy at the necessary pace.
Once these emissions are priced, the financial commitment should then be used to support a broad range of climate action. We recommend three avenues to do so:
financing additional internal or value chain reductions
investing in future climate solutions (such as landscape-scale conservation activities or research into direct air capture technology) and
purchasing high-quality carbon credits that represent real emissions reductions or the removal and sequestration of emissions from the atmosphere.
This approach will enable companies to maximise their impact on climate change and help halt nature loss. It will ensure that real climate mitigation secures the appropriate place in corporate strategy. And it will help to consider the suite of climate mitigation techniques and technologies we will need to deliver a net-zero future.
The proposed holistic approach does not end there. Credible corporate climate action requires that companies make a contribution to help wider society address the challenges we face. This involves lobbying in favour of progressive climate policy to ensure a level playing field between climate leaders and companies attempting to free ride. It involves collaborating with peers, suppliers and customers to support them on their path. It necessitates a focus on the long-term resilience of the ecological and societal systems on which we all rely.
As companies increasingly step forward to make their contribution to overcoming the threat of the climate crisis, the blueprint we have developed will help them design rigorous, credible and innovative climate strategies that help them create societal and market value and build competitive advantage. Adopting this blueprint will enable them to demonstrate to customers, shareholders and regulators that they are playing their full part in shifting the global economy towards a net-zero and nature-positive future.
Manuel Pulgar-Vidal is WWF’s Global Leader for Climate & Energy.
Fran Price is WWF’s Global Leader for Forests.
Jesper Nielsen is Senior Partner and leader of BCG’s Social Impact & Sustainability Practice in Western Europe, Africa and South America.