More companies are making climate pledges about their climate ambitions every day. Some pledges are framed in terms of percentage reduction goals. Others take the form of setting a date when a company will be "net zero" or "carbon neutral." Still others are identified are science-based targets.
For too many companies, these pledges have one or more "honesty" flaws:
- Who really knows how (and therefore if) companies will meet those targets and fulfill those pledges?
- Who is even sure what the terms really mean, what the assumptions are or what greenhouse gas emissions (or even emission increases) are hidden behind offsets? And many offsets are of dubious quality, longevity, additionality — or credibility.
- The climate pledges are often independent of the actual business goals and strategy of the company. They exist in some special world that is shared with the Board and the public. But if they haven’t actually changed business processes and, especially, business models, are those honest goals and commitments?
As a result, while many companies are making substantial progress on climate issues, others are plagued by these disconnects between climate goals and climate actions, or between climate strategy and the strategy of the business. These disconnects create real business risks as companies set expectations they cannot or will not meet, miss valuable opportunities or overlook real risks to their business model.
For too many companies, climate pledges have one or more 'honesty' flaws.
In a recent informal poll, a small sample of business ESG/EHS leaders were asked: "How well does your senior management (C-Suite) understand the potential business risks of climate change for your business, including mitigation, transition and physical risks?"
- Barely 20 percent said: "They understand well and it’s part of our real business strategy and planning."
- Over 30 percent said: "They understand well but it’s still separate from our real business strategy and planning."
- Over 40 percent said: "They’re still working to understand it."
Clearly, there is a credibility challenge. Can internal and external audiences count on what’s been promised? Are the promises being kept? Can companies stay focused on the climate promises they’ve made when business strategies are tested in a competitive marketplace?
Understandably, senior management of these companies and their ESG/sustainability leaders are responding to the signals and demands they get from investors, NGOs, raters and rankers, and the media. Often, though, they are just checking sustainability and carbon reduction "word boxes."
How can a company move from checking word boxes to meaningful climate action? There are four crucial steps:
1. Create honest senior-level conversations about climate change. Talk with them, not at them. Don’t batter them with data, reports and toxic PowerPoint. Have serious, informed conversations addressing:
- the real impacts on the company, including both risks and opportunities;
- both transition impacts and physical impacts (and therefore risks and opportunities), not just picking whichever one you are more comfortable discussing; and
- how the company’s actual business strategy might be affected by those impacts.
Get on their side of the table — and stay there. Focus on what this means for protecting or creating business value. Use business terms they use; stay away from jargon and acronyms. TCFD, used well, can be a great vehicle for creating those conversations. The key is to focus on helping senior management create what TCFD calls "qualitative scenario narratives or storylines" that have true meaning for the business (and their careers), rather than berating and sedating them with complex technical scenarios.
2. Bring the people who make promises and the people who keep them into one conversation. Collaborate with the business leaders and line managers who will have to deliver. That’s how you avoid companies publicly pledging to go "carbon neutral by 2030" without having any clue how tight the market is for renewable energy certificates, or that they have dozens of factories using natural gas in production lines, with a minimum $500,000 per facility for replacement — and nothing budgeted for that cost.
In many companies, this means leveraging existing resources who are often left outside looking in as ESG teams set climate goals: the long-term EHS teams, who are often embedded within operations or engineering. Make sure EHS and ESG are collaborating and leveraging each other, not competing or talking past each other:
- In too many companies, EHS and ESG are separate disciplines. ESG often has the context, ambition and greater access to senior management. EHS often has the operational knowledge and internal network (operations, manufacturing, field away from headquarters, etc.) to help evaluate and achieve goals and targets.
- They can see the world very differently and have difficulty collaborating: "ESG is from Venus, EHS is from Mars," said one veteran with a foot in each camp. EHS perspective comes from risk and regulation, while much corporate ESG perspective comes from external stakeholders, communications and opportunity.
- They need each other: one is often making promises, the other helps keep promises.
3. Be honest. Make sure what you’re saying publicly honestly and accurately reflects what you see as the potential opportunities, risks and implications for your company. You don’t have to detail every bit of confidential strategy about coping with climate change. But you do have to acknowledge the potential scale and direction of impact and what you plan to do about it. Pretending you’re ready for climate change, if you’re not, is just another form of climate denial.
4. Communicate honestly about climate change and your company with your employees (not to or at them). They have a right to know what’s ahead. Many are decades younger than senior management, with 20 or 30 or more years of career ahead of them. They are the ones who will have to live with unkept promises. They are the ones who will have to live with today’s extraordinary weather as their day-to-day normal, with more droughts and floods, heat waves and hurricanes, disruptive weather and disruptive geopolitical impacts. And they are the ones who will have to come up with the solutions. Tell them the truth and ask their help, don’t try to sell them false assurances that you’ve got it covered.
Nothing you do can make the climate challenge easy. But if we want to have a prayer of making real progress and averting the worst climate change impacts, we have to start by being honest.
Make climate a business solution instead of a legal or reputation problem. Get your senior management in the room and start working on climate with them — honestly.