You’ve probably seen the headlines about the latest climate report from the Intergovernmental Panel on Climate Change, a body of more than 200 scientists convened by the United Nations. The report is a dire warning and urgent call to action: the UN called it a “code red for humanity.”
We live in a time when the scope of the news—no matter how terrible or outlandish—seems to be taken in stride. I fear this call to action will suffer the same fate and quickly become another terrifying moment which swiftly leaves public consciousness. Even as someone who works in this field, I will admit to a certain level of “threat fatigue.”
But we must fight against that. As the report makes clear, it’s all but certain that the world will heat up by an average of 1.5 degrees Celsius in the next 30 years. A rise of 1.5C is generally seen as the most that humanity could cope with without suffering widespread economic and social upheaval. The atmosphere has already warmed by 1.1C leading to increased frequency and intensity of disastrous weather events around the world that will only continue regardless of what we do now.
Amid these perilous warnings, the IPCC offered a ray of hope: “I think a key message here is that it is still possible to forestall most of the most dire impacts, but it really requires unprecedented, transformational change,” said Ko Barrett, the vice chair of the IPCC.
Unprecedented, transformational change. We can do that. We’ve done it before: In 1987 countries signed the world’s most successful environmental treaty, the Montreal Protocol, which reversed growth of the ozone hole, saved millions of lives, and avoided a global catastrophe. Conditions are lining up for a similar breakthrough at the big COP26 meeting this November in Glasgow.
But climate change is a different problem than fixing the ozone hole. The source of the problem is fundamental to our economy and the changes we need to make will not be easy, especially at the speed called for by the IPCC.
The good news is that big companies and their investors see the wisdom in fighting climate change. A third of the Fortune 500 companies have published “net-zero” climate goals. And the membership of the Glasgow Financial Alliance for Net Zero (GFANZ) boasts $88 trillion of combined assets under management.
While this is a needed and welcome trend, there is reason for skepticism. Greenwatch claims that 95% of net zero claims in the communications sector are greenwash—or in this case “goalwash”— and other sectors are not far behind at 80%.
So, after digesting the devastating news of the IPCC report and topping it off with a healthy dose of goalwash skepticism, what should a company do to authentically and genuinely fight climate change? Here are a few ideas:
Treat carbon like financial transactions
Carbon accounting may sound boring, but getting the numbers right is fundamental to success. Investors require reliable information on company finances and the same rigor must be applied to carbon emissions. The good news is there is no debate on how to do this: the greenhouse gas protocol has been around for 20 years and is the de-facto global standard for carbon accounting. Start with effective management systems (i.e. involve top management) fueled by cutting-edge technology to measure carbon emissions across your value chain effectively.
Operationalize a strategy to reduce or eliminate your carbon footprint
Once you understand your carbon footprint, the question is what do you do about it? There are two main parts to an effective carbon management strategy – emission reductions, and adaptation to climate risks. Every company should seek to reduce emissions using a “science-based target.” This is your company’s allotment of greenhouse gas emissions aligned to a 1.5C warming scenario. To avoid “goal washing” include interim checkpoints and publish your performance indicators.
Since we now know that the climate impacts will increase, the second part of the strategy should focus on identifying and mitigating risks. Often dubbed “scenario analysis,” this means that companies need to forecast the risks to their business (including the value chain), across the world. This assessment can identify hidden vulnerabilities.
Prepare for regulation
Policy makers are cooking up a slew of new requirements that will affect most companies. The US Securities and Exchange Commission announced new climate disclosure regulations will be ready this year—a move that already happened in the UK. The compliance team must be prepared to meet these new requirements and scan the horizon for new regulations spurred by the IPCC report. While compliance is a must, companies should strive to get ahead of the regulators. Genuine climate leadership will help lower compliance costs and may inspire your peers toward similar action.
The opportunity for the financial sector
Early this year, BlackRock—the world’s largest asset manager—warned portfolio company CEOs that they must effectively manage their climate impacts, and backed it up when BlackRock voted against 255 directors who failed to take meaningful action against climate change. This type of action is taking root with other large asset managers and owners around the world. While driving portfolio companies to take action is needed, it is not enough.
The finance sector also must measure and manage the carbon impacts of their investments
The little-known PCAF standard has been growing in popularity as the global standard for measuring these impacts. It provides calculations for banks and investors to measure and manage the carbon impacts associated with six types of financial transactions. With trillions of dollars per year needed to build a low-carbon economy, it’s essential to monitor the carbon implications of the global flow of capital.
Turning fear into action
The IPCC did its job. The world’s best scientists have told us in no uncertain terms exactly what will happen and what we need to do to reverse these trends. Now it is time to turn these warnings into actions. While it is natural to be overwhelmed by dire predictions and the enormity of the task ahead of us, a better response is to think through what each of us can do to act responsibly. We have come together to fight and win against global environmental threats before and we can do it again.
Tim Mohin is the chief sustainability officer for Persefoni AI. Formerly, Mohin served as chief executive of the Global Reporting Initiative; he also held sustainability leadership roles with Intel, Apple, and AMD and worked on environmental policy within the U.S. Senate and Environmental Protection Agency. He is the author of Changing Business From the Inside Out: A Treehugger’s Guide to Working in Corporations.