More than half of companies are not transitioning fast enough, leaving them in danger of missing the Paris Agreement target of net-zero carbon emissions by 2050, according to new research from Standard Chartered.
Zeronomics, a study into financing a net-zero world, surveyed the senior leadership of 250 large companies and 100 investment specialists between September and October 2020 and found that:
- 55% of business leaders believe their companies are not transitioning fast enough to reach net zero by 2050
- A lack of finance is seen as the biggest barrier to progress – 85% of companies need medium or high levels of investment to transition to net zero
- Carbon-intensive industries and companies based in emerging markets are struggling most with the transition
- Just 47% of companies fully support the aims of the Paris Agreement
What are the barriers?
Companies seem to be delaying taking action, which could lead to the 2020s being a lost decade. The report states that more than a third of business leaders (34%) said their companies will make the most progress between 2030 and 2040, while 37% said they will take most action between 2040 and 2050.
Most companies are delaying transition because they do not feel equipped to meet the target and will require significant organisational change to make net zero happen.
Zeronomics states that accessing transition finance is not the only hurdle companies face. Some 64% of business leaders believe their company’s progress is being hampered by an absence of affordable alternative technology to help them transition, while three in five believe that a lack of support from investors is a significant obstacle.
The COVID-19 pandemic is also hindering net zero efforts, as many businesses are focusing more on immediate survival than emissions reduction strategies. Fifty two percent of senior executives say their organisation is postponing its net-zero transition in order to maximise revenues in the short to medium term.
How to fix it net zero action plans
The research reveals what business leaders believe is needed in order to speed up transition. Most point to standardised net-zero measurement frameworks (81%), underlining the fact that what we have currently–a matrix of different definitions, measurement and reporting requirements–is a major challenge for senior executives.
A further 81% said that cost savings from sustainable practices or increased operational efficiency, making it more attractive financially to move to net zero, would speed up transition.
Meanwhile, 79% of business leaders said that an increased demand for net-zero products and services and increasing pressure from customers to move to net zero would help the world hit the target by 2050.
What are the top accelerators of net-zero transition?
- Standardised global net-zero transition measurement, disclosure and rating frameworks 81%
- Increased operational efficiency/cost savings from sustainable practices 81%
- Increased demand for net-zero operations, products and services from net-zero trading partners 79%
- Increased shareholder activism/investor scrutiny and pressure 78%
- An effective global carbon tax 77%
Bill Winters, group chief executive of Standard Chartered, says: “Our survey reveals that most companies intend to transition to net zero by 2050 but have yet to take the action needed to get there. A majority cite funding as an obstacle and carbon-intensive industries and emerging-market companies struggle the most.”
“A successful net-zero transition must be just, leaving no nation, region or community behind and, despite the hurdles, action needs to be swift. We must act now, and we must act together: companies, consumers, governments, regulators and the finance industry must collaborate to develop sustainable solutions, technologies and infrastructure,” states Winters.
Reaching net-zero carbon emissions by 2050 will be a considerable challenge. Every organisation in every sector has a critical role to play in limiting global warming. Commitment to this agenda must be top of mind for all companies – public and private, large and small – and to succeed they must undergo major transformation.
Zeronomics examines the economics of transitioning to a net-zero carbon future and was commissioned by Standard Chartered to understand how far companies have come on their journey to decarbonise, as well as the gulf between words and action.