How to Accelerate Corporate Decarbonization
A rash of recent reports are sounding the alarm about greenwashing. The basic argument is that companies are intentionally trying to fool the public by exaggerating their decarbonization progress, thereby squandering our opportunity to actually achieve the net-zero emissions the world so badly needs.
Want to know our take?
Concerns over greenwashing are generally overblown.
- What the critics get right is that most corporate decarbonization efforts are behind schedule. This is a big deal. Voluntary climate initiatives by the private sector are an important part of the overall strategy to address the climate emergency, so it’s important to bring these delays to light.
- But the delays don’t mean fraud. Most companies that have pledged to reach net zero are sincere about wanting to pull it off. They’re just finding it difficult to do so in commercially viable ways.
Our ask to environmentalists and business leaders: rather than debate greenwashing, please focus on a more important question — how can we accelerate corporate efforts to reach net zero?
But first, let’s recap how we got here.
A Quick History of the Win-Win Strategy:
Starting in the early 2000s, many climate-concerned business people (myself included) began encouraging companies to pursue “win-win” environmental opportunities.
- Our notion was that environmental initiatives did not have to be loss leaders – they could yield both business and environmental returns. Hence win-win.
- It also meant that investors and other stakeholders (including environmentalists) should support these actions because they would be in everyone’s best interest.
- How exactly would companies find these win-wins? By seeking out environmental initiatives that also boost revenue, cut costs, reduce risks, rally stakeholders (i.e., shareholders, customers, employees etc.) or improve business outcomes in some other way.
This was and remains a very good strategy. But it was never meant to represent the entire solution for private sector environmental challenges.
Ambitious environmental strategies are challenging and expensive. This point may seem obvious, but it’s important to make. Corporate efforts to achieve positive environmental outcomes like decarbonization often:
- reduce profits (at least in the short-term)
- raise costs
- require large capital outlays
- lengthen time horizons
- pose big risks, and
- sometimes even require that companies ditch important lines of business.
That doesn’t sound so win-win, right?
Fast forward to the 2015 Paris Climate COP. Developed nations concluded that their top climate priority would be to attain net-zero carbon emissions by 2050. Everyone agreed that companies should try to do the same. So, leading companies around the world — encouraged by various NGOs — started making pledges to reach net zero 25 and 35 years into the future (2040 and 2050). And as progress on the policy front continually lagged, the pressure on business to move forward on its own only grew.
All of this is fine of course. It is absolutely appropriate to ask the private sector to lead on the global net zero campaign. But we shouldn’t act like there was ever a fully developed “theory of change” on exactly how companies could reach net zero.
Rather, the implicit thinking seemed to be something along these lines:
We have time (i.e., until 2050) to figure this all out. Public policy will likely improve over that timeframe and provide much of the support and momentum we’ll need. New technologies should emerge too and they will keep lowering the costs of decarbonization. And customers and investors will help by insisting that this progress happen and rewarding companies who lead.
To be sure, much important progress along these lines is, in fact, underway. But for most companies to reach their decarbonization goals on schedule, we will need to see a dramatic acceleration.