Net-Zero Business Success Requires Stated Strategy, Says Report

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by | Jun 16, 2022

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In order to strengthen their net-zero transitions, companies should articulate how targets fit into their future based on potential growth, showcase those targets in their strategic plans, identify benefits and risks, and establish accountability systems, according to a report from FCLTGlobal.

FCLTGlobal’s report outlines how companies can bridge the gap between sustainability goals and long-range business success and includes a climate transition conversion guide. That guide outlines strategies for companies to assess their objectives as well as help them communicate their strategy with investors.

The tool can help companies develop an integrated transition plan and assess how each piece of their long-term business goals is affected by environmental impacts and their sustainability efforts.

It outlines several sections with questions to ask and tasks to look into. Those include corporate purpose, external environment, strategy, investments, risks, accountability, and incentives.

More businesses are putting an emphasis on sustainability targets. A survey by Grant Thornton found that 70% of chief financial officers view ESG efforts as a top priority in their companies or more important than financial success.

The FCLTGlobal survey of 100 companies shows many of them are slow to address most of these topics. There were 19% that discussed in their annual reports how climate affected their corporate strategies, and 1% revealed those impacts to investors.

Of those companies, 57% recognized climate risks to business, but none of them referenced risks in their strategic reports. Nearly 30% of the respondents had specific financial goals outlined in their strategies and 13% listed planned financial investment toward sustainability efforts.

Net Zero Tracker, which collects data on sustainability efforts for organizations, businesses, and governments, recently reported that of half of the 700 corporations with stated net-zero goals, about half have the targets documented in company reports.

To close those transition gaps, the tool suggests companies disclose the actual and potential impacts of environmental risks as well as opportunities. It says to outline those situations in an organization’s operations, strategy, and financial planning.

Companies should disclose the metrics and information used to manage the work they are doing toward sustainable transitions, according to FCLTGlobal. Disclosure is also key in how they identify, assess, and manage risks, as well as the organization’s governance of environmental risks and opportunities, according to the tool.

Gathering data and making such disclosures are gaining in importance across industries. That has also led to more systems tracking a company’s sustainability and ESG efforts.

FCLTGlobal says companies that demonstrate these efforts will help differentiate themselves in their industries and gain the trust of investors, especially since investors are currently demanding the companies they work with align with their own sustainability goals.

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