How to identify a great net zero corporate strategy
At a glance
The need to pursue credible investments that substantially progress net zero outcomes has never been greater.
Investors are looking to better understand physical and transition climate risks within their lending and investment portfolios, while questioning the viability and feasibility of how organisations are planning for net zero. More broadly, ESG (Environmental, Social and Governance) investing is under greater levels of scrutiny. Industry regulators are calling for increased consistency and transparency in how decisions are made and calling out greenwashing in court. Private equity and lenders are looking to challenge those who are not doing enough. At the same time, asset operators are being held accountable for exaggerating environmental claims in their portfolios, leading to material business impacts, reputational risks, and stigmatisation in the public consciousness.
With COP27 pointing to the importance of credible action plans and the UN citing integrity, transparency, and accountability as critical to any net zero commitment, a framework that facilitates a thorough understanding of the roadmap to net zero is urgently needed.
Relevant resources are stretched and execution is lagging. Many corporate decarbonisation plans are self-defined or only measure financial risks aligned to pollutive practices when there is so much more across the E, S and G that influences bottom-line outcomes and success. A significant number of net zero plans do not stand up to scrutiny, meeting their demise when the pragmatic lens of implementation is passed over them.
Seven principles to inform investment decisions
Designing viable net zero implementation plans is key to the successful roll-out of decarbonisation strategies.
Considering more than solely bottom-line risks and applying a wider, integrated approach to decarbonisation investment decisions produces a complete assessment with meaningful data and insights that can equate to stronger, long-term financial gains. A net zero strategy with longevity considers the ‘how’ rather than just the ‘what’ and involves a deep analysis of the approaches and risks, prioritises stakeholder engagement and asset transition, and demonstrates solid metrics and measurements.
The seven principles listed below build on GHD Advisory’s processes, frameworks and supporting models applied across technically and commercially robust solutions for our clients. While each net zero journey is unique, taking learnings and best practices from across regions and industries establishes powerful parameters for assessing and executing a net zero strategy.
An integrated net zero strategy – bringing together strategy, risk identification and mitigation planning
2. Managing asset transition readiness - Managing the repurposing of assets, identifying technology maturity levels, and preparing for relevant transitions.
3. Identifying the risks - Deep understanding of technology, climate, financial and business model vulnerabilities and their impact.
Capability and behaviours – coordinating the organisational model around decarbonisation and the transition
5. Supporting governance structures and decision making - Ensuring that management, and accountability for decarbonisation, is embedded in the organisation and within all levels of the corporate centre. Ensure your partners in business are aligned and executive understanding and buy in.
Metrics and data – entrenching targets and decarbonisation measurement approaches into reporting systems
7. Commitment to measurement - Ensure that key performance indicators are understood and mainstreamed into performance reporting, while discussing risks and roadblocks regularly and openly.
Working within these principles, GHD Advisory partners with clients to build on existing decarbonisation initiatives while ensuring that gaps are bridged across new strategies, capability, governance, and processes. Truly viable and resilient decarbonisation planning requires excellence across all three factors for success: strategy and practical implementation approaches, capabilities and behaviours, and metrics and data. Being brilliant at just one or two falls short of the minimum requirements and impacts overall performance.
Many organisations are grappling with poor planning, especially during the costly and risky implementation phase. ‘Failure-to-launch’ comes with significant downside risk, and at a stage where the organisation might lack time to properly plan, or at a point where parameters defining feasible from the unfeasible cannot be redrawn.
As the clocks to 2030 and 2050 tick with greater tempo, businesses must reflect on whether there is embedded integrity in their net zero planning. The same reflections apply to those seeking to invest – as a bad decarbonisation plan will fundamentally impact business viability. By how much? Let’s take every step needed to identify a great net zero corporate strategy to mitigate hits to the bottom line.