No Match Found
‘We don't emit a lot of greenhouse gases’ and ‘we're not yet able to measure emissions in the supply chain’ are the most given answers of CEOs when they do not have a net zero ambition for their organisation. That's one of the results of PwC's 25th CEO Survey. These CEOs would be better off not waiting until all their knowledge and expertise is in place, but setting a clear goal. Especially to get the organisation moving.
First I would like to say: small emitters need to transform too. Our CEO Survey shows that your customers and employees think it's extremely important that you make a substantial contribution to combating climate change. The parties you do business with expect it.
In addition, laws and regulations are increasingly forcing it. Think of the European directive CSRD that significantly broadens the scope of companies that have to report on their sustainability performance. Moreover: we all have to go to net zero if we want to meet the goals of the Paris climate agreement.
I am the first to admit that it is all very complex. Net zero supposes that you not only aim to reduce the emissions that you can influence yourself (scope 1 and 2), but also the emissions that you cause at suppliers, sales points or through the products that you bring into the chain (scope 3). If a car manufacturer wants to become net zero, it must ensure that the cars that are sold also start emitting less and less and ultimately become emission-free.
For a good understanding, it sometimes helps to make things small and imagine what it would be like on a household level to become net zero. You then have to somehow figure out what you are emitting now, where you can cut back (lower the heating?) and where and when you want to invest (solar panels?). But, on top of that, you have to figure out which supermarket sells the best products that contribute to that goal.
It is precisely the latter that makes net zero so complex. Especially if you then also commit yourself to so-called science-based targets, which means that each year - in line with the Paris objectives - you have to reduce and compensate a certain amount.
The process to net zero starts with determining the emissions. That's complicated, because organisations need to collect a lot of data to do that. For example, not only do you have to know how many cars you have, but also which brand and which type emits what. Moreover, you have to find out what the production of that car has cost in terms of CO2. If you use data centers, you have to determine how much CO2 is emitted into the air by your use of server space. Anyone who operates internationally has a big job just measuring the energy consumption in offices and production sites in all countries. Once you have calculated the emissions, it becomes easier: then you can see what buttons you can press in order to reduce emissions.
In short: it is complicated and difficult. It is for a reason that large companies are often further ahead with this than smaller ones. But note: organisations do not have to do it all by themselves: knowledge about these kinds of processes is increasing. At sector level and in knowledge organisations more and more knowledge is being gathered and shared. Moreover, the partners in your supply chain are also working on this.
Supply chain partners more or less force each other in the right direction. If everyone is working on net zero, it will be much easier to measure all indirect emissions. That alone is a reason to start working on it. The scope 3 emissions of the car manufacturer in the above example will go down if companies (as part of their scope 1) electrify their lease fleet.
And it pays off: the Netherlands has many service providers, companies that are not major emitters and for which the business case for net zero works out very well. During the COVID-19 crisis, they noticed that their travel costs were reduced to such an extent that they were able to increase their profits considerably.
Why is setting a robust goal, aligned with science-based targets, so important? It changes the dynamics in an organisation. An executive sets the tone and determines the direction, but much of the execution is in the organisation.
I've seen at PwC that a net zero goal generates great creativity, innovativeness and enthusiasm. I have seen it in my own practice that people with good sustainability ideas did not initially get through all the layers of the organisation. But now that their plans are actually encouraged, they brighten up, so to speak. A sustainable goal gets organisations moving. And if there's one person who can get an organisation moving, it's the CEO.
CEOs find measuring their organisation's carbon emissions difficult. This plays a major role in the lack of a net zero target. When CEOs have a goal to reduce their own emissions and those in their supply chain as much as possible, it is partly because customers and employees expect them to do so.
PwC's 25th CEO Survey also revealed large companies are more likely to aim for net zero than smaller ones. We see the same difference between listed and unlisted companies. This difference probably has to do with both the public pressure on listed companies and the knowledge on measuring emissions that these organisations possess.
Partner, PwC Netherlands
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