The Global Stocktake is set to deliver a sobering truth–current efforts to reduce emissions are not enough to meet our goal of keeping global warming below 1.5 degrees Celsius. It is clear government commitments will not drive sufficient action–and the private sector is increasingly under pressure to close the growing emissions gap.
The corporate climate landscape is evolving quickly and is more complex today than even a year ago. New standards and guidelines, as well as regulations and reporting requirements, are raising questions about corporate integrity and ambition. The antidote to this is a chief sustainability officer–a leader who can set strategies to embed climate priorities within business goals, align purpose and profit, and navigate the plethora of new regulations and standards putting climate actions and claims under a microscope.
However, our research found that chief sustainability officers (CSOs)–or equivalent roles–do not exist at more than half of the world’s largest companies. Research from Climate Impact Partners examining the climate commitments of the Fortune Global 500 showed that companies without a CSO saw emissions increase 3% in the past year, while those with the position saw a modest decrease. This key role, despite being still relatively new, is expected to increasingly deliver a greater impact. It turns out that caring about climate change is also good for business. Among the world’s largest companies, those that reduced reported emissions from 2021 to 2022 earned on average nearly $1 billion more in profit than their peers.
CSOs must balance ambition with pragmatism. They need to set climate goals that support business growth. Fortune Global 500 companies with a CSO set carbon neutral and net zero targets seven and three years sooner respectively, compared to those without a CSO. Among those same companies, those with a 2030 or sooner target reduced operational emissions by 7% from 2021 to 2022, whereas companies without a 2030 target saw a 3% increase in emissions. This is why targets are table stakes– and the CSO is essential in setting the right ambition and path forward for the company.
The onset of standards and guidance around claims, such as the EU’s Green Claims Directive and Voluntary Carbon Markets Integrity Initiative (VCMI), is putting companies on edge as they try to avoid accusations of greenwashing. The VCMI’s latest rulebook, which provides guidance on the credible use of high-quality carbon credits and claims, is working to build integrity, end-to-end, from supply (provision of carbon credits) to demand (purchase of carbon credits). The guidance, which will be expanded later this year, will help address a critical solution that enables companies to finance emissions reductions around the world.
The tsunami of regulations is overwhelming. Starting next year, California will require companies to report on their engagement with the voluntary carbon market. Soon after, the EU will follow with their disclosure regulations, along with the U.S. Securities and Exchange Commission with their highly anticipated ESG rule.
All of this is forcing CSOs to focus more on accounting and compliance rather than strategizing to deliver reductions. Regulation can provide structure, direction, clarity, and credibility, but corporate sustainability teams need to be prepared to find the crosswalks between the different rules and disclosure requirements.
Everyone is going to walk out of COP28 with heavy responsibilities–corporations need a strong chief sustainability officer to succeed while taking bold climate action. But in order to reap the benefits, companies must first make the hire.
Sheri Hickok is the CEO of Climate Impact Partners.
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