Next steps for Canadian organizations in the journey to net-zero greenhouse gas emissions
Bridge the gap between your organization’s current state and ambition
The latest UN Climate Change Conference, COP26, provided an important platform for businesses and organizations to demonstrate how they’re taking action and mobilizing finance to support the transition to net zero.
PwC Canada’s new National Climate Change Leader, Elliott Cappell, recently shared his perspectives on the significance of COP26 for Canadian business leaders.
As we enter 2022, organizations are under pressure from shareholders, investors and customers to move beyond setting net zero targets. There’s a growing expectation of concrete transition plans, transparent reporting as well as increased leadership—and accountability—from the C-suite. In short, stakeholders are demanding real progress.
These raised expectations mean that even those organizations that are currently net zero leaders risk falling behind without a credible approach to tackling their decarbonization challenges.
The answer will vary between organizations, depending on the different stages of their journey. Net zero leaders have interim targets and a clear plan to decarbonize—which, in some cases, is validated by the Science Based Targets initiative. Others are earlier in the process and are working to improve their understanding of their own emissions as well as those scope 3 emissions from their suppliers, products, services, investments and other elements of their value chain. Meanwhile, some organizations are still in the earliest stages of establishing their greenhouse gas inventories.
Elsewhere, investors of all sizes are considering where they can find opportunities in the transition to a low-carbon economy. They are also measuring the emissions associated with their investments—known as finance emissions—and how those emissions affect their overall net zero goals.
Advancing on these and other goals is best achieved by viewing net zero as a key part of an organization’s broader environmental, social and governance (ESG) identity. Organizations will have different starting points on their ESG journey, depending on their mindset and maturity. But creating impact through ESG involves rethinking all dimensions of your business by creating a strategy-led plan, transforming operating models and measuring for transparency and accountability.
Taking stock of what’s driving your net zero ambitions will help inform your strategy.
Armed with these insights, organizations can turn net zero commitments into business transformation plans. A decarbonization blueprint, guided by building blocks and checklists of key actions, can provide a roadmap for organizations to move from net zero aspirations to implementation.
Build a credible and leading net zero ambition aligned to the achievement of global net zero emissions by no later than 2050, consider the whole value chain, and be supported by a science-based targets approach.
Strong governance ensures accountability for net zero is driven throughout your organization, starting from the top. Frameworks should be in place to enable decision making on the basis of meeting your long-term net-zero ambition.
Your net-zero strategy is critical to determine how to grow profitably while maximizing value and resilience. It requires an understanding of the associated transition risks and opportunities within the next one to two business cycles and beyond as well as how to minimize value destruction and unlock value creation.
Create a transformation program to execute the strategy and embed net zero into corporate structures as well as business functions and capabilities. This change effort will include realizing quick wins and, in parallel, work on longer-term operating model changes.
Enable and support emissions reductions at all levels of your supply chain to achieve net-zero transformation. An important element will be the evolution of traditional supply chains toward a connected, smart and highly efficient supply chain ecosystem.
Adopt existing low-carbon technologies at scale, and develop innovative new solutions and processes—many of which are at the R&D stage or other early phases of demonstration and commercialization. Companies need to invest heavily and build innovation into their ways of working.
Embed net-zero value creation and erosion considerations across all corporate finance functions including operations, financial planning, business strategy and development, facilities, corporate venture investing and treasury. Additionally, organizations can optimize outcomes by aligning their tax strategies and structure, factoring in tax credits, incentives as well as tax policy changes across the globe.
Provide transparent and balanced reporting on progress against your net-zero ambition, including your pace of business transformation and strategy implementation as well as progress against KPIs, including actual emissions reductions achieved.
Engage and influence stakeholders across a variety of ecosystems to deliver emissions reductions at pace and scale, and create the enabling conditions for an accelerated transition.
The net-zero landscape will keep evolving in important ways for businesses. Many expect the emission offsets market to come under additional scrutiny. At the same time, new approaches are emerging to financing and implementing carbon insets—investments that reduce emissions within an organization’s supply chain. And new regulations are likely on the horizon as governments work to close the gap between Canada’s net-zero ambitions and current level of emissions.
We’re already seeing the results when business leaders ask the right questions, identify gaps and take the right actions. Organizations that make progress on their net-zero ambitions are gaining an edge in building trust, accessing new sources of capital, attracting top talent as well as turning regulatory compliance into a competitive advantage.
We recently published our Net Zero Economy Index, which tracks the progress of G20 countries in reducing energy-related emissions. Canadians may be surprised that our national economy has a carbon intensity—measured in terms of energy-related CO2 emissions per dollar of GDP— far greater than the G7 (by nearly 60%) or world average. We have a long way to go in decarbonizing our economy.
Source: PwC Net Zero Economy Index 2021
The good news is that Canada has the policies and commitments in place to convert ambition to action: we’re phasing out coal, we’ve put a price on carbon and we’re enabling the electric vehicle revolution.
This index highlights the exceptional need for new ideas and breakthroughs. Most of our trading partners have also made net-zero commitments, and there’s strong global demand for low-carbon solutions. Canadian businesses have a unique opportunity to become leaders in the global low-carbon economy—delivering sustained economic benefits, creating lasting change and building trust.