A poorly designed or poorly executed Net Zero transition plan can put your organization at material risk.
“Every company and every industry will be transformed by the transition to a net zero world. The question is,
-Larry Fink, Chairman and CEO, BlackRock
will you lead, or will you be led?”
What’s at stake?
“Much has been written on why we need to move the economy to Net Zero emissions and fast, but precious little on how we get this done.”
–Anne Simpson
Global Head, Sustainability, Franklin Templeton Investments
Yes. It is an expectation of all capital providers (banks, bonds and ESG rating agencies) and securities regulators that all material Scope 3 GHG emissions are measured, reported, and will increasingly need to be third-party assured. The financial materiality test would be a greater than a 3% negative impact on revenue or operating profits as the cost of carbon becomes real in companies around the world.
While every company will have a different net zero transition plan and business strategy to achieve a net zero, zero, or carbon-neutral business model, all companies must have at least five core eco-efficiency plans, processes, targets, and disclosures to ensure their Net Zero transition plan is credible and legally defensible.
With plans, processes, and investments for 100% carbon-free energy, energy efficiency and conservation are at its core.
Yes. 90% of companies will be required to change their current board approved business strategy, enterprise performance metrics, key strategic targets, and incentive designs for Net Zero.
This will include aligning the long-term incentive plan design to a rolling 5-year plan:
– 5, 10, and 15-year Research & Development innovation targets
– 5, 10, and 15-year New Zero emission product and solution revenue targets
– 5, 10, and 15-year GHG reduction targets
– Employee safety and well-being targets
– 20-year C-suite succession planning processes for strategic leadership talent with the potential to transform business models (Net Zero, circular, digital)
– 5, 10, and 15-year Carbon Adjusted Return on Capital (CAROC) targets
Companies missing processes for all the above and related 5, 10, and 15-year targets and incentive design may find that their corporate directors and officers are in breach of their legal fiduciary duty if challenged by their shareholders in a derivative action against the company.
The net-zero transition is the greatest business transformation in human history.
We can help build your organization’s capacity for innovation—to ensure your transformation is both sustainable and profitable.