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Four Climate Action Insights for 2021
This blog was coauthored by Vincent Hoen.
2020 was dominated by the pandemic, yet business climate action did not stop in its tracks. If anything, it was cast in a new light as issues, including public health, air quality, justice, equity, and transparency, converged while the tick of the clock got louder heading toward 2030. At Guidehouse, we see that major brand sustainability teams are experiencing four important centers of gravity in 2021:
1. Brands are starting to activate their suppliers to meet greenhouse gas (GHG) targets, and they feel a little more power in 2021 to mobilize the supply base.
Sustainability teams face pressure from climate initiatives and investors to cut emissions upstream and downstream (often 10 times the operational footprint). This pressure means brands are looking to mobilize their suppliers to cut GHG emissions in a bid to match the ambition of their targets. In some restaurant and hospitality sector cases, councils of suppliers that provide logistics and protein are stepping up to set targets across the global value chain.
Many brands have received management and Science-Based Target initiative (SBTi) approval for bold supply chain goals they don’t fully know how to implement with procurement personnel and suppliers. Starting in consumer-packaged goods, Guidehouse sees big opportunities to tackle logistics, packaging, ingredients, and contract manufacturing by working with other like-minded brands. Mars, with its #PledgeForPlanet initiative, and others were part of an inner circle of brands we convened for a year to develop the Supplier Leadership on Climate Transition collaborative, launched on January 20 with Mars Chief Procurement and Sustainability Officer Barry Parkin. The collaborative aims to fully educate suppliers on GHG footprinting and target setting by mid-2021. The era of climate-compliant supply chains has certainly arrived, with the IKEA Foundation also making this topic a top priority.
2. Interest is increasing in better systems for tracking GHG emissions data throughout the value chain, and Guidehouse has a fruitful proposition.
After 20 years of blunt data collection tools, companies are eager to move from crude Excel-based emissions inventories that are difficult to use for reporting and monitoring progress. A new generation of tools and technology is emerging that not only tracks the emissions footprint of operations but also can pull data from supply chain information systems. A team at Guidehouse spent the better part of 2020 looking at the functionality big brand clients need, then developed a tool we call Papaya. With this tool, brands no longer need a full-time employee to own data management, as Papaya can better organize, manage, and generate data reports with a few easy clicks.
3. Organizations are taking a firmer stand on planning for net zero by 2050, with less apprehension about the 30-year runway and innovation gap.
Striving for net zero emissions is a rising priority that is making headlines. In May 2020, the Recover Better statement from the United Nations (UN) Global Compact and 150 corporations called for a net zero recovery from COVID-19. In July 2020, we saw Maersk, Danone, Mercedes, Microsoft, Nike, Starbucks, and Unilever launch Transform to Net Zero. Then at Climate Week, a cascade of net zero pledges were made public as brands signed on to net zero via Business Ambition for 1.5°C. In addition, BlackRock CEO Larry Fink’s 2021 Letter to CEOs made a strong push for net zero business strategies. The net zero GHG wave is here. Having a preliminary plan in place puts your company ahead of the trend, enabling you to report to stakeholders that not only is your company pledging but also you know how to get there before 2050.
Guidehouse helps corporations and senior management teams build a roadmap to net zero after signing the commitment. The Guidehouse team typically develops a strategic outlook and scenario to reach net zero emissions by the middle of the century. For the midterm, we counsel developing ambitious SBTs and then collaborate on what it means to achieve these targets with reduction measures and programs. Our assessments can also include change management and financial, technical, and communications aspects. Net zero is here to stay!
4. After a pandemic postponement, Conference of Parties 26 (COP26) is set for November 2021 in Glasgow. The whole world will be watching for corporate commitments, abatement action, and near-term results.
After a pause in 2020, UN Framework Convention on Climate Change COP26 will be an important moment for climate action. With US communities, businesses, and institutions stating America Is All In on the Paris Agreement and a new administration in Washington getting back onboard, the drum beat ahead of COP and during the 12-day conference will call for brands to showcase action and join forces to show that they are truly rallying for the Decisive Decade.
In the Months Ahead
These shifts point to things to come, including the following possibilities:
- Direct Tier 1 suppliers will get smart about climate action more quickly than their predecessors, and we will see a wave of brands behind the brands with bold commitments.
- GHG measurement, monitoring, and evaluation will improve across the value chain, as is the case with conventional environmental health and safety (EHS) systems.
- As with city, state, and regional public disclosure of net zero roadmaps, transparent corporate roadmaps will become more common, particularly given the earnest push from BlackRock and other financial stakeholders.
- COP26 will be a moment for resolute climate action that puts business on a path for the Restorative 20s, the next decade of restorative business.
Supplier activation, emissions data systemization, net zero assurances, and bold COP26 communications are the zones to watch in 2021. These hotspots are expected to bring the corporate response to climate change closer to an enterprise management system approach akin to Six Sigma, Kaizen, and Lean. No other partner on the planet is better equipped to lead you through these challenges than the sustainability team at Guidehouse.