Companies play a vital role in the transition to net zero, and one of the barriers in moving from net zero commitments to action has been the limited visibility of strong leadership and ownership of net zero commitments by CEOs and CFOs – indispensable to move the dial on progress.
A significant 70% of companies expect climate change to heavily impact their strategy and operations1. Yet we see that long-term climate transition planning is only superficially embedded in business strategies, if at all. This sits at odds with the recognition of climate change as a core business issue. 92% of global CxOs surveyed by Deloitte1 agree that their company can continue to grow while reducing greenhouse gas emissions and transitioning to net zero. And yet progress against net zero targets is patchy. Only 37% of the world’s top 2000 firms have set full net zero targets across all three scopes of emissions (with 65% setting scopes 1 and 2 targets), and only 16% are on track to reach net zero in their operations by 20502.
This will need to change (and drastically so), if we are to stand any chance of limiting the impacts of climate change, and if companies desire to seize the opportunities associated with an early transition towards net zero, and mitigate the very existential risks looming for those that don’t act fast enough. This, combined with the significant transformation required to get to net zero, and the reputational, legal, operational, and strategic implications3 of not meeting the target, makes CEO ownership of net zero targets important.
While the CFO's role has traditionally not encompassed sustainability matters, with incoming sustainability regulatory requirements this is rapidly changing, with sustainability reporting accountability increasingly falling upon the CFO. This should extend to net zero targets. CFOs are perfectly placed to understand the viability of various business models under different climate scenarios. With a remit to manage risks and opportunities, as well as manage capital allocation, the CFO should play a unique role in determining which decarbonization activities to finance, and therefore when and how to decarbonize, to minimize physical, transitional risks and create value through the transformation.
Acting on net zero is not without challenges of course, and where and how to get started can often feel daunting.
We typically ask CEOs and CFOs to start with some of the following questions at the outset of their net zero transition planning process:
It will take courageous leadership to address head-on the various challenges in implementing net zero: from decarbonizing supply chains, complexity of data collection, the extent of transformation not just to the business, but to the established ways of working and thinking, the need for a better policy landscape and ecosystem thinking, to a backlash against climate commitments in certain geographies, and negative economic outlooks, it can be tempting to hit pause on net zero action or hunker down on communication around progress. However now is the time for bold leadership and for demonstrating action and progress on the net zero transition. Those CEOs and CFOs that together seize the opportunities related to being an early mover will build competitive advantage.And as climate change brings unprecedented physical and transitional risks3, those that don’t, risk being at the helm of companies that in time may cease to exist.
1 Deloitte CxO survey 2024: https://www.deloitte.com/content/dam/assets-shared/docs/about/2024/deloitte-2024-cxo-sustainability-report.pdf, 2000+ C-suite executives interviewed over 27 countries
3 https://www.deloitte.com/nl/en/issues/climate/key-elements-of-a-net-zero-roadmap.html