Have Your Say
World | Nov 6, 2021

Dr Axel Kravatzky | Purpose with Profit: Companies as leader (1.5 to survive)

/ Our Today

administrator
Dr Axel Kravatzky. (Photo: Contributed)

Mia Mottley, prime minister of Barbados, threw out a huge challenge to COP26, that leaders lead. Dr Axel Kravatzky advocates that companies must step up, demonstrate leadership and be exemplars in this global effort.

The challenge of COP26 is to bring strength through collaboration for aggressive recovery and balance of our global environment, within one lifetime. Humans must only add as much carbon dioxide ( or GHG, greenhouse gases) into the atmosphere as they can cause to be absorbed out again. There is a finite limit or a maximum amount of GHG concentration that we can allow to be reached in order to have a chance to limit global warming; the total amount can be thought of as the carbon or GHG budget of the world.

We have to achieve a balance between what we put out and what we cause to be removed from the atmosphere, and we need to do this by 2050. If we don’t start immediately to drastically reduce emissions, global warming and consequences will accelerate; and risk is increasing at an even faster rate than the global warming itself. We need transformative thinking now.

Transformation – not tinkering

According the Institute for Global Environmental Strategies, about 80 per cent of GHG emissions can be attributed to direct and indirect activities of companies. That makes it very clear that companies have a pivotal role to play in solving the climate crisis. The challenge is unlike anything that the world has yet experienced.

This is not an incremental tinkering activity at the periphery of business-as-usual. Humanity, and therefore companies, needs to halve their GHG emission in the next 10 years. To halve emissions in 10 years, and to individually and collectively reach net-zero in 28 years requires fundamental transformations. Companies need to become acutely aware and proactively work toward achievement of (90-95 per cent) decarbonisation, by or before 2050.

The first steps will be easy for all – because our current systems are hugely inefficient. And this is where many companies start to greenwash. Too many of them do not even know what they need to achieve, nor what their carbon footprint might be, and yet they claim not only that they are committed but that they are proud of their ‘stellar’ achievements. That is dangerous – because it is false advertising and amounts to a failure in the fiduciary duty of directors, but particularly when it is ignorantly sincere it gives a false sense of progress and will lead to very bad consequences for us all.

This is why regulators the world over are now introducing mandatory and standardized climate related disclosure requirements – at a minimum.

Science-based targets for 1.5°C

What are Science-Based Targets, why do we need them, and who should set them?

The Science-Based Targets initiative (SBTi) was launched at COP21 in Paris and its mandate is to help companies, cities, regions, and other entities set targets for GHG reduction targets that enable these entities to achieve the net-zero target state by 2050. This is expected to be accomplished at a rate that gives the world a 50 per cent possibility to limit temperature increase to 1.5 °C over pre-industrial levels by the end of the century. These science-based targets and transition plans are independently validated for companies and all are based on the best available science.

We need Science-based targets (SBT) because the science is complex, the investment decisions that companies need to make are huge; targets that are based on internationally agreed standards and are validated reduces uncertainty and help all achieve the common and vital target.

In 2021 more than 15,000 companies, accounting for over 64 per cent of global market capitalisation, disclosed climate-related data. At the time of COP26 in Glasgow, just under 1,000 companies set SBTs, and most made commitments to 1.5°C. None of the companies are registered in the CARICOM Caribbean.

What about climate justice?

Industrialised countries have polluted and grown. Should we not be allowed to pollute, and should they not compensate us? And our relative contribution is miniscule – so, let’s just do some activities not to look like we are not trying, but they need to sort it out, we can’t be left behind. We must ensure that we get our fair share of the mitigation fund of $100 billion per year (promised but not materialised.)

There are many problems and risks with such an approach. A recent World Bank report demonstrated that the world is creating wealth without prosperity. Unless we transform our businesses from the ground up to be modern, agile, efficient, climate neutral and nature positive proactively, this unsustainable path will continue. If we don’t transform, not only will we lose competitiveness, but our companies and the employment they generate will be a lot more fragile, unattractive for investment or consumers, and we will be forced from the outside to adjust because we are part of the global value chain even if our regulators support lower standards and weaker enforcement.

Much more promising is a path in which companies, civil society, citizens, and investors demand of governments to enact and enforce policy, legislation, and regulation that promote climate and nature positive action through good corporate governance. One of the best ways for companies to support the global effort is to take up the leadership challenge, and to demonstrate commitment that politicians can also bank on. Companies must lead with ambition and courage by wisely following the science.

  • Dr Axel Kravatzky is managing partner of Syntegra-ESG LLC, vice-chair of ISO/TC309 governance of organizations, and the co-convenor and editor of ISO 37000 Governance of organizations – Guidance.
  • Disclaimer: the views presented are those of the author and do not necessarily represent those of any of the organizations he is associated with.
  • Comments and feedback that further the regional dialogue are welcome at axel.kravatzky@syntegra-esg.com

Comments

What To Read Next