By Laura Butula, Kingfisher Writer

Published May 15th, 2022

Thousands of companies across the world are joining the collective movement of corporate climate activism, including IKEA and H&M. Despite the associated challenges, it is critical that businesses take a leading role in sustainability transformations, in order to address their negative global, regional or national impacts on the environment.

Earth and its inhabitants are now at a kairotic moment in which the consequences of anthropogenic climate change can either be addressed in one final attempt or selfishly neglected.

I hint towards the egotism of mankind because modern science increasingly demonstrates that whilst human systems are advancing, they are simultaneously pressuring the resilience of ecosystems and pushing natural areas to their extreme limits of tolerance.

There is little debate that unsustainable socio-economic development has magnified the effect of manmade climate drivers, including increased greenhouse gas (GHG) emissions and perpetual land use change. Temperature changes, precipitation variability, sea level rise, ocean acidification, melting ice and extreme weather events associated with climate change have proven to be overpowering on a global scale.

Considering this distressing actuality, it appears the world needs some kind of climate hero capable of saving us from our projected retribution. So, where can we find such a champion?

The answer can be quite simple: the corporate sector. There is more than meets the eye when it comes to climate leadership in the business world. While some companies opt for marketing gimmicks such as greenwashing, others are genuinely motivated to buckle down and positively impact the planet.

More than six thousand companies worldwide are now dedicated to reducing their GHG emissions and overall pollution; this number is likely to soar in the coming years. Moreover, roughly two thousand companies and financial institutions are committed to the Science Based Targets initiative (SBTi) that guides businesses throughout their journey of setting scientifically-based objectives to cut emissions and calibrate to the low-carbon economy.

‘More than six thousand companies worldwide are now dedicated to reducing their GHG emissions and overall pollution; this number is likely to soar in the coming years.’

The SBTi promotes research-supported best practice in emissions reductions and net-zero targets, addressing Scope 1, 2 and 3 emissions in the corporate context. Scope 1 denotes direct emissions that are owned or controlled by a company. Meanwhile, Scope 2 includes indirect emissions associated with purchased electricity, steam, heat and cooling. Lastly, Scope 3 represents all other indirect emissions that arise in a company’s value chain.

The SBTi was founded in 2015 by the United Nations Global Compact, WWF, CDP, and World Resources Institute. It still takes the stand as a foremost global body that continually influences and engages new members. Yet, why do companies care about tackling climate issues? The overarching reason is that drafting a climate action plan often proves business savvy.

Indeed, the international Financial Stability Board (FSB), which monitors and advises the global monetary system, recognizes climate change as a major threat to economies worldwide. Global business costs of climate change could equate to approximately $24 trillion by the year 2030 and $43 trillion by the end of the century. Fortunately, the predicted gains of climate change mitigation typically outweigh the costs.

‘Global business costs of climate change could equate to approximately $24 trillion by the year 2030 and $43 trillion by the end of the century.’

Firstly, optimising operations can result in lower production costs and boosted sales, which in turn increases competitive advantage. Secondly, companies can face outside pressure from various stakeholders; promoting environmental activism can therefore attract more customers and nurture brand loyalty (a marketing strategy you may have heard be referred to as Corporate Social Responsibility). Thirdly, green investing can familiarise companies with sustainability practices and prepare them for future climate change policies.

This being said, it is not an easy task for a company to adopt and triumph in green business model innovation. Minimising an ecological footprint requires active effort, not just in reducing current GHG emissions, but also in reverting negative impacts and preventing future environmental damage.

To promote such climate-focused acts, the World Wildlife Fund (WWF) published a new report titled ‘Beyond Net-Zero: A Business Pathway to Spur Urgent Climate Action Towards 2030’ just last month. The report details seven key actions that businesses should undertake to contribute to the 1.5˚C global warming limit, halve emissions by 2030, achieve net-zero emissions by 2050 latest, and ultimately protect nature.

In brief, the seven deeds include (1) accounting and communicating transparently, (2) establishing climate targets in line with 1.5˚C, (3) decreasing value chain emissions, (4) financing and reinforcing climate solutions throughout and beyond the value chain, (5) engaging in climate policy and securing corporate policy alignment, (6) cooperating with central stakeholders, and (7) inspiring customers with sustainable products and education.

The report and actions were developed with fashion giant H&M and Swedish furniture conglomerate IKEA. Both companies are keeping tabs on climate science and making significant progress on their decarbonization journeys.

For example, IKEA has pledged to attain net-zero by 2040—a decade ahead of the Paris Agreement deadline! To date, the company has outlined how it has introduced more energy-efficient and long-lasting LED bulbs, ensured that its restaurants will be 50% plant-based by 2025, promised to phase out plastic from packaging by 2028, and how it plans to embed climate key performance indicators (KPIs) across the firm.

‘IKEA has pledged to attain net-zero by 2040—a decade ahead of the Paris Agreement deadline!’

Comparably, the green investment project manager at H&M Group, Kim Hellstrom, mentioned that the company’s sustainability strategy is prioritised throughout all supply chain areas, stating that H&M needs to ‘incentivise and financially support our suppliers in their transition away from fossil fuels. It is really about getting our hands dirty out in the factories; that is what will make the difference.’

Despite these ventures, the WWF stated that ‘no company currently reaches the ambition [Beyond Net-Zero] we are setting now, but that is the point’—an announcement that likely galvanised businesses globally. It could be that this lack of comprehensive success is due to barriers associated with realising corporate climate leadership.

One major obstacle is a deficiency of political winds, meaning that inactivity of national governments may confuse or stultify companies. However, according to the Porter hypothesis, national governments (should) incentivize corporate sustainability transformations and alleviate any complications or resistance associated with such transitions.

‘It could be that this lack of comprehensive success is due to barriers associated with realising corporate climate leadership.’

This relationship can be further explained by the ‘ambition loop’—a positive feedback loop where valiant corporate leadership supports bold government action, which in turn expedites further business action. The question therefore stands: who makes the first move? This is a dilemma in itself.

Another challenge could be a company’s organisation chart, which may prove to be misaligned and chaotic in terms of setting definitive mandates. As a result, there may be differences in top-down communication and bottom-up action plans regarding sustainable practices.

Additionally, a company might lack employees with specific expertise in climate change and sustainability; a knowledge gap like this could endanger future efforts. It is now increasingly acknowledged that hiring a sustainability team is essential, particularly to elevate the climate-centred readiness of all stakeholders. The team is also responsible for ensuring that climate data is available upon request from all business activities.

One company that has addressed many of these potential challenges is the global real estate services company JLL, which pledged to reduce emissions through Scope 1, 2 and 3 by half by 2030 and reach net-zero emissions across its value chain by 2040.

JLL is addressing Scope 1 and 2 by switching to renewable energy sources in offices and considering the comprehensive use of electric vehicles by 2032. The company has also approached its stakeholders (e.g., clients, partners) to reduce Scope 3 emissions by investing in high-tech solutions, setting up climate KPIs, and limiting needless business travel.

Notably, Andreas Ahrens, head of climate at Inter IKEA Group, corroborated this kind of collective and community-based approach, stating that “a company can never achieve its goals without cooperating with partners across its value chain and between companies, governments and organisations…One or two companies can't change [climate] policies, but 130 can."

‘It is now increasingly acknowledged that hiring a sustainability team is essential, particularly to elevate the climate-centred readiness of all stakeholders.’

For the most part, corporate climate action is being realised by more companies every day. Although some hindrances or laggards persist, thousands of corporations are on their way to achieving net-zero—in line with international coalitions such as the SBTi—and ultimately becoming climate leaders.

With victorious conglomerates like IKEA and H&M currently at the front line, who else will join the race for climate-conscious business success? In fact, this question should no longer ask ‘who’, but ‘when’ and ‘how’? The future of the planet undoubtedly depends on ‘when’ and ‘how’ companies take the ‘right’ turn in the current climatic watershed.

Featured Image: Sean Pollock | Unsplash

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