Closing the trust gap over net zero commitments

AHEAD of the 27th Conference of the Parties of the UNFCCC (COP27) in Sharm El-Sheikh, Egypt, in November, India has ratified its pledges to achieve net zero emissions by 2070.

Following COP26 in Glasgow last year, many other big emitter countries such as the European Union nations, Brazil, China and the United States have also raised their ambitions. Net zero means that all man-​made greenhouse gas emissions must be removed from the atmosphere through reduction measures.

Despite the momentum towards achieving net-zero carbon emissions and stabilising climate change, the planet remains on a path towards 2.7°C temperature rise by the end of this century as greenhouse gas emissions continue to soar, and floods, heatwaves and droughts intensify every year. According to the International Energy Agency, the latest pledges still leave a significant gap in the emissions reductions needed by 2030 to keep the 1.5 °C target agreed at the 2015 Paris Climate Conference.

The rich countries house the biggest greenhouse gas emitters such as major meat, dairy and other food and beverage companies that have only recently filled their annual reports with targets to reach net zero emissions by 2050. But there’s a trust gap here: critics and consumers aren’t buying it.

A French consultancy firm, Carbone 4, said companies cannot be net-zero, and that their pledges are more directly based on arithmetic than geochemistry. “The idea of a carbon-neutral company is fundamentally dubious,” the firm wrote in July 2021.

Meanwhile, a recent study shows that net zero goals aren’t clearly transmitted to consumers. Only 32 per cent of customers view these corporate commitments as meaningful, according to a recent Salesforce survey of nearly 2,400 adults in the US and UK. Meanwhile, 47 per cent view the promises as superficial. With this scale of skepticism comes the hard part of turning pledges into action.

To offset the catastrophic effects of climate change, there need to be a focus on closing these gaps. Cross-industry collaboration and implementation of the right technology are crucial to overcome climate change challenges and reach net-zero goals, and the onus is on governments to take the lead in turning these pledges into clear and credible policy actions and strategies.

Governments must step up and be bolder in incentivising the market and mandating change. Policies such as incentives and penalties encourage businesses to align investments and economic activities with climate goals. They must encourage capital investment from multilateral organisations, financial institutions and the corporate sector towards companies that enable carbon neutrality and away from those that aren’t, thus pushing them to act accordingly and accelerate the carbon transition. The beneficiaries could be companies with low carbon footprints that use or produce clean energy and other climate solutions. This also applies to high emission companies that have a credible carbon transition strategy and are in the process of reducing their emission levels. In parallel, imposing penalties and carbon taxes provide additional revenue for governments which can be returned to consumers in the form of rebates, to encourage a switch to low-carbon consumption.

The role of asset managers is also key in bringing about tax policy changes that are efficient and effective in facilitating the transition. An active investing approach pushed by asset managers is the determining factor in influencing the nuances of climate change. This kind of approach, supported by industries that want to apply climate-based or climate-aware investment strategies, will help countries reach their net-zero target.

The rise of environmental, social and governance (ESG) factors in the corporate agenda has turned attention to reaching a path of net zero and re-examining the outlook on energy investment. This change in perspective will lead to a sharp rise in both private and government spending and can create millions of jobs in clean energy as well as in associated engineering, manufacturing and construction industries.

On a micro scale, citizens also have a crucial role to play in tackling climate and environmental problems by changing their behaviour and informing policymakers of their views. Governments and companies can go beyond educating people on the impact of their lifestyle choices, nudging them towards more sustainable consumption choices and behaviour such as ethical investment, electric vehicles, retrofitting homes or changing diets.

Tracking and accountability will be critical to ensure governments and companies are following through on their promises. Detailed, sector-specific road maps can bridge the gap between long-term pledges and short-term action plans with measurable targets. These would include clear policy measures and initiatives, desired outcomes, timelines, and necessary resources required.

Finally, governments and companies will need to monitor the implementation of their action plans. With the right technology, clear and consistent measures must reflect the contribution of public, private and third sector entities to maximise accountability for results.

The Glasgow summit has exposed the painful truth that we are still far from meeting our net zero targets. We have yet to achieve the momentum to align all the agencies, private sector players, NGOs and citizens behind a coherent plan. Still, through innovation, allied with unwavering commitment, the world can deliver on its pledge of sustainable growth that benefits the planet and all who inhabit it.

The writer is CEO and co-founder of GoImpact Capital Partners