Climate strategy is no longer an isolated concept within companies, managed by a team with no decision-making power. It has become a real issue. A challenge in the face of pressure from the company's stakeholders. A challenge in the face of regulatory pressure. Because of the risks posed by global warming to the company's activities.
There's no point in kidding ourselves. At one time or another, all companies will have to define and deploy a climate strategy.
It's now up to them to decide whether they want to undergo their transition or anticipate it. Make it a constraint or a strength.
Most business players are well aware of the urgency of the situation, and have already implemented a climate strategy. Yet the objectives they set, however laudable, are rarely achieved.
Not that companies lack ambition. Targets are often set according to criteria established by third-party organizations or international agreements. But these strategies suffer from a number of shortcomings. There may be a mismatch between the objectives set and the company's business priorities. It may also be a problem of resource allocation, which may be too low or not optimized.
For a climate strategy to be applicable, it can and must respond to business challenges. It must be built and managed in such a way as to enable the company to make it one of the pillars of its current and future development.
The climate strategy: concrete benefits
Transitioning your development model is expensive.
Indeed, this is often the case. Nevertheless, in a world undergoing profound change, it's inevitable. But a climate strategy should not be seen as a cost. Above all, it's an investment.
It's an investment that brings tangible benefits for the company, enabling it to consolidate its business model and stand the test of time. By making it more resilient to climate change. By creating new business opportunities. By building a genuine competitive advantage.
Easier access to financing
More and more financial market players are taking corporate environmental policies into account in their investment strategies. This phenomenon has been amplified by numerous standards and regulations designed to increase the transparency of companies' financial and non-financial performance, as well as that of fund managers' portfolios.
Within the European Union, this is the case of the SFDR and the green taxonomy. These two regulations aim to better allocate financial resources by redirecting them towards companies and activities with a positive impact on the environment. These regulations are key elements of the Green Pact for Europe, and should help finance the European Union's transition to 2050.
In terms of international standards, the CDP score is one of the elements regularly required and scrutinized by international investors. It is used to assess a company's level of commitment to the environment in the broadest sense, and the seriousness of its climate strategy.
Finally, theISSB, a series of international extra-financial standards, was specifically created to meet investors' needs for transparency in corporate environmental policies. It is now considered a benchmark in extra-financial reporting for many countries around the world.
The aim is not only to favor companies that have made strong commitments and are sticking to them, but also to assess their capacity to adapt to global warming and their resilience in the face of the changes this will entail from an economic point of view.
New business opportunities
Investors are not the only ones to take corporate climate strategy into account.
More and more public and private tenders are incorporating selection criteria linked to companies' climate commitments. These criteria take a variety of forms, from the simple completion of a GHG emissions assessment to a concrete commitment to reduce the company's carbon footprint. Others, such as SNCF, are introducing a price per tonne of carbon emitted, which is added to the final commercial proposal, transforming this extra-financial data into financial data.
Among the CSR criteria regularly requested in calls for tenders today, we find :
- brand commitments ( SBT trajectory, CDPrating, etc.)
- climate impact (carbon footprint on scopes 1 to 3 minimum)
- climate change adaptation capacity and action plan
- resources allocated to the action plan (human and financial resources)
- governance: integrating CSR issues into the governance process and steering the action plan
A climate strategy can help you anticipate these demands, create new business opportunities and even gain a real competitive edge.
The inclusion of environmental criteria in the awarding of contracts is a phenomenon that can only increase over time. Companies, and in particular large corporations, are subject to increasingly stringent climate reporting regulations, starting with the European Union's CSRD. At the same time, they will have to reduce their impact by following clear objectives and a precise timetable. According to the CDP, on average, 75% of corporate emissions come from scope 3. To reduce them, they will have to step up the pressure on their suppliers and service providers. The aim is to create a snowball effect that will encourage all economic players to take action in favor of the climate.
A model adapted to market trends
According to a study conducted by Ipsos for the European Commission, in 2022, 56% of consumers in the European Union will take environmental factors into account when purchasing products or services . In fact, 20% will take environmental criteria into account for all their purchases.
Some sectors are more concerned than others by these new requirements, starting with the automotive sector, known to be one of the main emitters of greenhouse gases.
Awareness of climate issues is accompanied by new consumer demands and structural behavioral changes in consumer habits. An increasing number of companies in all sectors (food, textiles, transport, tourism, etc.) are the targets of lobbying or boycott campaigns linked to the impact of their activities on the climate.
Added to this are new national and European regulations limiting the scope for companies to engage in greenwashing.
In order to meet these requirements, companies often have to innovate and fundamentally rethink their production and distribution models. This is an opportunity to make a transition that can only be beneficial, enabling them to build a new competitive advantage and adapt to a new economic environment. Finding the right solutions to meet their customers' needs is the key to ensuring their long-term survival.
Can a climate plan pay for itself?
Implementing an action plan to reduce environmental impact inevitably requires investment. The first fear of managers is therefore that they will not be able to recoup these investments. As a result, climate actions are perceived as a cost to the company.
This is one of the reasons why CSR can no longer evolve alone within companies, and why these issues are increasingly addressed in collaboration with, or even directly by, finance departments.
A properly implemented climate plan can be highly profitable. Indirectly, by opening up new markets for the company. Directly, by optimizing resources or modernizing production tools.
Another indicator to consider is the cost of inaction. In the same way, staying on the sidelines can be directly or indirectly detrimental to a company's performance.
Finally, trade-offs have to be made according to available resources. While sobriety actions are generally the least costly and easiest to implement, they also tend to have the lowest impact on the company's GHG emissions. Conversely, actions requiring greater investment are those that will have the greatest impact on carbon emission levels.
It is therefore essential to set up a financial steering system for the decarbonization plan. At present, according to the CDP, only 3% of companies are able to provide credible information on the financial planning of their low-carbon transition.
However, a clear financial vision of your transition plan has many advantages. It enables :
- establish a carbon trajectory with clear objectives and a timeframe
- more easily convince company management of the need for action, and integrate climate-related issues into corporate governance
- better anticipate and allocate the financial resources needed to implement the climate plan, and thus take action much more quickly
- identify the most effective levers by weighing costs against results in terms of GHG emissions reduction and potential financial gains
The financial module integrated into our carbon management platform makes it possible to model the financial impact of decarbonization actions and establish clear trajectories, as well as providing a detailed estimate of the investments required to implement them.
Conclusion
Implementing a climate strategy should be seen as an opportunity for companies. In fact, it is often an essential process for ensuring the sustainability of their business.
The key is to reconcile financial and carbon data. And to do this, it is necessary, above all, to align one's climate strategy with one's corporate strategy. Rigorous carbon measurement coupled with financial analysis enables high-impact decarbonization actions to be identified and deployed.
Companies that will last the test of time have now understood that business strategy and climate strategy need to be put on the same level.
