The goal of transitioning an economy from a high-intensity to a low-intensity carbon economy requires contributions from all of society.
Therefore, each organisation taking a thoughtful, practical, measured, and proportional approach to decarbonisation that creates or preserves value is critical as they transform their business through decarbonisation for future financial success.
Also, organisations do not operate in a vacuum; they are members of society and draw their licence to operate and legitimacy from society.
As such, a decarbonisation approach needs to consider the organisation’s unique transformation context and the society in which it operates.
The relationships that organisations form with their stakeholders, and the understanding of how these stakeholders impact them, will inform how organisations map their decarbonisation roadmap.
In other words, an organisation’s decarbonisation plan cannot be unmindful of the priorities of stakeholders in the society in which it operates. Here are the reasons why organisations should align their decarbonisation plan and societal priorities:
First is to identify the risks and opportunities across their business based on the priorities set by society.
For example, we have seen countries determine their Nationally Determined Contributions (NDCs), which outline each nation’s plans to reduce emissions and adapt to the impacts of climate change, providing a quick reference for organisations in each country when preparing their decarbonisation roadmap.
A bank could easily identify the high-priority sectors noted in the NDCs, scan its loan portfolio to identify opportunities to leverage and risks to manage, rather than preparing its decarbonisation roadmap in isolation.
Regulators can also incorporate these NDCs and priorities into regulatory guidelines, for example, by central banks and capital markets authorities.
Another basis for achieving this alignment is to reduce the uncertainty and volatility that could result from a poorly developed decarbonisation roadmap.
Investors and capital markets do not take kindly to organisations revising their decarbonisation plans and commitments, which are often the result of misalignment between on-the-ground realities and the strategies laid out in their strategy documents. Other benefits include proactive stakeholder engagement and building trust with stakeholders.
Organisations should understand and consider their societal priorities as they prepare their decarbonisation roadmap.