Almost a third of businesses globally failed to deliver against decarbonisation targets set for 2020 when it comes to ESG, said Bain & Company.
Bain’s analysis of data from CDP, a non-profit that runs the world’s largest environmental disclosure system, shows that 31% of businesses who set and published scope 1 and 2 absolute emissions reduction targets* due in 2020 did not meet them.
More than a quarter missed decarbonisation targets by a substantial margin—below 80% of their target, Bain pointed out.
According to the firm, many companies are struggling to match ambitious pledges, which also include more complex-to-tackle scope 3 emissions, with effective action.
According to the research, a post COP26 surge in environmental target setting has driven a fourfold increase in the number of science-based targets being submitted to the CDP.
Bain said it found that the number of organisations who have committed to science-based targets has almost quadrupled from 775 in 2020 to 2843 in April 2022.
However, there remains a stark global divide when it comes to this aspect of ESG.
The majority (57%) of science-based commitments to date come from businesses in EMEA, with 19% coming from the Americas and 24% coming from Asia Pacific, Bain noted.
“2021 was a year of ambition setting catalysed by COP26. In 2022 the focus is shifting to delivery against the ambition and monetising low carbon leadership with customers in order to be able to reinvest in the topic” said Torsten Lichtenau, Senior Partner leading Bain & Company’s global Carbon Transition Impact Area.
The five steps: Bridging the gap between ambition and action
While businesses leaders have been bold in setting ambitious targets, their roadmaps to full delivery are still unclear and highly challenging, said Jenny Davis-Peccoud, co-leader of Bain & Company’s Sustainability & Responsibility practice.
“Successful leaders bring together what we call ‘dreamers’ and ‘doers’ in their executive teams to get to pragmatic solutions to visionary goals, steering toward net zero even through the macroeconomic and political turbulence in which we find ourselves,” she noted.
Bain outlines the following five steps companies can follow to bridge the gap between ambition and action.
Put a premium on strategic adaptability. Companies need to be aware of the direction of travel, notably in the regulation and technology spaces to inform the living strategy.
Proactively address investor dissonance. Executives need to strengthen the investor dialogue, focusing on strategic clarity to address the company’s green ambition and its growth and return aspiration.
Decarbonise customer-back. Companies should start decarbonisation with the customer in mind and work backward across offerings, operations and the supply chain.
Collaborate where it matters. The carbon transition must be tackled by engaging the wider ecosystem of customers, suppliers, peers, governments and civil society.
Create “net zero heroes” in middle management. Organisations must upskill employees to create an effective green middle management by being clear on what decisions to make and how to resolve trade-offs when they occur.