We are all vulnerable to the projected impacts of climate change. We have to act now before it is too late.
Our analysis shows that achieving net zero emissions in line with the Paris Agreement will require a five-times increase in the rate of decarbonisation every year.
The Irish government introduced the Climate Action Bill in March 2021. It’s ambition is to achieve net zero carbon no later than 2050. Under this bill, carbon budgets will be introduced. They will place a ceiling on carbon emissions in sectors within the economy. This will have a widespread impact on companies, their business models, their strategies and their requirement to set and report on targets.
What factors does your company need to consider if it also wishes to achieve net zero goals?
Due to widespread acceptance of the Paris Agreement, nearly all countries have committed to reduce their emissions, work jointly to adapt to the impacts of climate change and to strengthen their commitments over time.
The European Union (EU) has been a leader in global efforts to fight climate change and aims to be climate neutral by 2050, i.e. an economy with net zero greenhouse gas emissions. This will have knock on impacts for EU Member States requiring them to set their own targets within this context.
As a result of this Ireland has introduced the ‘The Climate Action and Low Carbon Development (Amendment) Bill 2021’. This will set out a framework for Ireland to establish clear targets and commitments and place them on a statutory footing. The bill legally requires the Government to adopt a carbon budget to achieve the national climate objective. This will result in sectoral emissions ceilings and related carbon budgets. Actions for each sector will be detailed in the National Climate Action Plan which will be prepared every five years.
The Government has invited public consultation in setting the Climate Action Plan for 2021 with a closing date of 18 May 2021.
All companies whether large or small, private or public, will be expected to play their part in contributing towards a lower carbon economy.
While we await the finalisation of the Climate Action Plan, it is in the best interests of companies to consider how they will be impacted, both directly and indirectly, by climate change and the government response. Companies will need to better understand both the risks and opportunities that this presents.
These impacts may be financially material and may also necessitate significant changes to your fundamental strategy and business model. Strategies, policies, internal control and reporting systems may need to be revised.
Many firms are committing to net zero targets with a view to becoming leaders and advocates in the fight against climate change. If considering when to set net zero targets it is important for firms to understand what their competitors are doing and how they are positioned relative to them.
Each organisation should begin by establishing an ambition to achieve net-zero. It should use science-based targets and cover the full value chain.
In setting that ambition, it is important to engage with stakeholders to establish what their needs are. It is also useful to benchmark against industry peers to understand your competitive position.
A target date for achieving your climate goals should be set. In the context of the ambitions of the Irish government, this should be no later than 2050.
Do you understand what the risks and opportunities regarding climate change are for your business?
Climate change brings uncertainty. Companies need to consider and understand how their organisations will be impacted by different future climate scenarios.
The Intergovernmental Panel on Climate Change (IPCC), the Task Force on Climate-Related Disclosures (TCFD) and the Science Based Target Initiative (SBTi) provide frameworks to explore these different scenarios. Companies can refine these scenarios when assessing their resilience and readiness against the impacts of climate change.
Do you have all the relevant information and data required for impact assessment and if not, how will you capture and analyse your material issues?
The first step on establishing net zero commitments is to establish a carbon emissions baseline.
A starting point is to understand the total emissions of the company. What are your largest emissions sources in terms of Scope 1, 2 and 3 as defined by the Greenhouse Gas Protocol, Accounting and Reporting Standard?
Once the baseline is established, companies should set science-based targets to decrease carbon emissions.
It is important to understand the risks and opportunities resulting from these targets. You must develop actions to mitigate and adapt to the identified priorities. Which risks will your business action first? How will the business ensure that the actions are coherent with strategy and with international initiatives?
Set long and short term targets, and create achievable milestones for your net zero journey.
Strategies should be reviewed to ensure their full alignment with your net zero ambition. This will require decoupling the business from carbon intensive assets and activities. You need to move towards climate-related opportunities while at the same time ensuring sustainable growth.
How will your net zero targets be integrated into strategic planning and risk management frameworks within the business?
Do you have the right governance frameworks in place to drive developments? Have the relevant change agents been identified for your business and tasked with delivering on these commitments?
Have you the right skill sets in place and have you mobilised your resources to deliver on your climate action plan?
Are there any industry initiatives or collaboration opportunities which your firm could engage with?
Determine how best to report your performance against targets. Will your business utilise a reporting framework such as TCFD or Global Reporting Initiative (GRI)?
How will you communicate with customers and stakeholders?
How will you ensure the accuracy and credibility of your reporting? Appropriate assurance of reporting, commensurate with the criticality of this data to your stakeholders, should be considered.
As pressures mount to reduce carbon emissions across the economy, we know the challenges you face. We are ready to help you as you face the future. Contact us today.