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Business leaders anticipate net zero transition will improve growth
A new report finds that business leaders estimate a transition to net zero could significantly improve annual growth, yet there is concern about sustainability plans being actualised.
Jerome Doraisamy
Global law firm Baker McKenzie’s recently released report, The Race to Net-Zero: Is the global business community on course to beat the clock?, surveyed 1,000 sustainability leaders and general counsel across nine global markets (UK, Germany, France, USA, Japan, Singapore, Mainland China, Hong Kong SAR, and Brazil).
About half of business leaders (51 per cent) expect their organisations to reach net zero by 2030 to 2033, although many organisations are struggling to understand how sustainability commitments will be actualised.
Net zero plans around the globe
Singapore and Hong Kong companies lead the way in the net zero transition plans they have in place. Companies in Singapore (64 per cent) and Hong Kong (58 per cent) indicated that they have a clear plan in place to eliminate the use of all carbon-based fuels, ahead of other markets.
Mainland China follows closely, with 61 per cent of companies having a net zero commitment. Companies in the US, Germany and Japan follow suit.
The challenge of significant upfront investment
Implementing the transition to net zero will require unprecedented financial investment, the report highlighted.
This was seen as a barrier by 70 per cent of leaders, with 58 per cent saying their organisations haven’t allocated nearly enough budget to make a successful transition.
It is predicted that sustainability funding and investment will continue to grow, with Hong Kong being especially well equipped to capture new opportunities.
Greenwashing and the threat of litigation
Organisations face pressure to transition and are eager to share their net zero ambitions with stakeholders; however, business leaders fear that organisations are at risk of setting objectives they are unable to meet.
Organisations face the risk of litigation for failing to take action to reduce their emissions, and at the same time, they see the threat of greenwashing as a barrier to advancement.
Mini vandePol, Asia-Pacific region head of the investigations, compliance, and ethics group, commented on the predicament: “Greenwashing is one of the main litigation and regulatory risks associated with ESG today.
“It is critical that companies address it with strong governance protocols that validate statements and ensure that sustainability and ESG are well resourced and prioritised by boards and management.
“Effective ESG due diligence needs to go beyond a desktop or data room review and should incorporate appropriate transaction testing and management interviews to understand the practical risks in the business operations and supply chain.
“Regular reviews and audits surrounding key areas of ESG risk exposure are also crucial.”
Supply chain transparency
Any organisations seeking to make progress towards net zero must do so in tandem with their suppliers, noted the report.
When faced with the complexity of understanding their extended value chain, many companies feel it is not feasible, and they decide to go it alone.
Only 40 per cent of organisations have started auditing their suppliers, which makes net zero an unviable prospect.
Forty-one per cent of leaders said their organisation had no view of scope three emissions and no plan in place to tackle them.
Aspiration v reality
The research suggested that 49 per cent of respondents were worried about leaders having overpromised, regarding the speed and scale of their organisation’s transition.
Only 49 per cent of net zero transition plans have been rolled out across the entire organisation.
Furthermore, 48 per cent of sustainability leaders believe there is a gap between their corporate ESG strategy, and the aspirations expressed by leadership, in comparison to the reality of what is being done.
6 solutions for progress
Baker McKenzie detailed six solutions that could drive genuine progress.
- Competitor collaboration — collaboration to reach goals across industries, between competitors and along supply chains;
- Improvements in target setting — developing measured, measurable pathways for greenhouse gas reduction, using science-based targets (SBT);
- Industry-wide benchmarking;
- Global harmonisation to create a level playing field, and new regulation in the form of reporting standards;
- Breaking down internal silos — creating an integrated, holistic strategy with connection across departments; and
- Harnessing leaders’ appetite for transformation.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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