By Deloitte Malaysia
Climate change is one of the greatest environmental challenges facing the world. The constantly growing emissions of greenhouse gases (GHG) have increased the global and annual mean air temperature of our planet.
The latest Intergovernmental Panel on Climate Change (IPCC) climate report warns a 1.5˚C global warming above the pre-industrial level will very likely increase the intensity and frequency of extreme climate events. Achieving the 1.5˚C scenario requires net global GHG emissions to be zero by 2050. It is estimated that we have a 300 GtCO2 remaining carbon budget to achieve the 1.5˚C scenario.¹
Reaching net-zero will require transformative change. Businesses play a vital role in decarbonising the economy. Investing in climate mitigation and carbon transition is likely to yield a significant competitive edge through increased innovation, competitiveness, risk management, and growth.
We share five things to consider when embarking on a net-zero journey:
Carbon footprint accounting
Understanding the company’s carbon footprint and the emission hotspots across the value chain is the first step in taking climate action. The company will need to develop a GHG inventory, accounting for Scope 1 (Direct GHG emissions), Scope 2 (Indirect GHG emissions), and Scope 3 (other indirect GHG emissions).
Align decarbonisation ambition with business strategy
On top of the GHG inventory, consider other climate intelligence such as competitors’ climate action, climate disclosure requirements, and stakeholders’ expectations in the decarbonisation strategy. The decarbonisation strategy should be integrated into the existing business strategy, to complement the company’s mission, vision, and values.
Consider a full range of tools and options, including culture, incentives, and the right management information and structure, to prepare the company’s operations for the transition to net-zero. This will facilitate and drive change internally while playing a role in mainstream disclosures.
Track and disclose progress
Corporates need to disclose and report their actions, strategy, and targets. Clear articulation of decarbonisation plans with progress updates would provide a common ground for stakeholders. The most widely adopted climate-related disclosure is the Task Force for Climate-Related Financial Disclosures (TCFD), which serves as a recommendation guide to corporates on reporting their climate-related risks and opportunities.
Help drive sectoral change
Think about emissions on a system level, and build partnerships to drive change across that system. Individual corporate climate actions are great but real change requires systemic rethinking. Companies can work with partners to drive emission reduction throughout the value chain and consider the whole system as an essential step to create meaningful change.
Climate inaction represents a major threat to global health. Based on Deloitte’s D.Climate Model, climate inaction is projected to cost Asia-Pacific’s economies US$96 trillion by 2070 whereas strong climate action could deliver US$47 trillion to the region by 2070. At Deloitte, we believe in guiding businesses to realise their full potential and to unlock business value. With the right strategy and risk management, businesses will be able to capitalise on climate-related opportunities for long-term gain.
¹ IPCC. 2021. Climate Change 2021 Physical Science Basis Report.