In this chapter of Environment Analyst's Corporate Guide: Accelerating your ESG transition, Ricardo's director of energy & sustainability implementation, Dr Daniel Strosnider, offers recommendations on how to embed a net zero culture across your organisation and activities.
Introduction
This is a call to action. Recent research suggests only 5% of FTSE 100 companies have published ‘credible’ net zero transition plans. No matter the size of your company, climate change will disrupt your business systems and affect your bottom line. Forward-looking companies are already implementing their net zero strategies and identifying the transitions they will need to go through to achieve them. The aim is to turn threat into opportunity, reducing risks to their business operations and increasing their resilience and adaptability.
If your company does not have a robust net zero plan and has not started implementing decarbonisation projects, you are missing cost savings and are avoidably damaging the environment. The best time to start on this is now. It’s a cliché for a reason.
A cross-cutting imperative
Achieving net zero is a business imperative, requiring companies to take a holistic and unprecedented approach to their decision-making. The goal of achieving net zero will influence your operations, procurement, HR, sales, sustainability and leadership teams. There are few net zero-related decisions that are made by one team that will not influence another.
When planned for effectively, your company’s net zero transition will help to protect the business from the impacts of climate change; demonstrate sustainability leadership; satisfy your investors, clients and employees; minimise the disruption to your operations; and improve the resilience of your supply chain.
It will also reduce your energy bills, increase your adaptability to future legislation, and provide you with a market differentiator. In short, it will reduce business risk, and so will inevitably reduce costs, in the short and longer term.
Improving the sustainability of your business is much more than reducing your carbon emissions. Carbon is high on the agenda, given its ever increasing costs, but other topics cannot be ignored.
Implementation challenges
Of the private sector businesses that have set ambitious net zero strategies, many are finding it difficult to embed these strategies throughout their decision-making processes and operations, and to implement real change
One of the most common challenges faced when integrating and operationalising net zero is that companies don’t know what they don’t know.
With so much at risk in terms of future investment, cost and reputation, companies need to be confident that they have all the facts. What works in healthcare may not be relevant for manufacturing. Ricardo has worked alongside automotive original equipment manufacturers, airports, airlines, healthcare providers, manufacturers, chemical companies and in many more sectors, to set the direction of travel they will follow for the next 20 years on their journey to net zero.
As an environmental and engineering consultancy, Ricardo operates across the full value chain, advising clients from policy to strategy through innovation to safe implementation. The strategies we develop for clients are pragmatic and achievable, and remove the risk associated with embedding and implementing a net zero culture within a company, and accelerating long-term climate ambitions.
We have also worked with the UK’s Climate Change Committee to provide an independent and critical assessment of what best practice looks like in transition plans, and the importance to business of transition. This work has further enabled Ricardo to provide sector-tailored, detailed and costed implementation strategies for achieving net zero commitments that reduce risk and increase business resilience.
The approach to net zero
There are two phases to implementing your net zero strategy: Plan and Deliver. Ricardo understands what is needed to deliver change, so knows how to plan for this.
Plan
In planning a net zero strategy, data is key. We help clients identify data gaps, look ahead to what might influence emissions going forward, and also test their understanding of sustainability impacts across all areas of the company. We prioritise key areas for action and develop robust implementation plans to drive execution and engage stakeholders. Identifying quick wins is essential. LED lighting, solar PV, submetering, controls and sustainable procurement are a must.
You can start delivering, while you are planning. Another cliché: don’t let perfection be the enemy of the good. Start with quick wins now, even if you don’t have a strategy. Demonstrating action and benefiting from this will rally support for more complex initiatives, such as your supply chain, the materials you use and changes to your operational processes.
Companies seeking to embed and implement a net zero culture need to build and maintain strong governance. A broad range of stakeholders from across your company must be involved in ensuring your journey to net zero is a success. Some of our multinational clients estimate it might take three years to embed transition plans across their portfolio, but we don’t let them stand still to wait for this to happen. We help prioritise specific jurisdictions, or cross-border solutions.
We ensure your company’s governance structure is designed around key principles of accountability, transparency and participation. Securing the requisite investment does not happen overnight, but planning the next board meetings, when the finance committee will meet next and when shareholders need to see financial and non-financial disclosures can help the plan filter through to (and streamline) the operational level decision-making process.
Deliver
Investors, regulators and consumers are demanding that businesses move on from talking and planning to implementing their net zero strategies, and make demonstrable progress towards net zero and other sustainability goals. The role of a consultant like Ricardo is to complement in-house capabilities and experience with technical and sector expertise and knowledge, working alongside a company’s procurement teams, engineers and decision-makers to accelerate change.
Undertaking a feasibility study is an important early step and can form the foundation of project implementation. The study will identify and limit associated risks, opportunities, costs and savings in implementing each net zero initiative. It will also help analyse the viability of identified technical or infrastructure solutions — and can evaluate changes in processes and procedures; the outcomes; payback periods and likely return on investment.
Ricardo’s breadth of technical expertise includes energy, circular economy, transport, water and wastewater management. Our teams can test the feasibility of all options; identify and mitigate risks; and define the implementation routes. We can also support functional changes across procurement, process improvement, product design and life cycle assessment.
We recently provided an airline client with an estimate of the capital expenditure needed over the next three years, which helped them determine the required team structure to implement these projects.
Our approach to implementation is to work with your business to bring about change safely and effectively. For infrastructure projects, this means coordinating designs, developing a procurement specification, engaging the supply chain, completing an Environmental Impact Assessment and overseeing the construction, engineering, installation, certification and maintenance of new technology at a client’s site.
For process change, this means shaping and guiding the progress of behavioural shift within a company so that net zero culture is successfully embedded.
Taking the first element: safely implementing new infrastructure has specific challenges. Imagine, for example, that a manufacturing or automotive company is seeking to implement a new heat pump heating system or communitybased energy generation schemes in order to reduce emissions and deliver on the circular economy.
A key question we might pose is: will the proposed project provide the energy savings and cost assurance to get sign off to progress? Answering this question requires coming up with technology specifications, budgets and costs, and regulatory agency input, to develop the business case and get board approval.
Once the project gets the green light, we can provide expert procurement support and make sure that a client’s tender exercise is robust enough to get the right price and construction input, and most importantly, that the price meets the proposed specification.
For a recent 50MW battery storage project, we developed a technical specification and evaluated multiple tender responses. By reviewing the tender submissions for our client (a large renewables developer/funder), we were able to confirm the submitted price and technical solution met the required specification, which gave our client commercial confidence and reduced overall risk to the project.
The majority of public and private sector organisations do not have internal expert teams managing multi-million pound energy project projects or complex multi-stakeholder group social value schemes. Consultants like Ricardo can support companies with decarbonisation infrastructure projects across solar, wind, hydrogen, storage, heat pump, heat network and many more technologies.
We can also support softer initiatives, such as process and design changes or behavioural shifts, to embed net zero culture within a company. A key element of a successful cultural shift is making the transition relevant to the individual stakeholder, using relatable language for a particular role. Not everyone relates to the term ‘net zero’ but they might get it if you break it down to what it means for them.
Net zero strategy implementation can be incentivised within a company to drive positive change. The consideration is: how are different parts of the business incentivised to act? One example is setting an internal carbon price, and designing the pricing mechanism. This requires a company to think through business drivers and processes.
Conclusion
Successfully embedding net zero culture within a company requires a client to take the following practical actions:
- Look to the future. Changing policy and legislation, and rapidly evolving technological innovation highlight the importance of being forward-looking.
- Keep track. Especially with big budget, complex programmes, the importance of tracking progress against corporate goals and targets and course correcting or adapting cannot be overstated.
- Listen. Actively ‘crowdsource’ ideas, insights and feedback from all key internal and external audiences and stakeholders. A business’s own net zero community – whether that is employees, clients, investors, suppliers – will more often than not provide the most useful actionable insights.
- Work together. Embrace diverse teams and share knowledge. Achieving net zero depends on collaborating, connecting, always learning and sharing ideas. Different perspectives and diverse thinking deliver the best ideas.
- Drive positive engagement. Make the transition relevant to the individual stakeholder, using language that is instantly understandable and meaningful for them or their role. Companies should also consider incentivising net zero implementation, with relevant strategies for different parts of the business.
- Continuously improve. Be curious and questioning, act on evidence and push boundaries. Companies that are realistic and open about their progress can adjust approaches if they need to.
Pathway to success
Integrating and operationalising a net zero strategy will require a comprehensive transformation impacting all areas of your business. Reaching net zero is a complex task and a long-term journey, requiring commitment and focus for decades.
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This chapter of Environment Analyst's Corporate Guide: Accelerating your ESG transition was kindly authored by Dr Daniel Strosnider, director of energy & sustainability implementation, Ricardo (www.ricardo.com/net-zero).