Promising signs of change despite disruption caused by the pandemic
This year marks the start of a crucial decade in the fight against global climate change. Based on the Intergovernmental Panel on Climate Change (IPCC) report on 1.5 degrees, we now have less than ten years remaining to avoid the most catastrophic impacts of climate change. So, as 2020 draws to a close, we reflect on what has undoubtedly been a surreal and challenging year, but ultimately a positive one for corporate sustainability and climate action.
Conscious consumerism and growing awareness on sustainability
In 2019, student and activist climate protests, spearheaded by Greta Thunberg, elevated public concern about global climate change to new heights. The call to act on what is now considered the climate crisis spread across all popular culture platforms: Coldplay cancelled their gigs until they could find a carbon-neutral alternative; many major music artists such as Justin Bieber, Ed Sheeran and Ariana Grande released new music for Earth Day with a strong environmental message; London Marathon used plastic-free water capsules; 150+ fashion brands signed the G7 Fashion Pact: and even Banksy is rumoured to have painted Marble Arch during the Extinction Rebellion protests.
The storm of environmental movements in 2019 set the precedent for 2020. A survey undertaken by IBM and the National Retail Federation found that nearly 60% of respondents would pay a premium for products from brands that are environmentally responsible. Thankfully, although the global pandemic has kept us all at home, we have seen a surge in low-carbon products entering the marketplace. While there is still some way to go before low-carbon technologies are in every household, there has certainly been a step change in the breadth of products available.
An increasingly high proportion of adverts on TV are for climate-friendly products, from biodegradable baby wipes to state-of-the-art electric vehicles. The rise in ‘green’ products is an indication that companies are now embracing sustainability as a core aspect of business strategy. Furthermore, the Covid-19 pandemic is demonstrating first-hand, the very real risk of climate-related impacts on company performance. As a result, companies are now seeing engagement on Environmental, Social and Governance (ESG) issues as business critical. Indeed, EcoAct have seen a significant increase in the level of C-suite involvement in climate and sustainability-related projects undertaken.
Greater disclosure on sustainability in 2020
In January 2020, the World Economic Forum released the 15th edition of their Global Risks Report. For the first time in its history, the top 5 risks related to climate and the environment. Consequently, we have seen investors increasingly making good on their promises to hold businesses accountable for their climate actions. Companies now face scrutiny on two fronts, with both consumers and investors demanding transparency of environmental impacts and proposed action. The good news is companies seem to be rising to the challenge.
This year, more than 9,600 companies participated in CDP, a 17% increase since 2019. EcoAct supported an increasing number of clients with their 2020 CDP disclosures, many of whom informed us that investors had approached them regarding the quality of their environmental disclosure. The 2020 CDP results, released on 8th December, revealed that many of EcoAct’s clients achieved the highest-level score, demonstrating their leadership in addressing climate risks and contributing towards a low-carbon future.
The increase in the quality and quantity of CDP disclosures this year is indicative of the influence that investors have on the progression of action on climate change. Their contribution to the societal transition to a Net Zero, climate-resilient economy will help towards reducing the ever-widening climate risk protection gap – the growing divide between economic and insured losses – across business activities.
2020 also saw the Task Force on Climate-Related Financial Disclosures (TCFD) gain further traction, with more than 1000 companies publicly declaring support for the TCFD and its recommendations. EcoAct’s latest research into the Sustainability Reporting Performance of the FTSE 100 revealed that alignment to TCFD increased from 37% in 2019 to 56% in 2020. TCFD reporting allows investors to gather climate-related data from firms and manage potential risks associated with transitioning to a low-carbon economy.
Therefore, while currently voluntary, the increase in investor pressure mean companies should all now be reporting decision-useful climate-related information in their annual report. Consequently, in November the UK became the first country in the world to mandate economy-wide disclosures in line with the TCFD by 2025.
The uplift in climate-related disclosures in 2020 is promising progress given the growing urgency of the climate crisis and need for concerted action.
The height of ambition – Net Zero
This year has also seen greater commitment to achieve Net Zero. According to science, it is essential that we meet this target by 2050 if we are to give ourselves a chance of limiting global warming and avoid the most catastrophic impacts of climate change.
In 2019, the UK announced its commitment, along with 124 other countries to become Net Zero. Since this announcement, over 230 companies have committed to Net-Zero emissions as part of the Business Ambition for 1.5°C campaign, led by the SBTi. With less than 10 years remaining, the uptake in Net Zero commitments is reassuring. However, EcoAct’s research found that while 45 of the FTSE 100 are committed to Net Zero by 2050, but only 16 have a strategy to realistically meet the commitment. This is a 30% increase in pledges companies to last year inspired, in part, by the UK’s Net Zero commitment, but also by the controversially disruptive climate protests and student strikes in the UK throughout 2019. However, to achieve Net Zero, companies must have a robust strategy and rapidly embrace transformational change.
In February 2020 EcoAct released their AtoZero programme designed to guide businesses and organisations planning for a Net Zero future and provide inspiration that ambitious climate action is both possible and good for business. Since its publication, the document has been downloaded over 2,000 times. This is a positive indication that people, companies, and organisations are engaged with our Net Zero ambition.
While there is a major challenge ahead, it is encouraging to see more companies demonstrating the ambition to achieve Net Zero and, in the process, build a business more resilient to future crises. If the current pandemic has given us anything, it is an opportunity to reassess our ways of working and proof that collective action in the face of unprecedented challenge is possible.
Let’s make 2021 the year of action on climate and sustainability
Despite the coronavirus pandemic dominating 2020, pressure on companies to act on climate change and think about sustainability has never been higher. The general public, consumers, and investors are now all well informed and are increasingly holding organisations and their environmental claims to account. As a result, low-carbon products are rapidly becoming the new normal as companies adapt to the increasingly climate-conscious market. Crucially, we have seen companies taking greater responsibility for and improving transparency of their environmental impact.
However, while 2020 has been a record year for environmental disclosure, in 2021 we must see companies and nations making more rapid advancements towards Net Zero. Current progress towards achieving the targets outlined in the Paris Agreement is falling short. However we remain cautiously optimistic that the recently announced UK target will encourage national leaders to step up. We hope to see companies continuing to move forward despite the current lack of global cooperation, and make 2021 an even bigger and better year for action on climate change.