The role of CEOs in the transition to Net Zero

Tranziția la Net Zero

The role of CEOs in the transition to Net Zero

On the other hand, for many years, commitments have been made at the state and company level to reduce carbon dioxide emissions. Capital markets include the risk of increasing CO₂ emissions as a factor for investors in setting the prices of traded assets, and the transition to Net Zero is the most talked-about goal.

Why? Because COO emissions are still generated, but are offset by the same amount elsewhere. The total net emissions are then zero.

Most national and international climate goals aim to reach the Net Zero target by 2030 or 2050. To achieve this, emissions must be reduced, and emission compensation measures are also absolutely necessary to achieve these goals. It is clear to executives that the transition of companies from zero to zero CO₂ pollution is not easy, but it is possible if they take into account the following five factors.

Net Zero emisii de carbon

Risk management

There is a very real risk to the affordability of the costs and effects of the transition to Net Zero for many companies in the absence of compensatory measures. For example, companies need to understand the new behaviors of consumers informed about the sustainability and impact of production technologies on the environment.

CEOs also need to know the impact of the costs of transitioning to Net Zero on existing products and services. Another aspect is how communities are supported so that they are not left behind by changes in the labor market as the world moves to an economy that focuses on Net Zero emissions.

There is also a risk that the transition itself will be missed if not enough capital is allocated to acquire new, low-emission assets or to responsibly withdraw high-emission assets from CO₂.

Overcoming work stereotypes 

Achieving the level of Net Zero emissions will require overcoming traditional ways of working and building new ways of working that will expand transparency and collaboration between companies in the same industry, but also between different industry sectors.

The constructive actions taken during the pandemic have demonstrated the world’s ability to innovate and intervene on a large scale to support both lives and livelihoods. This challenge of achieving Net Zero emissions will require similar efforts, albeit sustained over many years, even decades, and on a much larger scale.

Adaptation and resilience

Due to the inertia of our geophysical system, a certain amount of heat is already stored in the atmosphere, even with the measures provided to reduce CO₂ emissions. Countries and companies should therefore significantly strengthen and accelerate their efforts to adapt technologies and measures to mitigate the immediate harmful effects of climate change.

According to a World Economic Forum report, the benefits for companies taking rapid action for Net Zero are immediate and consistent: attracting valuable employees becomes 40% easier, the annual compound growth rate increases by 4 to 25 percentage points from product sales green, and financing costs are declining.

analiza financiara corporativa

Stakeholders’ contribution

As specific actions evolve over time, all stakeholders must decide to start the transition now. From simple employees to leaders, everyone needs to be involved in this transition, understand the scientific elements, and take steps to: risk assessment and design emission reduction plans.

Other measures include to conserve and regenerate natural capital, adapt and build resilience, reallocate capital and responsibly reduce high-carbon operations, doubled by the expansion of low-carbon operations, as well as the involvement and positive influence of investors, customers and suppliers.

In conclusion

There is no single solution to the challenge of reducing CO₂ emissions, but a lot of elements to consider individually and together.

Achieving the Net Zero CO₂  emissions target by 2050 is estimated at an annual expenditure of EUR 9.2 trillion for physical assets in the energy sector, EUR 3.5 trillion more than the current level of expenditure.

Economic and social, infrastructure and governance and institutional adjustments will play a key role in the success of this necessary transformation.