With the SEC seeking input on new climate financial disclosures and activist shareholders at the big oil and gas companies demanding reductions in carbon emissions, many companies are taking climate change seriously. Nowadays, If your company doesn’t have a climate plan, it doesn’t have a viable business plan according to CEO Steve Fechheimer of New Belgium Brewing.
In this context, it was heartening to see a new research report published by GreenBiz and Black & Veatch on how corporations are setting and measuring their sustainability goals. Without a realistic, actionable plan in place, companies are either ignoring climate impacts or simply greenwashing.
GreenBiz with partner Black & Veatch conducted online surveys and interviews with sustainability leadership at Fortune 500 companies. The findings are released in the report “Corporate Sustainability Goal Setting and Measurement.”
The good news is that across the globe, more than 9,600 companies disclose their environmental goals and performance measures in line with guidelines from nonprofit CDP.
What are the sustainability priorities of Fortune 500 companies?
Reducing GHG Emissions Goals
Seventy-three percent of survey respondents identified reducing greenhouse gases (GHG) as a key goal. For companies with revenues greater than $1 billion, this percentage increased to 89 percent.
To reduce GHG, 75 per cent of companies are turning to renewable energy but the ability to pivot to renewables depends on a company’s size. For companies with revenues between $250 million and $1 billion, more than 80 percent have renewable energy goals but for smaller companies that percentage was lower.
The vast majority (85 percent) of companies will achieve their renewable energy goals by focusing on “direct emissions from a company’s facilities, plants, and vehicles.” Seventy-four percent will focus on indirect emissions from purchased energy and only 52 percent will focus on indirect emissions from upstream or downstream activities related to consumption and production.
The largest companies (revenues over $10 billion) are more likely to be addressing all three areas (direct, indirect, and upstream/downstream activities) than smaller companies. But for smaller companies in the supply chain, there will be indirect pressure on them to press forward with reducing their own GHG emissions.
Water as a Sustainable Goal
According to the U.S. Census Bureau, “water-intensive sectors like manufacturing use 18 billion gallons of water per day in their processes, and account for nearly one quarter of freshwater withdrawals.” With the U.S. southwest facing a regional drought and water crisis, it is welcome news that water ranked highly in survey respondents’ sustainability goals.
Sixty-one percent of respondents ranked water as a sustainability goal, although larger companies were more likely to rank water highly than smaller companies. For companies with revenues greater than $10 billion, 65 percent ranked water third after reducing GHG emissions and energy efficiency. For companies with less than $100 million in revenue, only 32 percent ranked water in their top five sustainability goals.
Electrifying the Fleet as a Sustainable Goal
Electric Vehicles (EV) are gaining ground in the corporate sector. Over half of survey respondents reported that fleet electrification was part of their overall sustainability strategy. More than half of large companies (revenues $1 billion and above) have established an EV pilot program, while 42 percent are “analyzing operations such as drive cycles, routes, and how much of the fleet should be electrified.”
Even among smaller companies (revenues under $1 billion), 60 percent are reviewing EV technology options, and 40 percent are analyzing operations with the goal of electrifying their fleet.
Leading Sustainability Goals
A company’s senior management is the most important driver of sustainability goals according to the survey. Overall, survey respondents from companies with revenues over $1 billion identified C-suite or management as driving sustainability goals. Likewise, for companies with revenues under $1 billion, 38 per cent of survey respondents said senior management.
The main difference between large and small companies was around investors. Twenty-nine percent of larger companies said investors were primary drivers of establishing climate goals, whereas only 11 percent of smaller companies identified investors. Instead, consumers were drivers of climate goals at 19 percent of smaller companies compared to 10 percent at larger companies.
Strategies to Fund Sustainability Goals
All companies reported using a combination of capital and operational expenditures to fund sustainability goals. Larger companies were also likely to use power purchase agreements (58 percent) compared to smaller companies (36 percent).
A new way to fund sustainability and renewable energy investments is through green bonds. According to the Environmental Finance Bond Database, in 2020, “green, social and sustainability-linked bond issuances surpassed $600 billion, nearly double from the year before. More than 50 bonds raising $2 billion or more were issued in 2020 – up from just 15 in 2019 – and more growth is expected in 2021.”
In the pharmaceutical industry Pfizer was the first company to float a $1.25, 10-year sustainability bond. Using green bonds to finance sustainability goals may become more prevalent in years to come.
Measuring Sustainability Goals Through Data Analytics
To measure the effectiveness of implementing sustainability goals, companies are turning to data analytics. More than three quarters of companies with revenues greater than $10 billion are using analytics to reduce water and energy usage. For smaller companies, more than half are using data analytics.
Overall, 42 percent of respondents strongly agreed that their organization is committed to leveraging data analytics and digital transformation to manage their energy and sustainability programs. One third of respondents said their organization had dedicated a person or team to collecting and analyzing data to meet sustainability goals.
To download the full report, click here.
Whether your company is large or small, has activist shareholders or environmentally conscious consumers, it’s time to set up practical, actionable sustainability goals. Your business strategy depends on it.
Contact SSC for a free consultation.