Preparing to take action by understanding the impact and urgency of climate change

Climate action refers to the steps and initiatives taken to mitigate and adapt to the adverse effects of climate change. For corporates, it encompasses a broad range of measures, from deploying energy efficiency measures to shifting to sustainable business models or switching to low carbon alternatives, such as renewable energy.

Supporting climate action is key to limiting the implications of climate change. While there are different impact projections for climate change, the current warming projections of the Swiss Re Institute state that if current trends persist, water levels will continue to rise, along with food insecurity, extreme weather events, and the devastation of ecosystems. As a result, the Institute projects a 11-14% decrease in global GDP by 2050 in the likely range of global temperature increase, compared to a future without climate change (1).

Climate change quick facts

• The decade spanning 2010 and 2019 witnessed the highest level of emissions compared to any other decade in human history (2)

• Global greenhouse gas (GHG) emissions must fall by 43% by 2030, compared to 2019 levels, to limit global temperature rise to below 1.5°C (3)

• Human activity has already resulted in at least 1.1°C of global warming, and at the current rate, we will likely cross the 1.5°C threshold in coming years (4)

• Nearly half of the world’s population live in a climate impact danger zone where lives and livelihoods, as well as property and critical infrastructure, are under threat from more frequent and intense extreme weather events, such as flooding and drought, as well as more gradual changes, such as sea level rise (5)

• Scientists are now voicing their concerns about irreversible tipping points for Earth’s systems if warming rises above the 1.5°C threshold (6)

Limiting warming requires rapid and aggressive emissions reductions across all economic sectors to stay within planetary boundaries (7). The nine planetary boundaries describe the limits within which humanity should operate without straining planetary and environmental systems up to and beyond their abilities to self-regulate. By committing to Net Zero (reducing emissions as far as possible: 91-95% by 2050 and then removing the remainder) your company can participate in and help lead this transformation, which ultimately involves significant challenges. BCG research shows that more than half of all business transformations fail to deliver the planned impact (8). Thus, effective preparation and execution will be needed to successfully bring about net-zero operations at your company.

Additionally, becoming a climate leader can benefit your company through improvements to growth, cost savings, risk exposure and resilience, access to cheaper capital, talent, and overall value.

Preparing for climate action

Building the case for climate action, understanding your organization’s market position, defining your ambition, and optimizing your organization for climate success are all essential to prepare for a net-zero future. Let’s walk through four key steps to prepare your organization for a successful climate transition:

• Step 1: Build the case for climate action

An effective climate strategy begins with building the case for climate action. Recognizing that climate risks and opportunities directly impact a company's bottom line, resilience, and reputation, it becomes imperative for businesses to act. This not only ensures long-term profitability and competitive advantage but also meets the growing expectations of customers, investors, and other key stakeholders who prioritize sustainability. This requires envisioning climate-related opportunities, an often underappreciated yet essential facet of the net-zero journey. Then, you should assess climate-related risks, including global regulations and initiatives, supply-chain vulnerabilities, as well as industry-specific investor pressures relevant to your organization, customer implications, etc. You can then begin to address your organization’s risks and opportunities, using a scenario-based approach to assess future options and navigate the path forward.

• Step 2: Assess the state of sustainability in your company and industry

Another key input determining your company’s climate actions is its relative position among peers. You can conduct a materiality assessment to enable you to gauge the impact of sustainability factors on your company and its stakeholders. You can also use industry trends and hotspots as a benchmark for your company’s climate performance and identify best practices among your peers. These inputs can then help you assess which emission reduction practices may be feasible or challenging, which practices are tried-and-true versus more cutting-edge, and what the risks, trade-offs, or demonstrated benefits of each might be.

• Step 3: Define your climate ambition

A successful climate transition requires a clear articulation of your company’s ambition – informed by considering why you are taking climate action, what is important to address, and how to do so by bringing together inputs from the first two steps. Central to this is alignment of the company's intrinsic values and commitment of the C-suite. This step will help determine your company’s level of climate ambition. Credible, externally verified targets, like Science Based Targets (SBTs), will eventually be necessary to define your ambition, a topic covered in depth in Guidebook Chapter 3: Set target.

• Step 4: Optimize your organization for climate success

Once you have defined your ambition, it is critical to ensure accountability and ownership to drive toward that level of ambition. You will need to mobilize key stakeholders across your organization and communicate your climate ambition effectively to internal and external stakeholders. You will also need to define roles and responsibilities, establish some governance structures and processes, and begin implementing other enablers, including updated internal data systems, to support and track your climate journey.

Figure 1: Summary of Prepare chapter structure.

• Learn more: Build climate abilities

A successful climate transition requires the right talent and expertise. We foresee three phases of development as a company matures in the climate space, with distinct talent needs at each step along the journey: (I) Mobilize will involve establishing a core group of climate leaders; (II) Embed will see your organization integrating climate skills widely and deeply; and (III) Accelerate will involve strengthening and retraining your climate talent pool. Additionally, you can consider methods to upskill stakeholders outside your organization, including suppliers, partners, and customers.