ESG: The Race To Achieving Net-Zero

Fatihah Ramzi, DigitalCFO Asia | 25 August 2022

Where is Asia Pacific at in their plan to go green?

The effects of climate change are substantially more severe and manifesting much sooner than expected. Now is the perfect time for business to commit to net zero. The window of opportunity to reduce carbon emissions and keep global warming to 1.5°C above pre-industrial levels is quickly closing. The Asia Pacific area has a significant role to play, not least because it will feel the effects of global warming most keenly on the foundations of its society and economic prosperity.

It was emphasized in the PWC Asia Pacific Time study that cooperation is now more crucial than ever before if the area is to successfully expand a net-zero economy. The added difficulties posed by COVID-19 have further increased the urgency of that necessity. Despite the fact that there have been improvements, many governments in the Asia-Pacific region are still figuring things out and may even be just beginning to prepare their response to climate change and take the necessary steps to live up to public expectations.

Governments cannot go alone on this path, and never could have. Businesses must play a significant part in the effort to reach net zero since doing so is in both their long-term financial and stakeholder interests. Businesses have a duty and a chance to actively contribute to decarbonization.

Every organization must reinvent what is feasible in order to achieve net zero, and then implement an end-to-end transformation of its strategy, operating model, and technology based on that vision. Climate management must be relegated to an isolated Environmental, Social, and Governance (ESG) capacity or treated as an operational afterthought.

Code Red To Go Green

The 2021 Intergovernmental Panel on Climate Change (IPCC) WG1 assessment on climate change was dubbed a “code red for mankind” by UN Secretary-General António Guterres. The report emphasizes how urgent it is to keep global warming to 1.5°C above pre-industrial levels, which is the cutoff needed to prevent the worst effects of climate change.

The overwhelming body of data indicates that present efforts fall well short of what is necessary to keep global warming to 1.5°C and that remaining on the current course will have severe negative effects on the global economy and human welfare for years to come.

It is important to change to net zero. Rapid decarbonization, or the elimination or decrease of absolute emissions from the atmosphere, is required to accomplish this. With a global decarbonization rate of just 2.5% in 2020, up slightly from 2.4% in 2019, the world is currently well below the 12.9% annual pace of decarbonization needed to meet the 1.5°C target. This indicates that in order to stay on pace to limit global warming to 1.5°C, annual global decarbonization must increase to five times its current rate.

The Current State Of Play In Asia Pacific

In contrast to the 2.9% in 2019, the Asia-Pacific region decarbonized at a rate of 0.9% in 2020. The area needs to dramatically step up its decarbonization efforts if it wants to stay on the current 1.5°C track. This will not be simple.

Asia Pacific accounted for 52% of the world’s CO2 energy-related emissions in 2020. The demand for energy will inevitably differ across the region even though the territories are at various stages of development and have very different socioeconomic conditions. Decarbonization will be too sluggish as long as fossil fuels continue to make up a sizable component of the region’s energy mix.

The region is reducing its carbon footprint considerably more slowly than the world as a whole. These problems have been made worse by the region’s increased reliance on fossil fuels over the past 12 to 18 months, which also happens to be the COVID-19 epidemic period.

Government And Business Must Collaborate

Less than 25% of the governments in Asia and the Pacific have a definite net zero commitment. To combat climate change at the required pace and scale, targets, policy, and regulation are essential levers. The COP26 has made it clear that businesses and governments need to work together to bring about significant change. Even if all of the government and industry commitments made at COP26 are fulfilled, the world’s temperature will only rise by 1.8 to 2.4°C by 2100.

India pledged to a 2070 deadline for achieving net zero emissions following COP26. Given that it is the third largest emitter in the world, the vow will significantly affect global temperatures. In order to meet and de-risk the road for a longer-term net zero aim, India’s 2030 targets—500GW of non-fossil fuel capacity and 50% of power to be generated by renewable sources—both call for immediate improvements to the country’s energy sector.

Reimagining Business For Net Zero

Businesses have a duty to hasten the transition to net zero, and they currently have a fantastic chance for green growth. Businesses must act first, act quickly, and act thoroughly if they want to attain net zero. Businesses in the Asia Pacific region have the opportunity to actively guide the transformation and adopt net zero targets.

Change must begin at the top when it comes to how an organization affects the environment. There is no one size fits all answer because every industry and market is unique. Businesses need to reevaluate their strategy, and the path to net zero should start with a new assessment of people, performance, and purpose.

Investments are crucial. The transition to net zero requires creative and long-lasting relationships across all stakeholders, as well as massive and swift public and private investment. Transparency and data are essential. This ought to drive a new governance and reporting structure that unifies decision-makers and fosters trust among all stakeholders.

Companies are rising to the occasion. PWC’s case studies highlight instances of organizations leading by example and bringing about dramatic change as they move toward net zero.