A company’s performance can be assessed by how much it contributes to environmental sustainability and the well-being of the community in which it operates. According to Gray et al. (1995), businesses should take their social and environmental obligations more seriously to support the work they have done in these areas. This will assist the company in gaining the community’s trust and support, which will have a positive impact on the community. Furthermore, excellent corporate governance, as promoted by the Institute for Corporate Directorship (IIDC), plays a vital role in the company’s success.
Sustainable-based investment, often known as environmental, social, and government (ESG), is on the rise. ESG highlights the relevance of sustainability in all of the company’s business activities. The practice and application of this ESG score assist investors in making capital market transactions. Investors will look at the company’s environmental performance indicators as evidenced in its activity reports and their influence on the environment, such as carbon emissions, greenhouse gas emissions, renewable energy, and others. Furthermore, the company’s social performance measures, such as environmental welfare and discrimination, are as clear as its governance indicators on stakeholder relationships. Businesses should disclose the findings of these three metrics transparently to prevent risky investments. Therefore, organizations need to pursue this path and integrate ESG into their operations and practices.
Companies’ Benefits and Risks
A vast number of companies and countries throughout the world have now made zero promises. However, many governments and businesses are concerned about an uneven transition to net zero. This will give less time to adapt to, build, or finance the essential green infrastructure and technology. According to the 2022 global risk report, the number one risk over the next decade is the failure of climate action, or physical danger, such as an increase in the frequency and severity of extreme weather. Of course, this erratic transition will exacerbate the risks and have an impact on the company’s ability to conduct business, triggering economic volatility and disrupting the financial system. This is anticipated to have the biggest impact on carbon-intensive industries, their businesses, and the supply chain.
By mid-century, the transition of the global economy to net zero emissions will have high upfront costs. It will require $275 trillion in cumulative global capital expenditures, or about 7.5% of global GDP over the period 2021–2050. The McKinsey researchers state that it will start as a push to net zero, with physical asset spending rising to 8.8% of GDP between 2026 and 2030.
Achieving net zero emissions would probably involve high electricity costs. This will depend on how big the rise is and how long the transition is managed. If businesses do not switch to sustainable energy sources, unchecked climate change could have a negative impact on productivity, economic production, and growth.
Now is the time to act.
The path to net zero is a long and challenging one. There are several advantages for your company and the environment. “Going clean” provides advantages;
- Cleaner and healthier air
- Improve our quality of life
- Protecting the environment
- Mitigating climate risk
- Boost efficiency, cut costs, and promote innovation
- Potentially enhances revenues and profits by supporting clients in decreasing their carbon impact
According to the CDP, businesses could potentially earn $2.1 trillion in economic benefits from pursuing commercial opportunities associated with climate change. These include increased income from the demand for low-emission products and services, as well as changes in customer attitudes. If your business has SBTi-certified science-based objectives, you could highlight to stakeholders that your net-zero ambitions are credible.
