How to get sign-off for your carbon credit strategy?

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Key Takeaways

  1. Fortunately, companies today are no longer faced with the dilemma of choosing between a financially responsible business model and an environmentally responsible one. These goals can, and indeed should, be seamlessly integrated.
  2. In a survey by Southpole, 69% of respondents believe that C-level leaders, followed by Operations (37%) and Marketing-Communications (34%), played the most critical roles in helping sustainability departments achieve Net Zero targets. — Southpole

What do you need to prepare to get sign-off?

When the time comes to present the net zero strategy and accompanying carbon credit strategy to leadership for sign-off, you need to come prepared for the best chance of sign-off. This should be prepared as a business case, like any other big investment with a company.

In this chapter, we go through the essential steps for preparing a business case and cover the common objections you might get when pitching to executive leadership, like cost concerns, complexity, technological feasibility and stakeholder acceptance.

Checklist for preparing your net zero business case
Ensure you have the following information in preparation for making a business case for a net zero strategy that incorporates carbon credits

Common Objections to Net Zero Business Cases

When presenting a net zero strategy and the use of carbon credits to the C-suite, you might encounter various objections. It's important to be prepared to address these concerns effectively. Understanding these concerns and being prepared with the below remarks, which counter these objections, will help to make a case for Net Zero and Carbon Credits

1. Cost Concerns

The perception that transitioning to net zero is too expensive is usually the first objection, followed by uncertainty about the return on investment (ROI) for sustainability initiatives.

📌 The answer: Enhanced Market Performance through Sustainability Leadership:

  • Consumer Choice Trends: Modern consumers are increasingly inclined towards sustainable products and companies with strong ESG credentials. A study by McKinsey & Co. found that 66% of respondents consider sustainability when making a purchase, with this number rising to 75% among millennial respondents. - Mckinsey & Co study
  • Cost Reductions:
    • Energy Efficiency: Net zero strategies often involve improving energy efficiency, which can lead to significant cost savings over time.
    • Operational Efficiency: Implementing sustainable practices can streamline operations, reduce waste, and lead to overall cost reductions.

2. Implementation Complexity

Concerns about transitioning existing operations to net zero are complex, involving the integration of new sustainable practices into the current business model.

📌 The answer: Sustainable practices are becoming the norm, so act now

  • Enhanced Regulatory Compliance and Anticipation of Policy Changes: By aligning business practices with current and anticipated ESG standards, companies can adapt more smoothly to future policy shifts, particularly in the context of carbon emissions and sustainability goals.

Governments are increasingly integrating ESG criteria into mandatory financial disclosures as part of their efforts to achieve net-zero carbon emissions and contribute to the Sustainable Development Goals (SDGs). The adoption of mandatory ESG disclosures, once voluntary and used as a differentiator, is now becoming a regulatory requirement. - ICF

  • Moreover, investing in carbon credits helps organisations prepare for another regulatory scenario: the likelihood of incurring fines for carbon emissions. Numerous regions have put into effect carbon pricing strategies, including taxes or cap-and-trade systems, suggesting that a worldwide carbon pricing standard could emerge in the foreseeable future.

3. Operational Disruption

There will be fears that net zero changes could disrupt current operations and impact production efficiency or service delivery.

📌 The answer: Innovation and Long-term Competitiveness

  • Driving Innovation: The push towards net zero often requires innovative solutions, which can lead to new products and services, opening up new markets and opportunities.
  • Future Proofing: Companies that move towards net zero are better prepared for future environmental regulations and are less likely to face stranded assets as the world moves away from fossil fuels.
  • Securing Operational Longevity: With increasing regulatory scrutiny around ESG compliance, demonstrating your commitment to net zero could become integral to maintaining your license to operate.
  • Managing Reputation: Failure to meet ESG commitments can lead to significant reputational damage, adversely affecting stock performance and competitive positioning.

4. Market and Competitive Impact

There will be concerns that sustainability efforts might negatively affect the company's competitive position and divert attention from core business goals.

📌 The answer: Strengthen market position through climate action

  • Establishing Climate Leadership: Positioning your company as a climate leader can enhance your brand's reputation and credibility, leading to long-term benefits.
  • Employee Engagement and Talent Attraction: A strong commitment to sustainability can significantly enhance employee morale and attract top talent who prioritise corporate responsibility.
  • Innovation and Market Differentiation: Adopting a net-zero strategy can drive innovation, leading to new products and services that differentiate your business in the market.

5. Stakeholder Acceptance

There might be resistance from employees, shareholders, or customers who may not fully understand or support the net zero transition, raising questions about the effective communication of the strategy and its benefits.

📌 The answer: Strengthening Investor Relations and Access to Capital:

  • A robust ESG framework, particularly with a clear path to net zero, can attract socially responsible investors and improve relationships with existing shareholders, as ESG factors become central in investment decisions
  • Companies with strong ESG commitments often find it easier to access capital, as many financial institutions now favour investments with lower environmental risks.

6. Long-Term Commitment

Apprehension about making long-term commitments in a rapidly changing business and environmental landscape exists, along with questions about the agility and adaptability of the net zero strategy to future challenges.

📌 The answer: Proof in numbers

  • Oner 50% of the Forbes Global 2000 list of the world’s largest companies have made net zero commitment – marking a significant milestone in the global goal to drive greenhouse gas emissions to net zero by the middle of this century. These companies making the commitments are proof of the value in doing so and the long-term commitment is worth it.

Sustainability doesn’t have to come with a hefty price tag. When companies optimise their operations—whether to increase productivity, improve quality, or reduce cost—better environmental performance can be a byproduct. Efficient manufacturing processes and supply chains don’t just cost less to run: they also consume less energy, use fewer resources, and produce less waste. - Mckinsey and Co.

Furthermore, carbon credit investments help organisations prepare for another regulatory possibility: potential penalties on carbon emissions. Several jurisdictions have already implemented carbon pricing mechanisms such as taxes or cap-and-trade schemes, so it’s not far-fetched to anticipate a global price on carbon in the future. By taking the initiative to internally price carbon emissions, your company can proactively prepare for the eventuality of carbon pricing.