Memo to CEOs: It’s Time to Commit to Net-Zero.

  1. From a self-interested point of view, if you step up and lead, you and your organizations will be well rewarded.
  2. From an environmental point of view, if your organizations engage fully, it will make a big difference in society’s efforts to reach critical goals.

Could The Glass Be Half Full?

But Do We Know What to Do?

What’s a Net Zero Economy?

What does a net-zero economy look like?

  1. The electrification of everything that can be electrified (home and building heating, stoves, cars, etc) and all of the electricity needed comes from renewables.
  2. An enormous build-out of new infrastructure. Envision huge expansions in wind, solar, transmission lines, EV charging stations, and so on.

Why do we need business to take the lead?

  • Business can move faster than policymakers. The policy outlook is improving, but too slowly. Business can help us get everything moving now before it’s too late. Continued delay is very costly.
  • Business can demonstrate the upside. The path forward is one with huge economic opportunity and important win-win outcomes like better human health, protection of biodiversity, and — done right — greater environmental justice.
  • Business knows how to be cost-efficient. People sometimes assume getting to net-zero is an overly expensive endeavor. But done right, it’s not. And it’s far cheaper than the cost of doing too little. Society should earn very high returns on its investment in net-zero. But execution really matters. That’s one place where business can help a lot. It’s critical that we move forward in the lowest-cost way. Otherwise, high transition costs will hurt — especially for people who are less well off. That would be a bad outcome that also makes the politics more difficult.
  • Business leaders can credibly make the case for job growth. Again, consider the Princeton study and just think about how many high-quality new jobs are on offer here. Far more than are lost by canceling pipelines, for example.
  • Business can push policymakers. We’ll need regulatory frameworks and government funding that enables this transition. We’ll need quick permitting of new infrastructure; ambitious R&D programs; green federal spending (think EVs, for example); and regulations that crackdown on carbon polluters. Business knows how to lobby the government for the measures we need.

But what’s in it for you, CEO? Why should you take this on?

  • Larry Fink and other titans of the investment world downgrading or dumping your stock. Over time, ESG-themed investors will have more capital to deploy and greater determination to shun climate laggards.
  • Important corporate customers like Walmart and Apple insisting that suppliers also commit to net-zero plans, in accordance with their own ambitious climate commitments. Get in line, or they’ll drop you.
  • Your insurance coverage being dropped or repriced. Insurers under pressure to rethink their business models to minimize climate risk and to comply with investor demand for climate commitments (see here).
  • Activists naming and shaming you, or worse, leading a boycott against you.
  • Recruiting and retaining great employees. Growing numbers of climate-concerned employees want positive action from their employers.
  • Having to play catch up as old ways of doing business become obsolete (consider internal-combustion suppliers to GM) and climate-misaligned capital investments become stranded.
  • Regulators requiring such steps eventually. It will be lower cost and lower risk if you start now.
  • Ecological collapse, as this is not so good for business.
  • And your legacy being as “one of the CEOs who resisted addressing climate.”
  • Review the Princeton plan again. Don’t you see a huge number of new opportunities for top-line growth? And don’t you expect pursuing them will lead to more?
  • Given investor focus on climate, expect higher valuations for businesses that are on their way to being net zero-aligned.
  • Worried about recruiting and retaining great employees? The workforce today cares more than ever before about working for firms whose values align with theirs. This is especially evident in connection with climate
  • See Bloomberg Businessweek’s new list of “Climate Billionaires.” It’s a long list. But it includes only one American — Elon Musk. Most of the billionaires are from China. I was surprised when I read the article. Seems like a wake-up call to me.
  • Until very recently, no companies had ever done this before. The companies who will face the most criticism will be those who sit this out, not the ones who earnestly engage now.
  • The long time frame is helpful. On the one hand, there will be pressure to get most of the easier and lower-cost stuff done in the near term — say, by 2030 — but these initial moves should pay for themselves quickly. On the other hand, there will be time to iron out the more difficult challenges as 2050 is a long way off.
  • The first step is to formulate the initial plan — say, for the next 9 years. The Science Based Targets Initiative has guidelines and advice for how best to get started (and there are other good initiatives like this too). If you sign up, your fellow participants will include other companies, financial sector players, and members of the environmental and academic communities. Most of the participants collaborate with one another to determine the best ways to handle the toughest challenges. Grab a seat at the table; be part of the discussion and decision-making.

What about financial institutions?

  • See Blackrock. In addition to issuing letters like Larry Fink’s noted above, BlackRock is overhauling its fund offerings to align with the net-zero world. New products such as climate-aligned index funds will allow for huge amounts of passive money to be invested in a net-zero friendly way.
  • Pension funds are forming coalitions to push for these changes (see the Net Zero Asset Owners Alliance).
  • Global insurers like this one are doing the same both as investors and as risk managers.
  • Banks are finally moving with big names like Morgan Stanley and TD Bank leading the charge.
  • I think PE firms should be doing more, and I think we will see that shortly. It seems inevitable that the funds’ underlying asset owners — the limited partners — will press harder for this agenda. And PE deal teams will also come to understand that net zero-aligned companies will sell for higher valuations.

I’m Not Saying This is Easy.

My Recommendations to CEOs

  • Just get going. It’s not going to get easier if you wait.
  • Be transparent every step of the way. You don’t have to have all the answers, but you do need to “show your work.”
  • Set and disclose interim milestones. Give yourselves and others a way to measure your progress.
  • Don’t overpromise; don’t brag. This is difficult and never-been-done-before stuff. It won’t always go smoothly. Manage expectations. If things go better than expected, you’re in the position of overdelivering. That’s a good place to be.
  • Partner. There’s no need to do this alone. Join industry consortiums, collaborate with NGOs, help others and learn from them too.
  • Engage your constituents. Invite employees, customers, and suppliers to advise you and help.

--

--

--

Former CEO of The Nature Conservancy CEO. “Nature’s Fortune” author. Family man, yogi, ice climber, vegan.

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Communicating Climate Science in Missouri

Lack of clean water is a greater threat than coronavirus epidemic, UN warns

Stop Trying to Convince the Inconvincible

Oil prices hit 3 month highs during week ending June 10

Cheapest Solar Panels

GREEN GROWS HOPE — WE ARE JOINING FORCES WITH KLIMADAO!

Something fishy in the cold chain!

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Mark Tercek

Mark Tercek

Former CEO of The Nature Conservancy CEO. “Nature’s Fortune” author. Family man, yogi, ice climber, vegan.

More from Medium

The Real Estate Pandemic

How Does Inflation Affect the Value of My House?

Why Real Estate is still the King of Investments? — a Preamble

The Imperative to Account for Externalities: Why We Must Bridge the Gap Between Non-Financial and…