As the world grapples with the urgent need to combat climate change and achieve the goals set by the Paris Agreement, a new report by Zurich Insurance Group and global insights agency Horizon Group sheds light on the progress and challenges faced by businesses in their journey towards net-zero emissions.
The report, titled “Accelerating the Climate Transition: Long-term thinking for near-term action,” draws attention to the alarming fact that the globe is falling short of the Paris Agreement targets, with the potential for global warming to surpass 1.5 degrees Celsius by as early as 2040.
The associated risks of climate change are growing exponentially, as emphasised by Lars Henneberg, VP and Head of Risk Management at A.P. Moller-Maersk, who stated that “the average cost of physical damage and business interruption due to climate change hazards is expected to increase by 130% by 2050, compared to a 2020 baseline.”
The report is based on insights gathered from the Sustainability Executives Survey, which involved 668 executives responsible for sustainability within their respective companies.
It reveals that businesses worldwide are committed to achieving net-zero emissions and are actively working on short-term transition plans. However, they encounter significant hurdles in this endeavour. The primary obstacle identified, mentioned by half of all surveyed companies, is the high costs and scale of capital expenditure required for transitioning to net-zero.
Other major challenges include the lack of feasible technological solutions, regulatory obstacles, and difficulties in measuring and monitoring the impact of their efforts.
Matt Holmes, Group Head of Political and Government Affairs at Zurich, highlighted the critical role of policymakers in supporting businesses’ climate transition efforts. He emphasised the need for systemic, economy-wide interventions such as carbon-pricing mechanisms, which can leverage capital markets and incentivise innovation and decarbonisation at a large scale.
Holmes outlined three priorities for government action: creating policy certainty, facilitating investments in mitigation and adaptation, and fostering innovation.
The report’s additional key findings highlight the varying degrees of commitment and readiness across industries in the race towards sustainability. Notably, 77% of surveyed companies have taken proactive steps by establishing active net-zero transition plans, demonstrating a significant collective effort towards reducing carbon footprints.
However, a concerning trend emerges in the transport sector, where only 37% of companies have formulated net-zero plans, signaling a need for accelerated action in this crucial industry.
Furthermore, the report shows that 85% of companies are gearing up to implement climate adaptation measures within the next five years, indicating a growing awareness of the need to prepare for the impacts of climate change.
Heavy manufacturing leads the way in adaptation initiatives, underlining the sector’s proactive stance, while the agriculture sector is progressing at a comparatively slower pace, suggesting the need for more concerted efforts in this field.
Importantly, the report highlights the pivotal roles played by management boards, investors, and regulators in advocating and driving the essential net-zero actions within companies, emphasising the interconnectedness of business, governance, and environmental stewardship in tackling the climate crisis.
