Over the past decade, sustainability has evolved from a peripheral concern to a core business obligation. Consumer demand for greener consumption has forced corporations to develop sustainable products and services. This pressure, coupled with banks conditioning financing on environmental criteria, has driven large companies to set ambitious carbon reduction targets. However, the reality has shown that these goals, while well-intentioned, often clash with the costs and challenges companies face.
Companies worldwide have set targets to achieve net-zero carbon emissions, with deadlines ranging from 2030 to 2050. However, many of these commitments have proven difficult to meet in the short term. The lack of technological resources, limited availability of alternative fuels, and insufficient global and national regulatory policies have led some companies to backtrack on their initial goals.
A notable example is Air New Zealand, which recently announced its withdrawal from the Science Based Targets initiative (SBTi) and the removal of its 2030 carbon intensity reduction target. The airline cited several factors beyond its control, such as the availability of new aircraft and alternative fuels, as well as delays in fleet renewal due to global supply chain issues, as the main reasons for this decision.
The Science Based Targets initiative (SBTi) plays a crucial role in guiding companies toward reducing greenhouse gas (GHG) emissions in line with what climate science deems necessary to avoid the catastrophic impacts of climate change. This organization, in collaboration with entities like CDP, the United Nations Global Compact, and the World Resources Institute (WRI), sets standards and provides tools for companies to set and validate science-based targets.
The global commitment, reinforced by the 2015 Paris Agreement, establishes that global temperatures must not rise more than 1.5°C above pre-industrial levels. Achieving this goal requires drastic emissions reductions by 2030 and reaching net-zero carbon emissions by 2050. To put this into perspective, according to Our World in Data statistics, China, the world’s largest emitter, contributes 11.40 billion tons of CO2 annually, accounting for 30.68% of global emissions.
The Role of Finance in Sustainability
On the financial front, in March, The Guardian reported that four of the world’s biggest banks withdrew from the Equator Principles—a set of minimum industry standards and safeguards designed to address environmental and social risks in countries where these banks finance fossil fuel and mining projects. This departure from environmental standards highlights a growing trend among major financial services companies to exit corporate environmental initiatives, spurred in part by US Republican politicians who have suggested that participation in such initiatives could breach antitrust rules.
However, the financial sector remains a critical player in advancing sustainability. According to the 2023 report “Just Transition Finance: Pathways for Banking and Insurance” by the International Labour Organization (ILO) and the United Nations Environment Programme Finance Initiative (UNEP FI), a just transition is essential for inclusively promoting environmentally sustainable economies. This approach aims to create adequate work opportunities, reduce inequality, and ensure that no one is left behind in the shift to a low-carbon economy.
“Companies will probably have a greater ESG impact and a better chance of achieving outsize growth if they incorporate high-impact ESG-related claims across multiple categories and products,” states McKinsey.
Despite the challenges, there are promising trends in the shift towards sustainability. The United Nations Climate Change has highlighted that “zero-carbon solutions are becoming competitive across economic sectors representing 25% of emissions.” This shift is particularly evident in the power and transport sectors, where early movers have found significant business opportunities.
By 2030, it is projected that zero-carbon solutions could be competitive in sectors representing over 70% of global emissions. This transformation presents a tremendous opportunity for businesses to lead the way in sustainable innovation and capitalize on the growing demand for cleaner, greener alternatives.
Written by Adriana Alarcón
