With soul-numbing regularity, we receive the latest batch of bad news reports on the unfolding disaster that is climate breakdown. Tap, tap, tap; as each report falls, it seems to drive yet another nail into the coffin of life as we know it. Greenhouse gases are at a record high. Many countries are already experiencing the ravages of extreme climate events. Progress on closing the emissions gap is way too slow. Current national pledges are nowhere near sufficient. Companies are not doing enough. The window for meaningful action towards 1.5C is rapidly closing – and every tenth-of-a-degree of further temperature rise means even greater levels of destruction.

Never has the picture looked so gloomy. Yet, it doesn’t have to be this way, we can deliver a more transformational impact. Although, from where we stand today, we face an enormous challenge.

A mountain to climb

Antióno Gutteres, the UN Secretary-General, pulls no punches with his candid assessment of progress on climate action: “The latest IPCC report is a litany of broken climate promises. Some government and business leaders are saying one thing, but doing another. They are lying. It is time to stop burning our planet.”

Quite simply, despite all the pledges and rhetoric, we’re not doing what it takes. We have a mountain to climb and we’ve barely set out from base camp.

At the very peak is our target to stay within 1.5C average global temperature rise by 2050. Yet, we’re already at 1.2C, with very little wiggle room left at our disposal. On our current trajectory, we will hit somewhere between 2.4 and 4.8C. Either way, the prognosis for humanity is not good; we face a 2% to 10% hit on GDP along with ecosystem collapse, and all that this entails. In short, we can’t afford not to invest in radical climate action, otherwise, we’re firmly on track for an unliveable world.

It barely needs saying, but there is no business on a dead planet. The future, from our current vantage point, could hardly appear any bleaker.

Way off course!

The fact is, we’re already way off course. At a national level, the Earth Index reveals that G20 countries – responsible for around 75% of global greenhouse emissions – remain far off track from meeting our climate targets. Between 2016 and 2019, none of the 10 so-called developed countries managed to reduce our emissions at a rate consistent with 2030 targets. The Index describes this shortfall between what countries say they will achieve and what progress is being made as the “say-do” gap. Toby Heaps, the co-founder of corporate Knights, argues: “Along with targets that are fit for purpose, we need radical action to meet those targets.” Yet, our politicians remain largely behind the curve.

Corporate progress is also way too slow. The Net-Zero Company Benchmark demonstrates that “companies are not making the progress required to align with achieving the 1.5C climate goal agreed in Paris and reaffirmed in Glasgow last year.” And, according to the first Climate Corporate Responsibility Monitor (CCRM), many of the world’s biggest businesses are failing to live up to claims they will hit net-zero emissions targets: on current trajectories, their collective actions will deliver only 40% reduction in emissions, nowhere near the 90-95% deep decarbonisation impact implied by robust net-zero targets.

Companies like Amazon, Ikea, Nestlé and Unilever are named amongst those showing little real integrity in their claims that they will deliver radical enough cuts in their emissions. Even the best performers, like Maersk, Apple, Sony and Vodafone, can only demonstrate ‘reasonable’ or ‘moderate’ integrity in their net-zero plans. None of the companies assessed are considered to be making ‘high integrity’ pledges. Thomas Day, lead author of the CCRM, shares his frustration with current corporate progress: “It is not clear these reductions take us beyond business as usual. We were very disappointed and surprised at how much room for improvement there was [among the companies studied].”  We’re just not doing enough.

At the crossroads

So, we reach an important crossroads as we arrive at COP27. This is arguably the most important meeting in human history; could this be the last responsible moment for pulling ourselves back from the brink and engaging with more meaningful climate action?

We face some critical choices – which direction do we take?  Do we simply resolve to keep calm and carry on as we are, perhaps doubling down on our current pathway? Or, do we take the fatalistic road, and accept that we will never achieve the 1.5C goal, and merely surrender to live with whatever climate we inherit, perhaps with a greater emphasis on adaptation? Or, do we take a turn for the better, and find a more transformative road ahead?

“Every tenth of a degree counts!”

In reality, our choices are somewhat limited. We simply cannot carry on as we have been; it’s just not working. Surrender is not really an option, either. As Professor Johan Rockström reminds us, “Every tenth of a degree counts,” towards further, dangerous tipping points that will destabilise the whole planet – putting millions more lives at risk. This is the world’s greatest crisis and our response needs to be commensurate with the scale of the challenge.

Rapid decarbonisation is now a strategic imperative. It’s clear that we could have to accelerate on our plans for both climate adaptation and mitigation, cutting emissions much deeper and much faster than we’ve been delivering; globally, nationally and at an enterprise level. We cannot expect to simply comply our way out of crisis.

UNEP is right: meeting our climate goals requires nothing short of ‘rapid transformation of our societies.’  There are many similar calls for transformational approaches in the business sector, with a raft of new reports and initiatives. More of these, next time. The good news is that there is a growing consensus that incrementalism is no longer adequate.

Talking transformation, walking incrementalism

But, while there is much talk of transformation in the business world, we’re still walking incremental change. It’s all a bit pedestrian; developing eco-efficiency initiatives towards improving our business-as-usual platforms, reducing carbon intensity with only minor improvements in absolute emissions, doesn’t really cut it. Most interventions, currently labelled as innovations, are more akin to continuous improvement. Very few enterprises are engaged in authentic net-zero transformations, embracing bold and radical innovations, which will inevitably challenge consumption-oriented business models, towards generating breakthrough levels of carbon reduction, and ideally sustainability impacts and long-term business value.

So, what’s holding us back?

We can begin to appreciate some of the real difficulties involved, when we examine a selection of the carbon reduction curves being fashioned by some of the sustainability pioneers – exploring their performance to date, and likely future projections and challenges.

IKEA has been a leader on climate action for some years, and is committed to becoming ‘climate positive’ by 2030 – seeking to reduce greenhouse gas emissions in greater quantities than its entire value chain emits, while still growing its business.

The ambition is there — a bold and necessary commitment – but, the retail giant has, so far, only managed to deliver an overall 5.8% reduction in absolute emissions since 2016. This amounts to an average net rate of 1.16% reduction in absolute emissions per year: definitely a case of incremental, rather than the necessary radical progress we need to see, toward a climate-positive future.

“It very much feels like we’re trying to empty the bath, when the taps are still running full-bore – it’s going to take forever!”

Extrapolating from this current level of performance, it could take IKEA a further 86 years to achieve net-zero – exceeding a 2050 target by some 57 years. By its own admission, the company faces a significant challenge with value chain emissions, and the extended responsibility for customers, suppliers and key areas of sourcing.

A further important dimension of the challenge concerns growth: whatever the company does, in striving to reduce emissions, it will need to do so at a faster rate than its growth trajectories, and then some. At the moment, it very much feels like we’re trying to empty the bath, when the taps are still running full-bore – it’s going to take forever!

We should also appreciate that IKEA is not alone. The latest research from Accenture confirms that almost 93% of the world’s largest companies will fail to achieve their net-zero goals, based on their current trajectories. This is a staggeringly bad statistic.

Microsoft is another major corporation with significant ambitions – aiming to be carbon negative by 2030 – while also finding that maintaining good progress is difficult. The technology giant reported a massive 21.5% increase in emissions arising from its operations and products during 2021, after experiencing small declines in emissions during 2019 and 2020. The recent increase is driven almost entirely by emissions arising from energy utilised in building data centres, along with emissions associated with manufacturing devices, and from the consumer use of its products.

When it comes to net-zero, we’re just not delivering the transformative impact we need to see.

The net-zero crunch!

The fundamental problem lies in the methodologies we’re all following; almost exclusively founded on a (misguided) managerial mindset, which emphasises incremental change, supported with continuous improvement techniques. This approach provides the illusion of progress towards net-zero, especially during the early stages, until we hit the inevitable net-zero crunch point, with little in the way of further emissions reduction opportunities thereafter.

Our starting point is with mapping and measuring the emissions arising from our current business organisation. This is fine, as far as it goes – we do need to develop a robust baseline, from which we can appreciate the scale of the challenge and benchmark our future progress – but we shouldn’t let this constrain what happens next.

But, we do. We immediately start looking for ways to reduce the carbon emissions associated with our current business-as-usual enterprise, seeking percentage reductions each year, towards a linear annual reduction target (LAR). We look for early quick wins in efficiency, waste reduction, and switching to renewable energies.

Following the pathway of incrementalism, we then reach the net-zero crunch point, where we run out of carbon reduction opportunity; we can’t go any further within the current framing of the business.

Reflecting on progress to date, we might observe how many of our carbon reduction charts tend to resemble radioactivity decay curves – displaying some initial drop in emissions, but then tailing off with increasingly small increments, towards diminishing returns, potentially going on for decades. We’re just not going to make net-zero, in real terms, any time soon!

Our mindset is all about preserving today’s model of business, and how we make money, only seeking to make it better by increments. In taking this default approach, we already miss the real first step towards a genuine transformation. Our business purpose, strategies and business models – all key enablers for genuine transformation – remain untouched. We establish a path dependency which constrains future opportunities, choices and actions – leading to a major risk of net-zero failure.

And so, it’s no surprise that 93% of companies are currently destined to fail in meeting their net-zero targets.

What were we thinking?

In following this pathway, all of us in the sustainability movement have been rather lacking in strategic thinking, about how to deliver large-scale change. Ultimately, our model for change is completely wrong.

Incrementalism might be fine where small changes are sufficient, delivered over extended periods of time, and when we’re operating within a stable paradigm. But this theory of change is just not fit-for-purpose, when the scale of challenge is so enormous, when we’re working within such constrained time frames, and set within such volatile times. Incrementalism cannot deliver the right impact in these circumstances.

“We got too pragmatic, accepting some change as a sign of progress, even if we knew – deep in our heart of hearts – that this was never going to be enough.”

We haven’t challenged enough, allowing a culture of incremental change to become the norm, when it was never going to deliver the necessary impact. We got too pragmatic, accepting that some change was a sign of progress, even if we knew – deep in our heart of hearts – that this was never going to be enough.

We’ve also been ill-advised by many of the sustainability consultancies and footprint service companies, selling the illusion of easy sustainability at a low price; they are little more than snake oil salesmen, offering little real chance of providing a lasting cure. Or, perhaps they simply sold us what they thought we wanted to hear?

There’s no doubt that – over the last decade, and longer – we’ve been taking the wrong path. We chose the road of incrementalism and compliance, over the road-less-traveled of radical innovation and experimentation, toward transformation. As a result, most organisations are kidding themselves: on current trajectories, we’re not going to hit the net-zero target.

So, where do we go from here?

Getting back on track!

It’s time to get back on track by developing more transformational strategies for net-zero and sustainable enterprises. But this will involve completely redefining and redesigning our businesses, if we are going to deliver the necessary impact, in time, while continuing to be profitable. Are we ready to do what it takes?

For sure, we can still learn much from the early pioneers, but this does not mean that we need to repeat their mistakes. We can learn much from their successes, but we should not necessarily emulate their attachment to business-as-usual and incremental change. We can avoid falling into the trap of the ‘net-zero crunch’.  As an aside, I wonder who is really capturing, codifying and disseminating genuine net-zero learning?

The clock is ticking, we now have to switch tracks, and fast; not just for the sake of civilisation, although this should provide sufficient motivation in itself, but also for the future prosperity of our enterprises and economies. The risks to business models, through not properly integrating sustainability factors, is now increasingly high. The costs of climate-related events, increasing scarcity of resources and rising commodity prices, coupled with reputational impacts: the consequences are clear. There’s also the increased risk of customer migration towards more relevant and sustainable value propositions and vendors. Doing nothing, is not a viable option.

By not taking the strategic transformation challenge seriously enough, we drift towards becoming stranded assets, with the risk that many companies will fail in the coming years. As John Elkington argues, “By 2041, I suspect most major brands of today will be unknown.” He’s probably right.

Conversely, the opportunities derived by sustainability transformations are so great, it should be a no-brainer. Yet another study demonstrates clear link between strategic sustainability and financial performance, with pacesetting companies – leading in the development of new business models – “2.4 times as likely to report significantly higher financials than expected.”

One further important driver for transformation comes from new rules for net-zero, announced at COP27, yesterday – placing greater emphasis on deep cuts in greenhouse gases before 2030, reduced reliance on offsetting, and no tolerance for greenwashing. Catherine McKenna, the former Canadian climate minister, declared that net-zero pledges must be “about cutting emissions, not corners”. These new, more stringent requirements are designed to drive more radical and rapid cuts in emissions. This means transformation.

It’s time to change the conversation for good: From this moment, incrementalism is dead; ultimately, for net-zero and sustainability, it’s all about transformation.

Next time, we’ll explore what a genuine transformation really looks like, and how to develop a strategy to navigate pathways to net-zero and beyond — delivering both radical reductions in emissions, while harnessing commercial advantage: finding the new sweet spot for sustainable, yet profitable business models (without the greenwashing).

This article is based on extracts from the forthcoming Earthshine Group white paper, Delivering Net-Zero Transformations. Mike Townsend is founder and chief executive of Earthshine Group and the author of The Quiet Revolution.