This article was first published by Oliver Wyman here.
This report is co-authored with the Climate Group.
In our Getting Real report for Climate Week NYC in 2021, we set out a blueprint for a commercially smart climate transition. What we heard back from practitioners was that the blueprint was a valuable guide to what was needed, but that it required an initial step in how to get it to happen. This year, we have focused on that question: How can climate practitioners make the approaches described in our blueprint play out in their organizations?
The biggest barriers they describe are not about their companies’ commitment; they are about how, in practice, to get their organizations to act on that commitment (see Exhibit 1).
For this report we interviewed nearly 30 climate practitioners in companies around the world and across sectors, and we supplemented the interviews with a quantitative survey with climate practitioners from more than 100 corporations active in the climate transition. From this, we have created a diagnostic tool to help organizations get going. We describe four core organizational enablers that make progress on climate possible, the barriers that may be stopping those enablers from working, and the approaches that some practitioners have used successfully to break through those barriers.
To get going, lead with strategy, not measurement
The stories we heard from practitioners range from exhilaration to frustration — even in the same interview. In this report, we work through the details of both, offering a structured framework to explore what barriers might be holding your organization back and how others have broken through those barriers.
Beneath all the detail, one theme stands out: The need for a strategy.
Enabling the organization to act
Through our conversations with practitioners, the broader quantitative survey, and our ongoing consulting work, we have identified four core enablers that make corporate action on climate happen (see Exhibit 3).
The topic requires attention throughout the organization, at all management levels. The organization needs a vision to set goals and priorities and give shape to an otherwise disparate and tactical agenda. This vision must be embedded in the reality of the organization’s operation. And the organization must align people’s overall accountability — not specifically for climate — in a way that supports and incentivizes the actions required.
Breaking through the barriers
While the barriers are real, we also heard many stories of businesses breaking through them. These stories lead to a menu of approaches.
CASE STUDY: CLIMATE CHAMPIONS AT NATIONAL GRID
National Grid wanted to set out how it would achieve net zero in a fair way, that did not adversely impact other groups. The document would have implications for the business as a whole, and would require input from across the business. First, it converted its existing COP26 Network into a Climate Champions Network. A range of available roles (storyteller, engager, enabler and challenger) lets members of the Network participate in the way that best suits them. New joiners are encouraged to speak up and to introduce themselves on a dedicated Climate Champion Teams channel.
The company then ran a series of Fair Transition Workshops to gather input from stakeholders across the business. The resulting Fair Transition Document benefited from the cognitive diversity of the Climate Champions Network.
CASE STUDY: EMPLOYEE EDUCATION AT NOVO NORDISK
Novo Nordisk developed its Circular for Zero (C4Z) capability-building program to educate its employees on climate action. The learning path was based on employees’ level of subject-matter expertise: Basic, Proficient, Master, and C4Z Strategic Partner, each with different environmental and circular economy skills. The program is an example of a tailored educational system that can be employed to train employees within an organization depending on where their part of the organization is on its climate journey.
CASE STUDY: HOW TO INFLUENCE CUSTOMERS
Engaging customers is key to building the business case for change. Companies that overlook this dimension often see climate action as a cost, and underestimate the opportunity in climate investment. Oliver Wyman's Make Climate Meaningful report shares research insights into how to connect with customers on climate.
CASE STUDY: BRAVERY AT ØRSTED
In 2008, Ørsted was primarily a fossil fuel company — called DONG, for Danish Oil and Natural Gas. Eighty-five percent of the energy mix it supplied came from fossil fuels, accounting for one third of Denmark’s greenhouse gas emissions. In the run-up to COP-15 in Copenhagen, and in support of the European Union’s renewable energy targets, then-CEO Anders Eldrup felt that it was clear Ørsted had to move away from fossil fuels. At the time, renewables were not cost competitive, and access to government investment depended on the costs of offshore wind falling. Nonetheless, Eldrup felt that it was vital that Ørsted “create a completely different energy system” and that there was a moral imperative to begin the climate transition.
The company wrote down over US$6 billion that it had invested in fossil fuel businesses. It shut half of its coal-fired plants and converted the other half into certified sustainable biomass from residues from timber production. In 2012 Ørsted set an ambitious, top-down vision “to reduce the levelized cost of electricity by 35-40%, down to US$100 per megawatt-hour by 2020.” It partnered with institutional investors to finance this ambition and achieved this goal in 2016, with offshore wind already competitive with coal and gas-fired power plants. The company’s profit has almost doubled, with 98% coming from renewables.
CASE STUDY: COLLABORATIVE AUDITING IN THE TECH SECTOR
In 2010, three of the leading European telecom operators — Deutsche Telekom, Orange and Telecom Italia (now TIM) — founded the Joint Audit Commission (JAC). The organization aims to reduce both the time suppliers spend on corporate social responsibility (CSR) reporting and the time that the companies spend on CSR auditing: Its mission states that “sustainability is a common cause beyond competition.” JAC has since grown to cover more than half the industry by revenue.
Members of JAC share the load. In supplier data, the firms work to “collaborate to create the framework” that they engage in, as we discuss in Leadership (page 18). An individual member “has the responsibility, acting on behalf of the others, to lead a complete audit process” of suppliers on a pre-agreed list, according to the mission statement. Suppliers are assessed on 27 environmental issues, and over 700 audits have been conducted to date.
Through this initiative, suppliers receive only one CSR audit request. There is a standardized approach, and JAC acts as a forum to share best practices. All these outcomes drive efficiencies and reduce the task of disclosure. The JAC also runs academy and sustainability forums, as well as webinars for swapping case studies.
CASE STUDY: CLIMATE AUDIT AT SIEMENS
Having released their Degree framework (a set of ESG related target areas for the company) in 2021, Siemens conducted their first Climate Audit to assess their progress this year. Matt Helgeson, head of sustainability, and Cathe Reams, communications director of sustainability and urban infrastructure, describe the key things they have learned to consider when conducting a climate audit: Timing, Integration and Education.
Now that a commitment to climate action has been established in many companies, a range of practical barriers are making it hard to deliver on that commitment. But they are not insurmountable, and there are strong examples of practitioners and businesses breaking through these barriers to make real progress. It is time to tool up to match.