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net zero ledge

CEO Circle

Words of deeds: five steps to turn your net zero pledge into action

Published 21 February 2023 in CEO Circle • 7 min read

Ambitious rhetoric and pledges to achieve net zero carbon emissions by mid-century have not been backed up by actionable strategies. It’s time for CEOs to take the lead on decarbonization.  

On the face of it, many businesses are already progressing on net zero. The UN reports that the number of organizations that have pledged to achieve net zero emissions by 2050 has soared by 60% to more than 11,000 (as of September 2022). However, at the World Economic Forum in Davos in January, UN secretary-general António Guterres warned that aspirations have not been matched by action. Guterres asserted that the benchmarks and criteria used to assess progress are “murky and dubious”, adding that well-publicized use of carbon credits and offsetting measures are no substitute for quantifiable emissions reductions in core business activities. 

There is no universal path to genuine improvement. CEOs need to experiment with different pathways and make decarbonization a strategic imperative that is factored into core business decisions. Knowing that they will hit bumps in the road, organizations must be prepared to review and redraw their plans en route. Based on my conversations with leading companies, I believe there are five key areas for CEOs to focus on to build real momentum towards net zero.  

1. Lay the foundations 

The first step for CEOs is to prepare their businesses for change.  

The lack of high-quality data is the most common barrier to obtaining an understanding of where the company is on its journey to net zero, so the bedrock of this preparation should be a life cycle assessment or carbon footprint analysis. What are your emissions, and what are their sources in the value chain (suppliers, manufacturing, distribution, or end-users)?  

The next step is creating a system to monitor, track, and report progress. The CEO has an ally in this regard in the form of digital technology. Over time, the data collected will become invaluable in making key decisions, including allocating funding and resources. And, with regulatory requirements for disclosure beginning to tighten, the ability to satisfy carbon footprint accounting standards will be crucial.  

This capability then needs to be directed towards clear targets for both the short and long term, as 2050 is simply too distant to constitute a meaningful target. As some CEOs have observed to me, “It’s kicking the can down the road; the CEOs that make the pledge today won’t be the ones responsible for delivery in 2030, let alone 2050.” As the Science Based Target Initiative (SBTi) makes clear, interim targets are essential to staying on track towards the final objective.  

One firm showing how to prepare is the Dutch brewer Heineken. Its 2030 Brew a Better World plan incorporates 22 sustainability commitments, with interim targets for 2023 and 2025. By 2030, it aims for net zero emissions in production, with a 30% absolute reduction across the value chain. Progress is tracked and reported online.  

2. Get your shop in order

The second key area is assessing and, where necessary, adjusting the organizational structures and systems required to deliver emissions reductions. Start by identifying operational efficiencies. Use your life cycle assessment to find opportunities to reduce emissions, be that through transport, energy use, improved material efficiency, waste reduction, or any other avenue.  

Next, target net zero by amending product design criteria to prioritize emissions reduction over the entire product life cycle. Logitech has shown what can be achieved in this respect, including reducing material usage, using lower-carbon materials such as recycled plastic, and switching to renewable energy in its production facility.  

Critically, CEOs need to align incentives and rewards with the behavior and practices they wish to see. Obviously, that includes executive compensation for contributing towards net zero, rather than just financial results. Some companies have already gone a long way to achieving this: at French electrical equipment group Schneider Electric for example, one-fifth of executive pay in 2020 was dependent upon achieving ESG-related targets, including lower carbon emissions. 

Like any business transformation, culture is key to success. CEOs neglect their internal company dynamics at their peril

But executive incentives are not the only tool available. The reinsurance firm SwissRe has implemented an internal carbon charge of $100 for every ton of CO2 it produces, including indirectly – such as through employee air travel. This mechanism provides a strong signal of the company’s priorities and helps fund its ongoing transformation. 

Above all, CEOs must prioritize decarbonization. That may include divestment of carbon-intensive businesses, and ambitious transformation of their business models to drive down emissions. There are many opportunities to drive positive change. 

3. Seize opportunities 

The net zero agenda is often seen in negative terms – as a cost or compliance issue. Yet there are also major business opportunities to be explored. McKinsey research identifies 11 high-potential value pools that could be worth $12 trillion annually by 2030. For CEOs, that adds up to “a call to play offense”, as McKinsey puts it. The key is moving fast, making upfront investments to gain advantage, and managing the inherent risks to realize dividends over the medium term.  

Logistics company A.P. Moller – Maersk, for example, is investing heavily in renewables for its vessels, taking a big chunk out of the industry’s carbon footprint and putting the Maersk brand in a dominant market position as a developer of sustainable solutions.  

For many companies, seizing new opportunities will require wholesale transformation of the business model. The future might lie in a pivot from products to services, the so-called “Everything-as-a-Service (XaaS)” approach, potentially via subscription or rental models, often driven by digital technology. Think of how consumption of music and films has changed since the introduction of streaming services. Similar models can be applied to physical goods, enabling companies to promote product circularity to reduce emissions.  

4. Collaborate and build alliances  

The fourth priority for CEOs should be exploring possibilities for partnership, whether co-financing solutions or collaborating to achieve systemic change. Suppliers and government bodies are obvious candidates, but competitors should not be discounted as potential partners.  

Partnership with suppliers will be particularly important. Scope 3 emissions – emissions from across the value chain – account for up to 95% of a company’s total footprint. Collaboration is essential to improving the overall picture; the starting point is often sharing information. Catena-X, for instance, is the first collaborative, open-data ecosystem for the automotive industry, facilitating the sharing of end-to-end data from across the value chain and between multiple players in the sector. It is a model for how fierce competitors can work together towards the shared goal of decarbonization.  

Net zero targetsAs the Science Based Target Initiative (SBTi) makes clear, interim targets are essential to staying on track towards the final objective.

Examples are beginning to proliferate. Consider The Fashion Pact, an alliance of 200+ fashion brands – including suppliers and distributors – dedicated to environmental goals, or the joint work by rivals Unilever and Nestlé to make their supply chains “deforestation-free” by 2025. 

The CEO’s default mindset must be one of collaboration and co-creation. When it comes to the systemic changes needed to achieve net zero, there is simply no way to go it alone.  

5. Talk the walk 

The final area is communication and stakeholder engagement. CEOs need to engage key audiences – internal and external – in the company’s net zero strategy. They also need to bring stakeholders with them: suppliers and customers, shareholders and investors, regulators and policymakers. 

CEOs must be wary of two particular pitfalls. First is greenwashing – the reputational risk of being exposed for over-burnishing your company’s environmental credentials is greater than ever. However, it is increasingly common to see companies veer in the other direction and perpetrate “greenhushing”. This occurs when a company opts out of the discourse until their program starts to produce results, giving the impression that they are not even pushing towards net zero. We have found that a transparent, authentic approach works best, acknowledging that the whole stakeholder ecosystem is required to keep the company on its journey to net zero. 

Neither must CEOs forget the imperative to excite and engage employees. If the demands of the net zero journey are portrayed as too daunting, they risk generating despair or disengagement at precisely the moment that employee creativity, commitment and insight are vital to driving change. Like any business transformation, culture is key to success. CEOs neglect their internal company dynamics at their peril.  

The CEO must set the tone from the top 

The path to net zero is unparalleled in its ambition – and that means companies seeking to follow it can only be led by CEOs. A chief sustainability officer will support strategically and operationally, but action on these five critical areas must be owned and led by the CEO. Only the CEO has the authority to take on key tasks such as reviewing the strategic portfolio, aligning incentive structures, and engaging everyone involved in their business. 

As Antonio Guterres reminded us at Davos, accelerating action to cut carbon emissions is essential. “The world can’t wait,” he affirmed. It is time for CEOs to step up and lead the charge. 

Zeroing in: a checklist to accelerate progress 

Conduct life cycle assessment and carbon footprint analysis 

Create a system to monitor, track, and report  

Set short- and long-term targets 

Increase operational efficiencies 

Reduce emissions over the entire product life cycle 

Align pay and rewards with net zero ambitions 

Invest in emerging market opportunities 

Innovate business models 

Pivot from products to services 

Explore sharing opportunities 

Support suppliers’ decarbonization journey 

Co-create change by thinking in ecosystems 

Communicate a clear vision 

Take stakeholders on the journey 

Excite and engage employees  


Julia Binder

Julia Binder

Professor of Sustainable innovation and Business Transformation at IMD

Julia Binder’s research focuses on sustainability in organizations, with a focus on sustainable innovation, entrepreneurship, and marketing. Her work explores the processes, strategies and mechanisms that allow entrepreneurs and managers to combine economic, social, and environmental impact in initiating and transforming their businesses.


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