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How should business approach carbon neutrality? - What are the internal drivers for carbon neutrality in the context of our overall business strategy? - EY - Global

How should business approach carbon neutrality?

What are the internal drivers for carbon neutrality in the context of our overall business strategy?

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Some companies will see an advantage in having an identity that is more environmentally friendly than their rivals.

Some executives argue that setting a fixed objective of carbon neutrality helps ensure that all parts of the business remain focused on the goal.

Maintaining a license to operate

Certain product categories face a direct risk to their ability to remain in a market. The bottled water industry is a prominent example of this.

In response to these risks, companies have sought to go carbon neutral, to maintain a license to operate.

Another driver is about removing or reducing energy risk for a business, partly due to uncertainty over the future energy costs. A growing number of firms are working to install decentralized renewable energy within their operations, to try to ensure more predictable prices over time, as well as cut emissions.

Differentiating the corporate brand

A common objective is to stand out within a competitive market.

“It’s about leaders in a sector wanting to differentiate themselves, either to their customers, or else to capital providers,” says James Close, from Sustainability and Cleantech Services at EY in the UK.

Generating new demand

A further consideration lies in the potential of increasing demand for products, if consumers might seek to choose between rival products on an environmental basis.

The difficulty lies in assessing the degree to which this might impact demand. In the UK, research suggests that 56% of people would be more loyal to a brand if they could see that it was taking steps to reduce its carbon footprint. Elsewhere, such as in the Middle East and North Africa region or across South America, consumer awareness of the concept of neutrality remains low.

In most markets, few consumers are willing to pay extra for environmentally-friendly products.

Driving cost-efficiency

Cost-efficiency is another driver that is perhaps surprising, given that carbon neutrality typically involves paying for some offsets. But by considering energy efficiency as a proxy for overall business efficiency, neutrality signals the most concrete goal a firm can aim for, removing any ambiguity about the need for cutting waste and thus driving deeper internal energy use reductions.

Alternatively, a firm may use carbon neutrality as a long-term goal to highlight the need to transform its carbon usage and use this as a means for driving greater internal innovation over carbon reduction.



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