The global economy is undergoing a rapid transition towards a low-carbon state, whereby global businesses are realising that transitioning towards net-zero carbon emissions, via a process of decarbonisation, is crucial to the long-term viability of their operations. Businesses who wish to remain competitive will therefore need to calculate their scope 1, 2 and 3 emissions, set science-based targets, develop decarbonisation pathways, and gradually move towards long-term carbon capture, storage, and sequestration for those emissions which cannot be reduced.
However, businesses cannot undergo green transition on their own - there are a range of stakeholders that must be actively engaged with on this journey. As such, it is absolutely vital that businesses which commit to reducing their carbon emissions gain a comprehensive understanding of the best stakeholder engagement and management practices to ensure an efficient and effective transition.
Who are stakeholders within the net-zero transition?
Beyond the influence of government bodies and policy drivers; there are a number of groups that directly or indirectly affect, or are affected by, business activities. Accordingly, these groups affected by businesses are called stakeholders, and they play a key role in placing pressure on businesses to act on climate change and reduce their emissions. These stakeholders play a critical role in the success of any business, and therefore must be a key consideration within all aspects of business decision-making. The different stakeholder groups include:
- B2B customers (suppliers)
- Non-government organisations (NGOs)
Why is stakeholder engagement crucial within the net-zero journey?
Effective stakeholder management is absolutely crucial within the journey towards net-zero. Businesses who identify their stakeholders and balance their needs will be able to create long-term value, whilst engaging with stakeholders also creates opportunities to learn more about their needs, concerns, and expectations regarding the business and its operations. Ultimately, clear and transparent dialogue with stakeholders regarding the business’ sustainability strategy will promote mutual understanding and trust whilst mitigating both the financial and non-financial risks of sustainability.
Given the foundational role that stakeholders play within the overall operation of businesses, a central focus of stakeholder management should be on demonstrating credibility and translating value to stakeholders.
- Effectively managing employees within the net-zero journey is fundamental as human resources are vital to completing decarbonisation and sustainability related activities. The benefits of engaging employees with the business’ sustainability strategy are demonstrated through findings of an increase in employee satisfaction, productivity, retention and engagement.
- Meanwhile, consumers are crucial to the long-term success of any business. Therefore, ensuring consumers are aware of the business’ sustainability stance is key within the decarbonisation process. In doing so, businesses can improve their brand value and sales; with a Nielsen study highlighting that sustainable product sales have grown by nearly 20% — four times more than conventional product growth.
- Engaging B2B customers across the businesses supply chain with the business’ sustainability strategy is key to achieving set targets and reducing scope 3 emissions. Carbon is money; and with new EU regulations such as the CSRD coming into play - not acting on carbon emissions will increase costs in the long run due to increased regulations and carbon taxes.
Finally, investors typically play a key role in the growth and development of businesses. Meanwhile, an Oxford university study found that more than 80% of mainstream investors now consider ‘ESG’ – environmental, social and governance – information when making investment decisions. As such, businesses must ensure that the needs of investors are balanced. In ensuring that there is clear and open communication surrounding the role of sustainability within their overall strategy, businesses will create value via enhanced investment returns and allow for long-term investment and asset optimisation.
6 stakeholder management strategies vital to the the low-carbon transition
Undertaking engagement activities are clearly a vital formative step when tackling decarbonisation initiatives. As such, a key first step to stakeholder management is the development of a strong communications strategy. A strong communications strategy will engage stakeholders, confidently communicate decarbonisation initiatives, and translate the value of businesses' wider net zero action plan. Specifically, the steps that decarbonising businesses should prioritise and engage stakeholders with include:
- Setting and validating net-zero targets will be expected by stakeholders, and it is advised that businesses’ set science based targets (SBT’s) to put their emissions reductions commitments on the right trajectory. SBT’s align emissions reductions with the latest climate science for limiting warming to 1.5º C or well below 2º C, and are considered the gold standard in emissions reductions targets, particularly among the investor community. Setting and validating SBT’s will also help businesses improve their disclosure performance against the major reporting frameworks and gives you full confidence in your carbon footprint.
- Risk and opportunity analysis is vital within the management of stakeholders (particularly investors). Stakeholders want to see that against these scenarios, businesses have fully analysed both the risks and the opportunities that sustainability poses to the business and its value chain. Businesses should develop ongoing capabilities for their holistic and dynamic assessments of transition-related risks to be communicated, allowing for opportunities relating to shifts in regulations, investor preferences, consumer behaviours, and competition to be evaluated by the business and its stakeholders.
- Footprint calculation and validation via the utilisation of a carbon accounting software, such as Plan A, is key to demonstrating credibility to external stakeholders. Businesses’ that validate their carbon footprint can also improve their disclosure performance against the major reporting frameworks. Meanwhile, carbon footprint calculation and validation completed by independent experts guarantees accuracy.
- Incorporate climate-related considerations into critical decision-making processes across various domains, such as strategy, risk, finance, R&D, operations (including supplier management and procurement), organisational structure, talent management, pricing, marketing, and relationships with investors and government entities. Furthermore, consider the possibility of adopting sustainability leadership within the company's organisational structure who oversees the broader business ecosystem - encompassing investors, supply chains, customers, and regulatory bodies.
- Repositioning to meet the increasingly sustainable demands of consumers is a key step within the net-zero transition. Not to be confused with greenwashing, companies should truthfully communicate the role of sustainability within their operations and their net-zero progress with consumers to build trust and brand value. This may involve investing in new physical assets and reallocating capital, redesigning products, or utilising their communications channels to highlight their sustainable actions to consumers.
- Ensuring employees are involved and educated on the company’s net-zero journey is key to building an effective sustainability strategy. Educating employees on the importance of the global net-zero transition and up skilling employees to ensure the net-zero goals of the company are met is key. Senior-level leaders should take ownership of the sustainability agenda to ensure alignment organisation-wide.
Plan A’s data-driven decarbonisation platform can streamline key processes such as science based target setting, carbon footprint calculation and validation, thus ensuring businesses can leverage the vast opportunities relating to the net-zero transition. However, the clock is ticking. Businesses who do not manage their stakeholders as they undergo decarbonisation will ultimately forfeit their ability to mitigate risk and sustain a competitive advantage.
For tailored support on efficiently and effectively balancing the managing stakeholders within the sustainability journey, book a demo with Plan A today.