Climate Change: Who is really responsible?

Climate Change: Who is really responsible?

Intro:

Since their debut, carbon footprints calculators have been made readily accessible and widely applicable. Want to know the carbon footprint for a London-to-New York flight? Just use Google, which says that it’s roughly 1 tonne of CO2e per passenger. This specific phrasing, however, subtly shifts the focus of responsibility away from the airlines and onto individuals. This pattern isn't isolated: CO2e per household, per person. Even a basic Google search for 'top CO2 emitting' shows autocomplete results for countries, celebrities and people, overshadowing the contributions of corporations and industries.

Individuals are constantly pressured into reducing their footprint – take public transport, store less photos on mobile phones – while some corporations either don’t even know the accuracy of their carbon emissions. At the same time, corporations promote a consumer-driven narrative: suggesting individual consumption practices drive climate action, in order to avoid making meaningful changes. However, only about 10-20% of the world’s population controls the vast majority of the world’s emissions; specifically those involved in industrial production and supply chain management.

Furthermore, sustainable alternatives are often inaccessible due to limited availability and infrastructure. Even when available, sustainable alternatives are often more expensive than conventional options: around 75-85%. This places additional stress onto individuals, while those in power do little to alleviate it.

What is the reason for this?

The disparity between individual and corporate climate action boils down to a fundamental difference in perceived cost and resource allocation. While individual lifestyle adjustments to combat emissions are difficult yet manageable (at least from a corporations’ perspective), companies have to establish robust emissions tracking across intricate value chains. This necessitates significant upfront investment in technology, software, and specialized expertise. But doing so for every part of the value chain is expensive, time-consuming and labour-intensive.

There is also the issue of data complexity, as seen with scope-3 emissions. Encompassing all indirect emissions in the value chain, these are often the largest source of a company's carbon footprint: at times up to 90%. However, they are also the most difficult to measure and control. In 2023, Google faced challenges in managing its scope 3 emissions, experiencing an increase largely attributed to data centre expansion and AI investments. To effectively track these emissions, companies need to collaborate with their entire value chain. This requires a level of transparency that hasn’t always been present, much less reinforced.

These difficulties lead to inaction, with the reasons given varying based on the organization's size. Smaller businesses struggle with perceived prohibitive costs, while larger ones cite time constraints and operational disruption. This reveals that another primary obstacle is a reluctance to change established practices and a lack of perceived urgency.

But such behaviours have a steep price. Especially today, where the climate crisis is a present reality and not a future threat.

 
Facing the consequences

Governments worldwide are increasingly imposing stringent environmental regulations on corporations, with nearly 40 new regulations taking effect this year alone. Sustainability and ESG reporting are transitioning from voluntary practices to mandatory requirements, with non-compliance resulting in substantial financial penalties, legal disputes, and potential operational constraints. This can be seen with Volkswagen. In 2015, the company admitted to installing "defeat devices" in millions of diesel vehicles to cheat emissions tests. This led to a, 20% sales decline in early 2016, a $14.7 billion settlement, and Volkswagen recalling the affected vehicles - 323,700 cars in India alone.

Additionally, the growing visibility of climate change, combined with the understanding that individual actions have limited impact, has significantly undermined the narrative of consumer-driven climate action. This was starkly illustrated during the COVID-19 lockdowns: 2020 saw only a 4.6% reduction in global emissions despite drastic, involuntary behavioural shifts. Consequently, public trust in businesses and institutions is steadily eroding. Consumers increasingly recognize the gap between corporate sustainability claims and actual practices, as exemplified by the Volkswagen emissions scandal. This necessitates a fundamental shift: corporations must prioritize genuine systemic change over marketing narratives, or risk further alienating a public that is rapidly losing faith in their sustainability commitments.

Beyond small changes

While individual actions, such as adopting plant-based diets, can contribute to emissions reductions—potentially by up to 17%—these efforts have often been mistakenly viewed as tangible solution for sustainability. In reality, these are isolated actions, valuable but insufficient when addressing the scale and complexity of the climate crisis. True, lasting change demands systemic shifts that address the root causes for environmental degradation. For individuals, this means actively holding the most influential decision-makers accountable, in particular corporations and governments. This involves demanding transparency, advocating for policy changes, and supporting businesses that prioritize sustainability – a trend already underway.

For corporations, they must start adopting a systemic approach that recognizes the interconnectedness of environmental, social, and economic issues. This means acknowledging that their responsibilities extend far beyond regulatory compliance and demand taking proactive steps: setting ambitious emissions targets aligned with scientific recommendations and global climate goals, ensuring sustainable supply chain practices like ethical sourcing, reducing waste, supplier assessments, etc. Furthermore, they must embrace transparent reporting on their ESG performance, providing stakeholders with clear and accurate information about their environmental and social impact. And in the modern age, where information is paramount, the foundations for such systemic actions are based on having comprehensive, reliable, and accessible data.

An ESG-based data-driven roadmap

Accurate data collection, advanced analytics, robust reporting, and data-driven decision-making are crucial for corporations to understand their impact, inform strategy, and drive positive change throughout their value chains.

When integrated with an ESG framework, the impacts of this approach can be magnified. Specifically:

• Environmentally: Accurate emissions data drives science-based targets and renewable energy transitions, while material flow data promotes circular economies and supply chain data ensures responsible sourcing.
• Socially: Comprehensive data builds community resilience and facilitates inclusive economic transitions.
• Governance: Climate risk assessments and transparent reporting strengthen accountability systems.

For this approach to work in the first place, corporations’ view of ESG must first shift from simple compliance to a valuable growth opportunity. Unilever's ‘Sustainable Living Plan’ exemplifies this. First introduced in 2014, the plan focused on environmental and consumer well-being. In 4 years, the Sustainable Living brand grew 69% faster than the rest of the business.

However, corporations must overcome significant challenges to achieve those same benefits. For example, modern supply chains cover multiple geographies and involving numerous tiers of suppliers, making it difficult to gather comprehensive ESG data. Data platforms like what we at Impactree have with RUBICR, are designed to address such challenges head on. By streamlining data collection from diverse sources, providing real-time analytics to identify trends and anomalies, and enhancing traceability to monitor the flow of materials and products, these platforms empower companies to gain a complete picture of their value chain's ESG performance. This comprehensive visibility enables organizations to implement targeted sustainability initiatives, optimize resource usage, mitigate risks, and foster collaboration across the value chain, driving meaningful progress towards a more sustainable and responsible future.

Conclusion

Meaningfully addressing the climate crisis requires more than awareness; it demands a fundamental shift in our approach to sustainability. More importantly, a balanced strategy combining top-down government leadership with bottom-up citizen engagement. And ESG provides the best courses of action for both parties.