3 ways CEOs can tackle climate change and build a net-zero economy

A growing number of CEOs get it: they have an obligation to address climate change. Advocates and environmentalists everywhere are cheering commitments by big companies that demonstrate the various ways they are taking on climate change, from asset manager BlackRock’s push for portfolio companies to disclose net-zero plans to IBM’s commitment to hit net-zero greenhouse gas emissions by 2030.

As the US rejoins the Paris Climate Agreement and we approach the UN Climate Change Conference (COP26) in Glasgow this November, we’ll likely see a steady drumbeat of announcements in the months to come. But can companies really get there?

While many leaders I’ve spoken to are optimistic about their ability to use cleaner sources of energy, reduce buildings emissions and improve energy efficiency, making commitments is one thing; meeting them is quite another.

As one energy utility CEO told me, he thought 80% of getting to net-zero was achievable. The hard part was the remaining 20%, because of everything from the intermittency of renewable technology to the high cost of energy storage to the challenge of upgrading our grid infrastructure, “The last mile” as this CEO called it.

So even though we’re just starting the race, it’s that last mile that we need to keep in mind. Here’s three key things companies can do to make it to the finish line:

Large corporations generally have the infrastructure, networks and the resources to scale technologies that startups don’t. But we can’t expect a successful company to abandon a corporate culture developed over decades to suddenly launch a quixotic quest for blue-sky innovation.

Fortunately, corporations are showing a greater interest in supporting climate entrepreneurship – and government is playing a part as well. The Department of Energy offers Lab-Embedded Entrepreneurship Programs, in which top scientists and engineers are assigned to US national laboratories where they perform early-stage research and development and train to be entrepreneurs. Providing scientists with entrepreneurial acumen and skills gives them a better chance to succeed in the innovation ecosystem and seize commercial and investment opportunities. Using balance sheets or corporate philanthropy, the private sector can and should partner with government and the NGO community to support promising new developments.

And it’s not just about championing the little guy. Microsoft, for example, has committed to being carbon negative by 2030 and water positive with net-zero waste. At the same time, its Climate Innovation Fund focuses on investing in developed climate solutions that require capital to scale in the market. The company prioritizes technologies that are relevant to its core business and help suppliers and customers reduce their carbon footprints.

Big companies have no problem making their voice heard in policy debates – even those outside their areas of expertise or narrow self-interest, as we saw last spring when CEOs endorsed police reform during racial justice protests. At the same time, early-stage entrepreneurs lack the capacity and expertise to engage with policymakers, which has led to a fundamental misunderstanding of how early-stage innovation works in many parts of government. One way to bridge that gap would be for corporates to lend their lobbying expertise to climate innovators to ensure the trillions of dollars President Biden promises to invest, as part of his Build Back Better plan, are effective in incentivizing entrepreneurs and scientists. At a minimum, corporations should swear off lobbying against climate change regulation, which often undermines them.

A goal of net-zero carbon emissions by 2050 is a laudable one. But achieving it will require a full-scale review of a company’s business strategy, including products, operations, vendors and supply chains. The good news is that while 60% of the 100 CEOs at large companies surveyed recently said they have already taken that important step, four in 10 of these companies haven’t. The more companies with a net-zero strategy, the clearer the demand for “last mile” innovation will be.

Regarding climate, Jesper Brodin, the CEO of Ingka Group, which owns IKEA, put it simply: “We have definitely shifted the dialogue from the ‘why’ and are now focused fully on the ‘how.’” We need more leaders who are ready to ask: how does my company reach net-zero? If current technology doesn't get us there, how can we support the research and startups that could?

Getting there won’t be easy. But after developing lifesaving vaccines faster than ever, there’s no reason we can’t apply the same urgency and commitment to problem-solving to addressing climate change. And we have to start now.