High-growth firms need ‘enablers’ to lead net zero transition – research

Report points to role played by standard setters and government policies.

“To remain effective in driving action aligned with climate science, target-setting frameworks must incentivise low-carbon, high-growth companies to lead on the net zero transition whilst also enabling and rewarding climate solutions providers for scaling-up to power that transition.”

Those are the words of the Carbon Trust in the climate consultancy’s “Grow to Zero” report, which outlines how target-setting standards like Science Based Target Initiative’s (SBTi) Corporate Net Zero Standard can incentivise responsible growth and at the same time enable global decarbonisation.

In the 23-page report, the Carbon Trust pointed out: “The scaling and deployment of low-carbon technology required for the global net zero transition has proceeded at varying speed across different sectors.

“High-growth firms can accelerate this process and decarbonise faster than peers by leveraging capital and flexibility to acquire newer, low-carbon assets and services, provided they have access to clean energy, financing, and supportive regulation.

“Strategic incentives – such as carbon pricing and innovation subsidies – combined with demand-side measures like green procurement can accelerate clean tech deployment whilst supporting growth and competitiveness.”

In the Carbon Trust’s view, it’s these “key enablers” or enabling conditions that will allow high-growth businesses to lead the net zero transition. These include updated target-setting standards and supportive government policy.

It was also highlighted that net zero frameworks, such as the SBTi’s Sectoral Decarbonisation Approach (SDA), need to evolve, as the growth of companies scaling low-carbon technologies can lead to increased reported emissions.

According to the Carbon Trust, high-growth firms with cleaner operations and value chains are disproportionately punished under the SDA approach.

“Companies starting from a high-carbon baseline are not heavily penalised, whilst those pursuing aggressive growth, even from a low-carbon starting point, are required to demonstrate disproportionately greater reductions,” the Carbon Trust explained.

“This feature of the SDA approach places an undue burden on fast-growing firms, including those developing and scaling low-carbon solutions, whilst not sufficiently penalising carbon-intensive companies that are consuming a relatively higher share of the global carbon budget in the near term.”

As for the impact of government policies, the Carbon Trust said governments should set effective frameworks and clear market rules, given that innovation in the private sector will not be enough in delivering the net zero transition.