How do we ensure net zero emissions in turbulent times?Here’s what business leaders have to say

As highlighted in the 2023 Global Risks Report, the world faces highly interconnected, complex and dynamic political, economic and social risks in 2022. The resulting disruption to food, energy, networks, supply chains, finance and global security shows how quickly unanticipated shocks can jeopardize the race to net-zero emissions by 2050.

It sets out the challenge that governments, business and the public must face together: how to navigate geopolitically challenging conditions to achieve an unprecedented systemic transformation to decarbonize the world economy.

Business organizations are being asked to examine their products, value chains and processes to enable this net zero transformation, while managing risk and building resilience in the face of ongoing economic shocks.

With these two pressures in mind, we asked business leaders what short- and long-term actions they are taking on these fronts, and what are the key parameters of their sustainability strategy, which also highlights resilience.

Bonnie Y Chan, Head of Listing, HKEX

We believe that sustainable and resilient business go hand in hand, as integrating ESG and net zero principles into business strategy will only make companies more agile and better prepared to respond to sudden changes – whether supply chain disruptions, geopolitical Rising tensions are also an ongoing challenge related to the pandemic. To incorporate net zero principles into business strategy, companies need to start with the board of directors, as change from the top is most effective.

This means that board members need to promote a good ESG management culture and adopt an ‘ESG mindset’ when setting the strategic direction for their businesses. With the right mindset and investment tools, companies can establish an effective internal governance and implementation framework—covering areas such as risk management, measurement, and reporting—to implement a climate strategy across the organization.

At HKEX, we see ourselves as change agents in Asia’s sustainable transformation. As a regulator, market operator and listed company, we drive the sustainability agenda through listing regulation, advocacy and education to encourage cultural change within the organisation. For example, we provide a clear framework and guidance to our markets through our Corporate Governance Code and ESG Guidelines.

We also foster a vibrant sustainable financial ecosystem through our partnerships, products and people to finance the transition to a more sustainable, low-carbon future. In October 2022, we launched a new carbon marketplace – Core Climate – linking capital with climate-related products and opportunities in Hong Kong and beyond.

Amy Barnes, Head of Sustainability and Climate Change Strategy, Marsh

Coronavirus disease. Ukraine war. Climate-driven increases in floods, droughts and fires. Recent serious events have highlighted the fragility of the corporate ecosystem.

Businesses that understand and manage complex risks can protect their bottom line and stakeholders while transitioning to a more resilient model.

Determining resilience parameters requires executives to consider the risk of disruption beyond their plants and assets. The corporate ecosystem extends to key suppliers and their suppliers, to raw materials and infrastructure business continuity depends on – whether it is storage, transport, logistics, packaging, grids or fuels.

Every business relationship creates a vulnerability, and it needs to be understood how vulnerable it can make the business. A better understanding of these risks and how to manage them will make operations more resilient as climate changes or geopolitical tensions rise.

Marsh McLennan is building a unique platform to expose vulnerabilities. Through a sophisticated combination of supply chain mapping, data imaging and climate science, combined with state-of-the-art risk modeling, we help clients quantify the impact of specific risks in terms of downtime and financial loss. With this, executives can control their risks and develop sustainable and resilient strategies.

Risk resilience at the executive, board and risk manager level emphasizes proactively making better risk-based decisions rather than reacting to crises or events.

According to the 2023 Global Risks Report, organizations should focus their resilience efforts on accelerating investments in green energy, climate and nature; improving the health and well-being of employees; and strengthening cyber resilience.

Especially for green energy transitions and adaptive risk mitigation strategies, accelerated investments are critical for long-term climate resilience.

Despite rising global investment in clean energy—expected to exceed $1.4 trillion by the end of 2022—hurdles to transitioning to a net-zero economy remain. However, new approaches to risk modeling, assessment, and allocation can help businesses, governments, and financial markets overcome these barriers and accelerate transformation.

These approaches may be applicable to newer energy security and sustainability programs that leverage green incentives designed to stimulate the economy.