The role of CEOs in the transition to Net Zero carbon emissions

The role of CEOs in the transition to Net Zero carbon emissions

Author: Florentina Susnea, Managing Partner, PKF Finconta

As the conflict in Romania's neighborhood continues, the impact it has on humanitarian and environmental issues is growing. The signs of climate impact are multiplying and amplifying as ammunition and fuel depots are destroyed, and the threat of the destruction of nuclear power plants or even the use of strategic weap-ons is still looming.

On the other hand, for many years, commitments have been made at the state and company level to reduce carbon dioxide emissions. Capital markets include the risk of increasing CO₂ emissions as a factor for investors in setting the prices of traded assets, and Net Zero is the most talked about desideratum because COO emissions are still generat-ed, but are offset by the same amount elsewhere. The total net emissions are then zero.

Most national and international climate goals aim to reach the Net Zero target by 2030 or 2050. To achieve this, emis-sions must be reduced, and emission compensation measures are also absolutely necessary to achieve these goals. It is clear to executives that the transition of companies from zero to zero CO₂ pollution is not easy, but it is possible if they take into account the following five factors.

1. Risk management

There is a very real risk to the affordability of the costs and effects of the transition to Net Zero for many companies in the absence of compensatory measures. For example, companies need to understand the new behaviors of consum-ers informed about the sustainability and impact of production technologies on the environment.

CEOs also need to know the impact of the costs of transitioning to Net Zero on existing products and services. Another aspect is how communities are supported so that they are not left behind by changes in the labor market as the world moves to an economy that focuses on Net Zero emissions.

There is also a risk that the transition itself will be missed if not enough capital is allocated to acquire new, low-emission assets or to responsibly withdraw high-emission assets from CO₂.

2. Overcoming work cliches

Achieving the level of Net Zero emissions will require overcoming traditional ways of working and building new ways of working that will expand transparency and collaboration between companies in the same industry, but also between different industry sectors.

The constructive actions taken during the pandemic have demonstrated the world's ability to innovate and intervene on a large scale to support both lives and livelihoods. This challenge of achieving Net Zero emissions will require similar efforts, albeit sustained over many years, even decades, and on a much larger scale.

3. Adaptation and resilience

Due to the inertia of our geophysical system, a certain amount of heat is already stored in the atmosphere, even with the measures provided to reduce CO₂ emissions. Countries and companies should therefore significantly strengthen and accelerate their efforts to adapt technologies and measures to mitigate the immediate harmful effects of climate change.

According to a World Economic Forum report, the benefits for companies taking rapid action for Net Zero are immedi-ate and consistent: attracting valuable employees becomes 40% easier, the annual compound growth rate increases by 4 to 25 percentage points from product sales green, and financing costs are declining.

4. The contribution of the factors involved

As specific actions evolve over time, all stakeholders must decide to start the transition now. From simple employees to leaders, everyone needs to be involved in this transition, understand the scientific elements, and take steps to: risk assessment and design emission reduction plans, conserve and regenerate natural capital, adapt and build resilience, reallocate capital and responsibly reduce high-carbon operations, doubled by the expansion of low-carbon operations, as well as the involvement and positive influence of investors, customers and suppliers.

In conclusion

There is no single solution to the challenge of reducing CO₂ emissions, but a lot of elements to consider individually and together. Achieving the Net Zero CO₂  emissions target by 2050 is estimated at an annual expenditure of EUR 9.2 trillion for physical assets in the energy sector, EUR 3.5 trillion more than the current level of expenditure. Economic and social, infrastructure and governance and institutional adjustments will play a key role in the success of this neces-sary transformation.

About PKF Finconta

For more than 27 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR, and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR, and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas, we tailor our services to your business and your needs: audit, corporate finance, tax, bookkeeping, and accounting advisory services, transfer pricing, payroll and personnel administration, and insolvency.