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Welcome to FNEI Insights, the FiscalNote Executive Institute’s monthly thought leadership blog where we interview executives about top issues affecting companies, including ESG and sustainability; diversity, equity, inclusion, belonging, and accessibility; technological innovation; global risk, and more. This month we spoke with Martin Chilcott, Chairman and CEO of Manufacture 2030, and Suzanne Murtha, Vice President for Connected and Automated Technology at AECOM, about how companies should prepare for a radically different regulatory and legal environment in the years ahead in relation to addressing climate change. 

For climate watchers, the UN’s Intergovernmental Panel on Climate Change (IPCC) is a reliable bearer of grim news; the IPCC’s latest report, released in early April, held true to form. Carbon emissions continue to rise steadily — complicating efforts to keep average global temperatures below 2 C of pre-industrial levels. Solar and wind power still accounted for only 5.7 percent of global energy consumption in 2020, while fossil-fuel-burning oil, coal, and gas tallied more than 83 percent. 

Countries and communities face a growing “adaptation gap” too, the IPCC noted, as sea levels rise, storms become more extreme, droughts worsen, and crop yields falter. At the same time, the war in Ukraine and surging energy prices are further testing governments’ resolve to meet their climate commitments.

Despite such setbacks, the urgency of the climate challenge means that the world must, and will, press on with its mitigation and adaptation efforts, explained Martin Chilcott, Chairman and CEO of Manufacture 2030, a consultancy firm. Companies, in particular, should prepare for a radically different regulatory and legal environment in the years ahead. “[Unaddressed climate change] is existential for modern society,” said Chilcott. “I don’t think humanity will disappear, but it won’t be anything like the thing we have now.”

An Economic Revolution

Manufacture 2030 helps firms measure and reduce their “scope 3” emissions (i.e., the direct and indirect emissions associated with producing a good or service). A common mistake companies still make, observed Chilcott, is to view their emission-reduction efforts too narrowly. “You can look at climate change in a whole series of different ways. Many look at it [merely] as a risk management, compliance, and reporting [exercise].” 

Yet to make the most of the changes ahead, organizations need to embrace a bigger vision. “This is an economic revolution that’s taking place. And I don’t think we always think about it like that,” said Chilcott.

Transform or Die

Another common mistake business leaders make is to assume that, because some firms and industries have thus far been relatively spared from the harm of climate change, those same benign conditions will endure. “Some sectors of the economy, like agriculture and tourism, have been affected earlier than other areas. But all industries will ultimately be massively transformed,” he added.

When it comes to transforming their businesses to become carbon neutral, tinkering won’t do. Bold ambition and action are instead the only viable option, argued Chilcott. “[Carbon] transformation requires radical mitigation and radical adaptation.” 

Like the internet revolution before it, today’s energy transition “represents an opportunity for business to transform and build competitive advantage, improve efficiency, or be outcompeted,” added Chilcott. “In exactly the same way we saw what seemed like very healthy businesses disappear almost overnight [with the rise of the internet], we’re going to see similar sorts of things [with the energy transition]. For companies, it will be … transform or die.”

Transportation Leading the Way

As for a key sector and company that will help lead the way toward a “net-zero” economy, pay extra attention to transportation and, in particular, Tesla. “Tesla is going to ‘eat’ some of the traditional car companies,” predicted Chilcott “in the way that Wikipedia destroyed Encyclopedia Britannica.”

Indeed, over the next decade, the spread of electrified cars and helicopters can play a critical role in reducing not only emissions but also traffic-related congestion and deaths, said Suzanne Murtha, Vice President for Connected and Automated Technology at AECOM, a leading infrastructure consulting firm. More sustainable transportation will, in turn, provide numerous other knock-on benefits — from healthcare to jobs to education — especially in underserved urban communities, added Murtha.

The Biggest Changes Are Yet to Come

Even as business leaders navigate the ongoing energy transition, it’s a safe bet to assume that the biggest changes for their companies, as well as for society, have yet to come. “What we’ve seen [to date] are people playing with a bit of reporting and playing on the edge of decarbonization,” said Chilcott. “We’re only just beginning to see the real [climate-related] innovation.”