Net zero transition planning as a change management process
By Darian McBain, CEO and founder of Outsourced Chief Sustainability Officer (OCSO) Asia and Visiting Professor in Practice to the Grantham Research Institute
Transition planning is currently too data-focused and should instead include a people-centred change management approach to show society that the net zero world is one we should all be wanting to strive for, writes Darian McBain in this commentary for the Sustainable Finance Leadership Series.
We have all heard many times that the facts do not change people’s minds about climate change. Around the world, people are increasingly seeing and feeling its impacts, from droughts to floods, extreme heat to extreme cold. The social consequences could be catastrophic, including impacts on health, access to food and water, livelihoods and geopolitics. Rather than data, it is this often traumatic lived experience that is starting to overcome the longstanding cognitive bias against action.
The scientific evidence that climate change is real and happening has been available for decades, with the first IPCC Assessment Report published as far back as 1990. In fact, scientific consensus on human-caused climate change is estimated to be over 99%, one of the greatest rates of consensus among the different disciplines. Not only are the scientists convinced but the financial sector is too, moving from an initial focus on climate risk to a new spotlight on transition planning, through a data-led, disclosure-based approach.
Growing momentum for transition planning
It is worth considering how this momentum for transition planning evolved, and why the focus is on data and disclosure. The landmark speech in 2015 by Mark Carney, while Governor of the Reserve Bank of England on Breaking the Tragedy of the Horizon – Climate Change and Financial Stability led to a greater consensus that the financial sector has a significant role to play in halting climate change to prevent the instability that will ensue around the world. That year, under the auspices of the Financial Stability Board, the Task Force on Climate-related Financial Disclosures (TCFD) was formed to develop a disclosure framework for climate-related financial risk. Then in 2017, the ‘coalition of the willing’ of eight central banks started the Network for Greening the Financial System to develop a range of climate change scenarios, planning for net zero central banking, and even consideration for how to take into account nature in the decarbonisation journey.
In 2021, ahead of COP26, the Glasgow Financial Alliance for Net Zero (GFANZ) was born, bringing together over 550 different financial institutions to commit to a pathway aligned with the Paris Agreement and science-based trajectories to shift the global economy to net zero greenhouse gas emissions. Publication of transition plans quickly became a way for GFANZ members to turn high-level commitment into real world implementation. In the same year, the International Sustainability Standards Board (ISSB) was launched by the Trustees of the IFRS Foundation.
Widespread agreement on a metric-led approach… yet slow progress?
Through this evolution, building on the science, a very economics-focused, metric-led approach has been introduced to solution-making for climate change. This approach has extended beyond scientists and economists. By November 2022, around 140 countries had announced or were considering net zero targets, covering close to 90% of global emissions, up from just 70 countries in May 2021. Further, over 2,000 companies globally have committed to transitioning to net zero through the Science Based Targets Initiative (SBTi). But if the scientists and economists agree, the politicians and corporations agree, why is progress on the transition towards net zero still so slow?
I think the reason is hidden in plain sight – it lies in a disjuncture with the notion of ‘transition’ itself. Transition is all about change and change management, a “process or a period of changing from one state or condition to another” (Oxford English Dictionary). So far, much of the focus in net zero transition planning has been on data, measurement and disclosure. It started with the E or Environmental pillar of ESG, with Governance beginning to gain traction in planning guidance (for example, from GFANZ). The Social dimension still lags behind, although recognition of the importance of just transition in net zero plans is beginning to take root. In short: net zero transition plans risk being developed with an environmental data mindset rather than a focus on the operational and human outcomes of changing core business practices.
From data to change management
This data focus becomes a problem when we need a process to reimagine our future in which personal, societal and economic growth are decoupled from greenhouse gas emissions. ‘Net zero emissions’ focusses on carbon dioxide-equivalent emissions, which are both comparable across different geographies and have the ability to be added, subtracted and potentially exchanged (on which the carbon markets are based). This ability to have a comparable proxy for addressing climate change is attractive, but the simplicity of comparison hides the complexity of how many systems will need to change for human society to genuinely experience a ‘just nature transition’.
From society’s perspective, we find it difficult to picture a positive future. I started to think of the future worlds that are part of popular cinema that may coincide with our current transition planning timeframe to 2050. Blade Runner, Mad Max and Dune come to mind and they are all pretty bleak, certainly not places I would want to live in. And then I tried to think of the movies that portray an optimistic future. I couldn’t think of any so I polled my friends; other than Japanese solarpunk anime, not many options came up. There seems to be a serious cultural deficit in creating our vision for change. For many, net zero is not yet a place we want to live in.
I would advocate considering transition planning as a change management approach, to engage people on their future, guided by science. Net zero transition planners can start by looking at the lessons learned from organisational change management – a structured, coordinated approach taken to move an organisation from a current to a future desirable state, with collaboration with people at its heart. Both organisational change and the net zero transition can be adaptive or transformational. Kurt Lewin pioneered the social research into change management, studying group dynamics in the 1930s, well before current concerns about climate change and its impacts. However, his observation that “It is not the similarity or dissimilarity of individuals that constitutes a group, but interdependence of fate” seems very apt when considering how as societies we must adapt to climate change and the interdependence of our fates. Since Lewin’s research, much of the development of organisational change management has taken place in the business world. Multiple models exist, and most focus on how to create a shared vision for the future, enabling change, accelerating the pace and adapting to changing conditions. All these aspects could be usefully applied to net zero transition planning.
As a sustainability practitioner I have long advocated that sustainability champions are all about change management. If you are supporting business-as-usual, unless you work for a very enlightened organisation, you are unlikely to be generating the change that is required to transform and adapt to a new sustainable business mindset. To genuinely have a chance of reaching net zero, we need to bring a more human-centred change management approach to transition planning: an approach that envisions and develops strategies for a future we want to live in, rather than a future based on metrics and historical data.
What we have learned from successful change management processes in the business world is that there needs to be a shared vision or common understanding of what we are trying to achieve. Data (or the number zero specifically in this case) is not a vision for the future, any more than the answer to the great question of life, the universe and everything being 42. To think about new food and transport systems, different ways to generate energy, new skills and beyond, we need to engage our imaginations as well as recognising the cognitive dissonance that exists today between the world we think we will be living in (Blade Runner) versus the world we want to live in (unknown). We need to better execute transition planning as a process of transformation and break the tragedy of the data-limited future.
The author would like to thank Nick Robins and Josie Murdoch for their comments on an earlier draft. The views in this commentary are those of the author and do not necessarily represent the views of the Grantham Research Institute.