The limited adoption of digital technology for net-zero reporting is placing companies at significant risk of negative consequences, according to a Verdantix study.
The study from the research and advisory firm surveyed 350 net zero leaders and found companies are facing risks due to the insufficient use of digital tools for achieving net zero goals. Only 8% of the surveyed firms believe they possess the necessary software tools to effectively achieve their net zero targets.
In their inaugural report titled “Verdantix Global Corporate Survey 2023: Net Zero Budgets, Priorities and Tech Preferences,” Verdantix highlighted that relying solely on in-house digital capabilities is insufficient for achieving net zero. The report identifies the lack of climate change expertise at the board level as the main obstacle to implementing effective net zero strategies.
The lack of climate change expertise is particularly concerning for US firms, as the proposed climate disclosure rule by the SEC may require clarity on whether any board members possess climate change expertise.
The report also highlights a significant increase in companies publicising net zero targets, with over one-third of the world’s largest listed firms now doing so, compared to just one-fifth in December 2020. With impending regulations that will impact economies worldwide, tens of thousands of firms are at risk of severe consequences, including legal penalties, reputational damage, financial risks, investor pressure, and employee dissatisfaction, if they fail to accurately report environmental, social, and governance (ESG) and climate information.
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Given these circumstances, it is crucial for companies to swiftly adopt digital technologies to provide accurate and high-quality carbon data. This step is essential to meet the growing demand for regulated climate disclosures and the amplified stakeholder pressure for transparency and performance.
Ryan Skinner, research director at Verdantix, highlighted the urgency for companies to embrace digital technologies to deliver reliable and high-quality carbon data: “The low market penetration of net zero reporting tools highlights the urgent need for companies to adopt digital technologies to deliver reliable and high-quality carbon data. With regulated climate disclosures and increasing stakeholder pressure for transparency and performance, it’s critical that firms prioritise decarbonization and invest in net zero reporting tools.
We anticipate a significant increase in spending on net zero digital tools over the next few years as companies seek to avoid penalties and demonstrate their commitment to sustainability. However, achieving success in decarbonisation will require consistent collaboration with other departments to drive change at the operational level.”
According to Verdantix’s projections, the expenditure on carbon management software is expected to reach $1.4 billion by 2027. The survey indicates that budgets for net zero and climate change initiatives are anticipated to experience substantial growth in 2023, with most companies expecting double-digit spending increases. However, effectively achieving net zero goals will necessitate ongoing collaboration with other departments to drive decarbonisation efforts at the operational level.
The Verdantix Net Zero Global Corporate Survey offers insights into the budgets, priorities, and technology preferences of net zero leaders across various industries and geographies. The full report, “Global Corporate Survey 2023: Net Zero Budgets, Priorities and Tech Preferences,” can be accessed here.
