Soheila Yalpani, the Co-Founder and COO of TerraScale Inc., believes that businesses need to prioritize climate transition efforts over traditional ESG strategies in response to the escalating climate crisis. While ESG criteria have gained prominence as a framework for evaluating corporate sustainability practices, critics argue that the lack of standardization and transparency, as well as inconsistent regulations, undermine its effectiveness and make it susceptible to manipulation and greenwashing.
Unlike ESG, which encompasses a broad array of environmental, social and governance considerations, climate transition specifically focuses on implementing comprehensive decarbonization and adaptation measures to combat climate change. This involves transitioning to renewable energy sources, reducing greenhouse gas emissions, and building resilience to climate impacts. Yalpani stresses the importance of concrete measures that reduce emissions and mitigate environmental risks in addressing climate change.
The urgency of implementing climate transition efforts is well documented, as global temperatures have already risen by approximately 1.1 degrees Celsius above pre-industrial levels. Without rapid and substantial reductions in greenhouse gas emissions, the world is on track to exceed the critical threshold of 1.5 degrees Celsius of warming, leading to catastrophic consequences. The amount of heat-trapping greenhouse gases in the atmosphere reached a new record in 2022, further highlighting the need for immediate action.
There are numerous opportunities for companies to innovate and grow through climate transition efforts, as renewable energy accounted for 81% of all new power capacity additions globally in 2021. The transition to a low-carbon economy could lead to the reallocation of labor, with about 10 million net jobs gained by 2050 driven by investments in renewable energy, energy efficiency, and sustainable infrastructure. These efforts not only help mitigate climate risks but also spur economic growth and job creation.
Businesses can incorporate climate transition efforts into their plans by setting ambitious emission reduction targets, investing in renewable energy and energy efficiency, adopting sustainable practices across supply chains, building resilience to climate risks, and engaging stakeholders to advocate for policy action. By prioritizing climate transition, companies can address critiques of ESG, align with stakeholder expectations, and seize opportunities for innovation and growth while contributing to a more sustainable future.
In conclusion, addressing the urgent challenge of climate change requires businesses to prioritize climate transition efforts over traditional ESG strategies. By targeting climate transition, companies can align with stakeholder expectations, mitigate climate risks, enhance resilience, and seize opportunities for innovation and growth while contributing to a more sustainable future. As part of the Forbes Business Council, Yalpani emphasizes the importance of prioritizing sustainability to build a more resilient and sustainable economy.
