Climate change is disrupting lives globally, but there are reasons for optimism. Declining emissions, renewable energy growth, and increased government and business action are driving positive change. With standardized climate data reporting and the right mix of incentives and regulations, we can accelerate the decarbonization flywheel.

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Many of us are coming face-to-face with the climate crisis. For me, it is right outside my front door as raging wildfires force evacuations in my Colorado hometown. This personal experience reflects a broader trend: about 85% of consumers report that climate change is disrupting their lives. Constant headlines about natural disasters and global peril make it easy to feel demoralized. The challenge might seem insurmountable – but that’s not the entire story.

Data shows we are on the precipice of a positive change in course, and momentum is on our side. With the right approach, we can achieve our goal of limiting global warming to the 1.5C target recommended by the Intergovernmental Panel on Climate Change (IPCC) and set in the landmark Paris Agreement. I am optimistic about our planet’s future. 

Reasons for optimism 

Four main factors inspire my positive outlook:

Emissions data

Reports from Bloomberg and Climate Analytics suggest that global carbon emissions will begin declining this year, which is a positive sign that our initiatives are working. We cannot declare success yet, but this downward trajectory bodes well for our chances of attaining the IPCC goal. 

Renewable energy availability

The technical feasibility of significantly reducing worldwide carbon emissions in the next ten years is no longer in question. Critical technologies for energy decarbonization are widely available and cost-competitive, including wind and solar power, battery storage, electric vehicles, and the power grid.

Businesses have significant motivation to use renewable energy. In many cases, it is cheaper than traditional fossil fuels and is not subject to dramatic price swings. Transitioning to renewable energy also mitigates supply chain risks, supports compliance with government regulations and satisfies investor and consumer demand for sustainability. The benefits are so apparent that Bloomberg forecasts that market forces alone will elevate renewables to account for 50% of energy production by 2030. 

However, many hurdles remain in developing sustainable energy sources for high-emitting sectors, such as cement and steel production and aviation. Other energy production and storage technologies need additional refining, including hydrogen power and carbon capture and storage. This fact is not entirely discouraging, as the existing low-carbon technologies are driving reductions while we work to address these additional challenges.

Business and government action

We have seen a seismic shift in government and business priorities as decision-makers realize the economic and moral imperative of addressing climate change. Governments are creating bold climate-related legislation. For example, the Inflation Reduction Act in the US incentivizes cleantech development, while the European Union’s Carbon Border Adjustment Mechanism essentially puts a carbon tariff on imports. 

In the private sector, 1,600 public companies worldwide have established aggressive, science-based targets for emissions reduction, while climate change and ESG are regular talking points in many board meetings. 

Increasing talent in climate tech 

The number of talented people flooding into climate tech has been astonishing. As any organizational leader can attest, talented and mission-driven people are the true catalyst for progress. We have more of the best and brightest people dedicating their careers to solving the climate problem than ever before.  

These factors have generated significant progress in the fight against climate change. We have done the hard part – building the flywheel and starting its movement. Now comes the big test: can we accelerate the flywheel fast enough to save the planet? With momentum on our side, it is within our reach. 

Accelerating Progress With Data

The market economy has contributed to our current situation, but we can leverage its tools to solve the crisis. Regulators must concoct market conditions to accelerate carbon reductions, which will require the right mix of carrots (rewards) and sticks (punishments). For their part, companies must understand the critical importance of sustainability for business longevity and make the most of the opportunities offered by regulations to move in that direction. 

The question is: what combination of carrots and sticks makes the ideal recipe for change? Calculating the necessary ingredients requires data. Mandating companies to report climate risk-related data should be the first step in building the right market conditions. With transparent, quality information, regulatory bodies can set benchmarks and design targeted, impactful incentives and regulations. 

Reportable data should include full value chain (scope 1, 2 and 3) emissions as well as product carbon footprint data so regulators, investors, customers and other stakeholders can understand a company’s comprehensive climate risk. 

Patchwork regulations hamper risk visibility. Depending on what climate data the companies are compelled to disclose, you may be comparing apples to oranges. Establishing a standardized global reporting framework creates a level playing field for evaluating climate efforts, allowing all stakeholders to understand a company’s risk and performance relative to its competitors. 

Standardized emissions data equips policymakers to set achievable targets and build regulations that drive change. For example, implementing penalties for violating an emissions threshold is ineffective when all parties are already compliant. Robust data allows regulators to set a benchmark that forces companies to make reductions, perhaps even designating different thresholds for different sectors. 

Consistent reporting requirements lighten companies’ regulatory burdens, and quality data supports business strategies. When organizations acquire product and company-level emissions measurements, they can create actionable plans to mitigate risks during the inevitable transition to a low-carbon economy. 

The EU’s Corporate Sustainability Reporting Directive (CSRD) makes a significant stride toward enhanced transparency and accountability in data reporting. The US is further behind, though the SEC’s climate disclosure rule will be a positive milestone if it survives its current legal challenges. However, a federal law on par with CSRD would create more consistency across geographies, making it easier for multinational companies to comply with regulations.

More on the topic: Sustainability Reporting in the Era of ESG: Best Practices and Emerging Trends 

The Government’s Sticks and Carrots

Governments must use every available legislative and regulatory instrument to incentivize decarbonization. Direct investments and positive incentives (carrots) encourage innovation and support the scaling of critical technologies. The Inflation Reduction Act is an excellent example of how government action can stimulate growth. 

However, we also need sticks, such as regulations that impose fines on companies for carbon-intensive operations. These tools have been used to good effect in the EU and are beginning to meaningfully influence markets. 

The current fragmented regulatory landscape and constant legal challenges are stymieing progress. Business leaders hesitate to commit to long-term investments when the future is unclear. A coordinated effort to create and enforce climate-related rules will establish the certainty necessary to spark progress. 

There is no perfect policy; everything has trade-offs. Governments must balance short-term economic considerations with long-term sustainability goals, recognizing that immediate disruptions may yield substantial future benefits.

The Market’s Sticks and Carrots

Market forces also significantly influence companies’ sustainability efforts. As consumers increasingly seek out sustainable brands and products, businesses risk losing market share to more environmentally conscious competitors. Investors place significant importance on ESG as well, with more than 70% believing that strong ESG practices boost returns. 

The B2B pressure for decarbonization has been mounting for years. As regulations compel more large companies to report value chain emissions, they are increasingly assessing whether their suppliers are partners or liabilities. Sustainability efforts provide a competitive advantage in business partnerships. 

Companies must also consider the long-term viability of their business models. Climate change disrupts operations with complications such as natural disasters, material shortages and supply chain disruptions. Additionally, the transition to a low-carbon economy will force companies to evaluate manufacturing processes and the utility of their products. For example, the demand for gas mowers will eventually drop to near zero. Failing to adjust business models to mitigate these risks threatens a company’s longevity. 

Obtaining transparent, quality data helps companies navigate these market pressures. Carbon accounting enables them to prove the impact of their reduction efforts to stakeholders while illuminating risks in their value chain. 

Now Is the Time to Act

History has shown that market economics spur rapid innovation. The current generative AI boom is a prime demonstration of market influence. Strong leadership and concrete action will provide the same boost to sustainability. 

We have the momentum and the tools to accelerate the flywheel enough to provide a livable planet for future generations, but only if we act now.

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