Net Zero Planning Requires Both Realism and Imagination

Companies everywhere are promising to drop their greenhouse gas emissions. For example, companies representing more than 90% of global GDP have already committed to some form of net zero target (net zero is a state where any new greenhouse gas emissions are balanced by removals.)

In many cases, however, companies aren’t yet acting on their net zero goals. Sometimes, that’s because the future is so uncertain. Companies want to keep delivering their products and services, but the technology doesn’t exist to do so without emissions. Consider the company that delivers farm equipment to remote regions, where no charging stations exist for electric fleet vehicles. Or, a company that produces food, but can’t source carbon neutral food packaging.

These companies are in a tricky position. To avoid the worst impacts of climate change, they must start cutting emissions now. But how can they take assertive action, when the right technologies don’t yet exist?

This article describes how one of the world’s largest dairy companies, Arla Foods, is tackling that challenge. Keep reading to learn how Arla is mapping their net zero pathway. They are balancing future imagination with realistic short-term action.

Why Companies Don’t Act on Net Zero Goals

Corporate net zero goals are proliferating globally, but considerably less short-term action is being taken. This is a problem. According to the Science-Based Targets Initiative, to limit warming to 1.5°C (the threshold at which climate change impacts get much worse), companies must cut 50% of their emission by 2030 and achieve full net zero by 2050. That means companies must start acting now and sustain their innovation and momentum into the future.

There are many reasons that a company may not be taking short-term action on its net zero goal.

Lack of genuine commitment

If you’re reading this article, you’re probably pretty committed to your net zero goal; But not everyone shares that ambition. Some companies enjoy the public relations benefits of net zero commitments but don’t prioritize or resource their goal. Recent research coined the term ‘futurewashing” to describe this phenomenon.

Future uncertainty

The transition to net zero will require companies to act in the present, without knowing which technologies, materials, or policies will exist in the future. The technology may not exist yet to fully decarbonize your operations – or maybe it exists, but your region lacks the supportive policy to make the technology financially viable. What do you do? If you wait 10 years until that new technology is viable, you will miss the opportunity to cut emissions now. You may eventually achieve net zero – but in the meantime, the world will blow past the critical 1.5°C target of the Paris Accord.

Short-term demands

Another challenge is the need to keep delivering on short-term demands. While a company is waiting on a new technology, developing lower-carbon products, or building relationships with suppliers for scope 3 emissions reporting, they must continue delivering existing products and creating shareholder value. If firms aren’t careful, short-term demands can overshadow long-term net zero planning.

This article shows how a Danish company – Arla Foods – is navigating these tensions and taking decisive action to reduce emissions.

How Arla Foods is Balancing Short-Term and Long-Term Climate Action

We recently studied the net zero planning process at the Danish dairy company Arla Foods. In March 2019, Arla Foods set a goal to become net zero by 2050. They are implementing company-wide efforts, like reducing emissions on farms, using fossil-free fuels, optimizing transportation, and reducing the carbon footprint of product packaging.

We specifically followed the work of the Sustainable Packaging Workstream (hereafter called ‘the workstream’). This is a group of senior managers charged with transitioning to lower carbon packaging, like yogurt cups and milk cartons. To motivate quick action on emissions reduction, the workstream created a 5-year and a 10-year packaging goal: 100% recyclability by 2025, and 0% virgin plastic inputs by 2030. We wanted to know how the workstream would plan to achieve these goals and develop a sustained course of action to reach its long-term net zero target.

To understand their process, we did a few things. We watched the team’s strategic planning meetings in 2020; we interviewed 24 Arla leaders across a range of functions, like innovation, brand and business development, and sustainability; and we reviewed documents, including reports, newsletters, and press releases. Once we had collected and analyzed the data, we then used feedback sessions with key Arla decision-makers to discuss our interpretations.

Our research shows that workstream staff used a three-phase process to balance short and long-term strategies. We describe their process below.

Don’t work in the food sector? That’s OK. This process is relevant across sectors!    

A Three-Phase Process for Net Zero Planning

Arla Foods’ approach to net zero planning unfolded in three phases – which are the same three phases your company can use. Those phases are:

1. Imagine individual solutions. Be sure to include solutions that exist already and solutions that don’t exist yet, but are likely to exist in future.

2. Integrate solutions into pathways. How could the most promising solutions be combined into coherent bundles, called pathways?

3. Stretch pathways to ensure they will meet long-term goals. Confirm that the pathways you’re considering will be enough to ultimately achieve net zero.

During each of the phases above, Arla’s staff also used a few tricks to improve their planning. They broke planning into distinct categories, making it easy to keep conversations organized. For example, they talked about solutions for yogurt cups separately from solutions for milk cartons.  At each phase, they also thought about the big picture and how emerging solutions were connected to other aspects of their company. For example, which solutions would consumers prefer? Which solutions would require new partnerships, or new internal processes? Finally, they were constantly calculating (and recalculating!) the costs and benefits of various solutions, so the most promising solutions could be prioritized.

Net Zero Planning at Arla Foods

Here’s are the details of how Arla’s process unfolded.

Step 1: Imagine individual solutions

First, Arla got creative. The team brainstormed a range of possible solutions. Some were already available through existing suppliers, like recycled plastic inputs. Other solutions, such as packaging made entirely of paper, weren’t yet available at all.

Once Arla staff identified potential solutions within each packaging category, like yogurt cups and milk cartons, they thought big picture about the solutions. Were they available through current suppliers? When would new technologies be market-ready? Would Arla’s internal processes need to change? How might the solution affect the consumer experience?

Describing these details, even if they were hypothetical, helped the team get a sense of each solution’s feasibility and timeline. It also revealed unexpected complexity. For example, changing the cap on a milk carton may not seem radical, but it would be a huge investment for Arla. The shift would require a new cap to be developed, new materials, and new internal processes and equipment at Arla’s own production facilities.

Finally, the team did rough calculations on the potential benefits of each solution, including emissions reduction potential, and economic and logistical feasibility. These calculations, although not yet precise, helped the team identify promising solutions, even at this early stage.

Step 2: Integrate promising solutions into pathways

Based on what they learned in phase 1, Arla’s team prioritized promising solutions and bundled them into potential pathways. The goal was to understand, “How can these solutions complement or build on each other?”

To keep the conversations streamlined, staff continued talking about each product category, such as milk cartons and yogurt cups, separately. Within each category, they explored which solutions should be rolled out simultaneously. Could they pair a future technology, like paper-based packaging, with more feasible short-term changes, like using more recycled plastic? To simplify their planning and operations, the team also prioritized solutions that they could ‘go all-in on,’ using the same material across multiple products.

This process also required the team to think about the bigger picture. For example, if they needed new materials, what was available? Could they get multiple solutions from the same supplier? (Sometimes, this exploration even sparked innovation. For example, one supplier offered to explore whether one of their new ideas was feasible.)

Once the team sequenced the solutions into potential pathways, they were able to roughly estimate the cost and emissions reduction potential of each pathway. These calculations were then reviewed by organizational decision-makers.

Step 3: Stretch promising pathways to ensure they meet long-term goals

Once decision-makers approved the pathways, the team had one more step. They had to create specific, time-bound milestones, to ensure their solutions were radical enough to achieve their climate goals. After all, if paper-based materials create less emissions than plastic, then total emissions will be lower if you shift to paper in 1 year, instead of 5 years. Sometimes, the timelines involved uncertainty. There was no guarantee when paper-based caps would be available, for example. Here, the team made a ‘best guess.’

This process was more straightforward for some types of packaging than it was for others. For example, for milk cartons, fiber-based technologies were quite advanced, and were the single, most promising pathway. Technologies and suppliers were known, and a timeline could be more easily predicted. It was also easier for staff to understand the implications of milk carton changes on their own operations.

Yogurt cups were more challenging. The short-term solutions would rely on recycled plastic inputs. As paper-based materials became available, Arla would begin the shift to paper, but that timeline wasn’t guaranteed. There was a lot of guesswork around future suppliers, technologies, timelines, and implications for Arla’s internal operations.

But ultimately, Arla’s team was able to create an informed and coherent story about which short-term and long-term solutions were best for their net zero journey.

Learning Doesn’t Stop

Once the Sustainable Packaging Workstream completed the process above, Arla baked packaging into its sustainability strategy. Shortly after, Arla was able to make sustainability a critical pillar in its broader corporate strategy.

But that doesn’t mean the work is done. The workstream is now busy measuring actual emission reductions, and ensuring the organization stays on track for its time-bound milestones. As new information becomes available, the team sometimes goes back to refine their original plans.

Balancing Realism and Imagination

Studying Arla taught us that achieving net zero is a lot like achieving any major life goal. You must start where you are. Do the things you can realistically achieve today. But don’t lose sight of your long-term dream. Allow yourself to imagine – and take steps towards – a future that could be wildly different.

Read the Original Article

Feuls, M., Hernes, T., & Schultz, M. (2024). Putting Distant Futures into Action: Path Enactment Toward Distant-Future Goals. Academy of Management Journal. https://doi.org/10.5465/amj.2022.0257