Further transforming business models in the private sector
Methodologies for setting targets and assessing climate alignment: current status and prospects for better incorporating nature and resilience
Economic players are under increasing pressure to transform their business models — environmental sustainability, technological leadership, security of natural resources — whilst strengthening their competitiveness and resilience.
On environmental issues, collective efforts have so far focused on climate change mitigation: the Paris Agreement sets the objective of making financial flows consistent with a low-carbon and climate-resilient pathway, known as ‘alignment’. In Europe, the additional investment required for climate action alone is estimated at €620 billion per year between now and 2030, the bulk of which is expected to come from the private sector — representing around 2 per cent of the approximately €33,000 billion in European savings that need to be redirected each year.
Numerous methodologies, both private and public, offer complementary perspectives on alignment, whilst remaining primarily focused on climate issues. These methodologies help guide capital allocation, financing and investment decisions within the economy, while encouraging the transition of businesses and sectors. This report is based on an assessment of these methodologies and highlights three limitations:
- Insufficient interoperability between methodologies for climate, nature and adaptation. Climate, nature and adaptation each rely on dedicated methodologies, designed separately. However, the Paris Agreement and the Global Biodiversity Framework cannot be considered in isolation: the effectiveness of one depends on the success of the other. Further work is needed to clarify how each set of methodologies takes account of the priorities of the others, to ensure their interoperability, and to develop more consistent or even comprehensive methodologies covering both climate and nature.
- There has been insufficient consideration at sectoral level. The sectoral coverage of methodologies varies, and the choices made for a given sector — decarbonisation pathways, indicators, weightings — can be inconsistent. More in-depth work at sectoral level appears necessary to identify the most relevant transformations along value chains, and the indicators that genuinely incentivise transformation and competitiveness in each sector, as well as investment in innovation in the face of global challenges.
- A still marginal focus on the circular economy, particularly the “product as a service” economy, which reconciles climate and nature. Whilst the extraction and processing of resources account for half of global GHG emissions, current methodologies still provide too little incentive for circular models — particularly “product as a service”-based models, where the seller retains ownership of the product throughout its life cycle and ensures its use via a long-term contract. These models represent a natural point of convergence between climate and nature, as well as a lever for competitiveness and strategic autonomy, the reorganisation of value chains and economic security.
Alignment methodologies have become more sophisticated, evolving from a simple measurement of the carbon footprint to a multidimensional assessment of transition plans. The ability of the various tools to effectively steer capital allocation towards a sustainable, resilient and competitive economy now depends on their capacity to integrate nature, adaptation and sectoral dimensions within a consistent framework — a task that both studies in this collection argue should be undertaken jointly.
The challenge is to move beyond siloed approaches, to understand interdependencies and to anticipate future developments. The quality of decision-making itself becomes a strategic capability.
