Delivering on a business’s net-zero commitment often involves a tremendous transformation of its business model, which can take many years of hard work and commitment. This transformation involves revamping processes, shifting the organization’s product portfolio, and potentially building new capabilities from scratch.

Such an impactful transformation can only be delivered with a robust transition plan and a strong commitment from senior leadership. While most climate transition plans are still a work in progress, climate change has become a board-level concern for the vast majority of large European companies.

Last year, virtually all of them indicated they have adopted board-level oversight on climate-related matters, with approximately four out of five having sufficient expertise within their board. Similarly, around 78% have integrated climate as a recurring topic in regular board reporting.

Yet, there are still key differences between leading and lagging companies. Integrating climate-related KPIs within executive compensation is a good example. Approximately half of European companies have yet to make meaningful progress on incentivizing their senior leadership to deliver on their transition commitments. Meanwhile, a well-designed incentive system could help to reinforce strategic focus on the organization’s long-term transition by acting as a countervailing force against overly focusing on short-term pressures.