Climate change as a transformation accelerator: The case of Formula 1
According to the latest IPCC report, global warming of + 1.5 degrees Celsius will have catastrophic impacts worldwide. Countless weather events like droughts, heat waves and floods are already wreaking havoc around the world. These are all putting more and more people in precarious conditions (food insecurity, climate-related migration, access to drinking water, etc.).
Faced with the pressures exerted by all ecosystems, companies must take short-term action to reduce their greenhouse gas emissions. That’s what 44% of the organizations examined in a study are committed to doing by 2025. However, as the study shows, many companies are overlooking their Scope 3 emissions, which include all other indirect emissions that occur in a company’s value chain. It’s worth noting that Scope 3 emissions account for up to 50% of a company’s total emissions. Worldwide, the eight biggest supply chains are food, construction, fashion, electronics, consumer goods, automotive, professional services and freight transportation. That why it’s important to pay special attention to these sectors and to review their business models to lower the impact on GHG generation.
Let’s consider the transportation industry, which currently accounts for 25% of global CO2 emissions. With Formula 1 happening in Montreal this month, we wanted to take a closer look at this major event to better understand the transformational journey and business models of companies with a heavy carbon footprint. It’s difficult for an event like this not to come under the spotlight with regards to its carbon emissions. The road to becoming carbon neutral might be rocky if a transformational plan isn’t properly implemented from the start. We’ll use the example of Formula 1 to illustrate the steps organizations need to follow, such as measure their carbon footprint, identify opportunities for improvement, and plan and execute their vision to achieve short-term environmental goals.
F1’s carbon footprint
The green shift is gaining momentum in many industries, and Formula One is no exception. In 2019 its carbon footprint was over 250,000 tons of CO2. As part of its sustainability strategy, F1 aims to be net zero carbon by 2030. This plan will address the carbon footprint related to travel and logistics, which account for 72% of CO2 emissions, and that related to car engines, which make up less than 1% of CO2 emissions. Since 2014, Formula 1 has taken many steps to reduce the impact of its car engines, including hybridization, sustainable fuel use and electrification. The company strongly believes R&D in this area can greatly benefit the entire transportation sector. Sustainable changes in travel and logistics (including transportation of materials, staff and spectator travel, office and plant operations) need to be well executed to achieve the desired results.
That’s why it’s so important to measure carbon footprint and identify opportunities for improvement to achieve a green economy. As mentioned earlier, Scope 3 emissions make up a large percentage of total corporate emissions and yet companies still aren’t taking action on them. This shows how important a proper assessment is to making a green shift. This first step will allow you to establish a roadmap for projects and potential changes.
At Talsom, we’ve developed expertise in Design Thinking, an iterative approach to generating innovative solutions based on a deep understanding of the user experience. In the case of a green transition, Design Thinking allows you to identify opportunities for environmental improvements based on a GHG emission assessment. For example, F1 identified certain measures to implement over the coming years: sustainable materials, recycled waste, better integration of racing tracks with nature; zero-carbon emission cars, optimized and greatly reduced logistics and travel, renewable-energy offices and factories, etc.
Sustainable change for positive impact
While it’s important to identify the areas of improvement and changes needed for an effective transformation, what about planning and execution? A major challenge is that 70% of the failures to implement a solution are due to human factors. In the case of Formula 1, many stakeholders are involved (employees, teams, spectators, investors, etc.), and they may be resistant to change if it’s not properly planned and executed.
Our Talsom change management team guides and supports people in their change processes to create faster, more effective buy-in for the solution. As an example, Formula 1 wants its offices and plants to use renewable energy over the next few years. This change has potential impacts for many stakeholders, which is why a proper plan and communications are key.
Incorporating new business models
As with any business, a major challenge for Formula One is making a sustainable transition while remaining profitable. In the case of F1, it’s important to rethink its business model in an ever-evolving environment, both to mitigate the negative impacts of its overall operations and to create value. With a governance model that emphasizes a continual assessment and realignment of the company to adapt to external changes, you’ll be able to introduce change and ensure your organization’s long-term survival.
We can’t talk about business models without mentioning the BMC (business model canvas), a synthetic tool developed in 2005. In 2021, a responsible version of the BMC was created to take sustainable development challenges into account. Among other things, it allows organizations to consider environmental and social factors that may be directly or indirectly related, while ensuring that the needs of all stakeholders are taken into account.
A company’s success is no longer attributable to its financial results or environmental considerations alone, but to the integration of all these principles into its strategy. That means business models will be increasingly driven by environmental and sustainability factors. Accelerated by various pressures caused by climate change, regulatory constraints (municipal, provincial, national and international) and citizens, it’s even more important to have experts who can support you on your transformational journey and help you achieve your objectives. Formula 1 is an example of an organization that has a considerable carbon impact and needs to adapt to environmental challenges.
If your organization is also working to reduce its carbon footprint, we can help you every step of the way—from project definition to delivery.