S04E07 - What Actually Works: Recommendations for Achieving Net-Zero

Duration: ~35 minutes
Host: Daniel Helmig with AI co-host AImee

Daniel: [00:00:00] Welcome to the Supply Chain Dialogues, Season Four, Episode Seven. I'm Daniel Helmig, and we’re near the end of the second-to-last episode of this series.

We've explored why measurement standards correlate negatively with emissions reduction. We've discovered that cost-benefit analysis systematically kills climate investments. We've seen how regulations focused on Scope 1 and 2 barely touch the Scope 3 elephant in the room. We've examined why digital transformation alone doesn't deliver decarbonisation. And we've dealt with the organisation paradox – why larger companies with more resources actually struggle more than smaller firms.

It's been a bit depressing. Six episodes of "here's why everything we’re doing isn't working." 

And if you do not believe me that we are not cutting it, just listen to the coverage of the currently ongoing 30th COP, where all governments, or at least the grown-ups among them, meet to discuss again what would be good to do. You will read that we have already missed the 1.5 degrees target set at the Paris COP 21. Or take a look at Iceland, a country where most people seem to have their heads and hearts still in the right place: They defined this week that they regard the risk from melting glaciers and a potential linked collapse of the Atlantic Meridional Overturning Circulation (AMOC), as a national security threat. If you then read about what the collapse of the AMOC means, you will quickly find that it will create a new ice age in Europe, not the cute one we know from the movies with the talking mammoth and sloth. And if any US Americans now gleefully clap in your hands, that these damn liberal Europeans get what they deserve, be advised that one of several effects of this collapse is that a weakened or collapsed AMOC would cause water to "pile up" along the US Atlantic coast, raising sea levels by 20-30 cm beyond global averages in cities like New York, Boston, and Miami. Ensure that in the next 10 years you still catch up with your visit of the MOMA, consider an alternative University to the MIT for your kids, and have one last overpriced vacation in Florida.

AImee: [00:00:50] Ok Daniel. Enough of this doomsday talk. I know that you are using scientific facts, but scare scenarios will not get us anywhere. Getting back to what we have been taking about in the last six episodes: We’ve been systematically dismantling conventional wisdom about supply chain sustainability. But surely this episode is where we pivot to solutions?

Daniel: [00:01:00] Absolutely. Because it is not too late - even though it is quite an uphill battle now. But let’s try: Today, we're translating the research into positive action. We're answering the question: if current approaches are systematically failing, what actually works?

And I want to be clear about something upfront: this isn't about marginal improvements to broken systems. We're not tweaking standards, adjusting economic models, or refining regulations. Those approaches fundamentally miss the point.

What we need is a paradigm shift. And I know that sounds like consultant-speak, but I mean it literally. The current paradigm – measure more, analyse thoroughly, regulate comprehensively – is actively preventing the transformation we need.

AImee: [00:01:45] So what paradigm should replace it?

Daniel: [00:01:50] The transformation paradigm. Instead of asking "how do we measure emissions better?" we ask "how do we reduce emissions faster?" Instead of "how do we conduct more rigorous cost-benefit analysis?" we ask "how do we restructure evaluation frameworks to enable climate action?"

It's a fundamental shift from compliance to transformation, from measurement to action, from analysis to implementation. And that does not mean, as the government heads at the current COP are shouting in all directions, that we need another Climate fund. This has been tried so many times, that it becomes boring. And you know what it is called, if you try again and again the same thing, although it fails…

AImee: [00:02:20] And the research you did provides evidence for this paradigm shift?

Daniel: [00:02:25] The research proves that the current paradigm isn't working. All three core hypotheses showed systematic barriers. Standards implementation correlates negatively with progress. Economic assessment kills climate investments. Regulatory frameworks fail to incentivise meaningful change.

But the research also revealed what does work. We discussed it in the other episodes: Companies with geographic diversity perform better. Organisations that focus on implementation costs rather than comprehensive economic evaluation make more progress. Firms that prioritise operational changes over compliance theatre get results.

So today, we're building on those insights to provide concrete recommendations for three audiences: academics, policymakers, and business leaders.

AImee: [00:03:10] Let's start with academics, since this research emerged from doctoral work. What should the academic community focus on?

Daniel: [00:03:20] Academics need to rethink how we conceptualise and study supply chain sustainability fundamentally. The current literature is trapped in its own assumptions, which are leading us astray.

First, we need longitudinal studies. My research was cross-sectional – a snapshot at one point in time. But transformation is a process. We need to understand how companies evolve their approaches, what triggers successful transitions, and how implementation strategies change over time.

One company reducing emissions by 20% in year one might achieve that through easy wins – switching to renewable energy and optimising logistics. But years two through five, when they're tackling complex supplier relationships and product redesign? That's where the real learning happens. And we're not studying it.

AImee: [00:04:10] What other methodological changes do academics need to make?

Daniel: [00:04:15] We need mixed-method approaches. Quantitative research like mine can identify relationships and measure effect sizes. But it can't tell you why those relationships exist or how organisations navigate the barriers we've identified.

Imagine pairing a study like mine with in-depth case research. The quantitative work shows that larger companies struggle more with implementation. The qualitative work might reveal that the struggle stems from siloed decision-making, diffuse accountability, and misaligned incentives. Together, they provide actionable insights.

AImee: [00:04:50] The research also highlighted the need to study alternative measurement frameworks.

Daniel: [00:05:00] The current measurement paradigm – comprehensive, precise, comparable – creates sustainability bureaucracy. We need research into action-oriented measurement frameworks that support implementation rather than just reporting.

What would a measurement system look like if it were designed to accelerate transformation rather than enable comparison? How could we measure outcomes rather than processes? What metrics actually correlate with emissions reduction rather than just transparency?

These are researchable questions that could fundamentally reshape how companies approach sustainability measurement.

AImee: [00:05:40] And what about studying the organisational factors you've identified?

Daniel: [00:05:45] Yes. The organisation paradox – where larger companies with more resources struggle more than smaller firms – needs deep investigation. We need research into:

How do different governance structures affect climate action? What decision-making processes enable rapid implementation? How should organisations allocate resources to balance compliance with transformation? What incentive systems actually drive emissions reduction?

The sustainability literature has focused heavily on what companies should do – reduce emissions, engage suppliers, implement circular economy principles. We need much more research on how organisations can actually execute those strategies within their structural constraints.

AImee: [00:06:30] What about geographic and cross-cultural research?

Daniel: [00:06:35] My research focused on German discrete manufacturing. The findings are robust within that context, but we don't know how they translate to other regions, other industries, or other cultural contexts.

Does the standards paradox exist in Japan, where corporate culture emphasises continuous improvement? Do Chinese manufacturers, operating under different regulatory frameworks, face the same economic assessment barriers? How do US companies, with their shareholder primacy model, navigate the triple bottom line differently from European firms?

We need comparative studies across countries, industries, and regulatory environments. Because if we're going to design effective policies and practices, they need to work across contexts, not just in one specific setting.

AImee: [00:07:20] Any final recommendations for the academic community?

Daniel: [00:07:25] Yes. Academics need to engage more directly with practitioners. Too much sustainability research sits behind journal paywalls, is written in academic language, and addresses questions academics find interesting rather than those practitioners need answered. That’s for example I decided to make my study open access. You can go into Google Scholar and search for my name, and you will find the PDF for easy consumption.

We need action research, where academics partner with companies to implement and study transformation efforts in real time. We need research that informs practice and practice that informs research. The gap between academic knowledge and business implementation is one reason we're failing to make progress on net-zero.

AImee: [00:08:00] Good. Let's shift to policymakers. The research revealed significant gaps in current regulatory approaches. What should change?

Daniel: [00:08:10] Policymakers in Europe, need to rethink the European Union's approach to emissions reduction fundamentally. The current framework is systematically misaligned with the climate challenge we face.

Let me start with the most important recommendation: refocus regulation on Scope 3 emissions. The current approach – mandatory reduction targets for Scope 1 and 2, reporting requirements for Scope 3 – is a catastrophic misapplication of the Pareto principle.

For most companies, 70-90% of their emissions fall under Scope 3. But that's where we have the weakest policy mechanisms. It's like a doctor prescribing intensive treatment for a minor symptom whilst ignoring the life-threatening condition.

AImee: [00:08:55] The research showed regulatory frameworks had weak relationships with implementation. Why?

Daniel: [00:09:00] Because current regulations focus on compliance rather than transformation. They mandate processes – measurement, reporting, disclosure – rather than outcomes. Companies can tick every box, satisfy every requirement, and still not reduce emissions.

Policymakers should mandate emission reductions, not reporting methodologies. Set clear targets: reduce Scope 3 emissions 50% by 2035. Then let companies achieve those targets however they want. Stop prescribing specific measurement approaches, standardised frameworks, or compliance procedures.

AImee: [00:09:35] Won't that create problems with comparability and transparency?

Daniel: [00:09:40] Possibly. But here's the question: would you rather have perfect comparability of emissions that aren't actually declining, or messy but declining emissions that are harder to compare?

The research reveals that the pursuit of measurement perfection is consuming resources that should be directed toward transformation. We're optimising for the wrong outcome.

And let's be honest: current reporting isn't as comparable as policymakers think. Different companies use different methodologies, make various assumptions, and apply different boundaries. The veneer of standardisation masks substantial variation in practice.

AImee: [00:10:20] What about economic barriers? Should policy address those?

Daniel: [00:10:25] Absolutely. The research showed that traditional cost-benefit analysis systematically undervalues sustainability investments. Policymakers can address this in several ways.

First, implement meaningful carbon pricing. If carbon had a real price that reflected its environmental cost, suddenly those sustainability investments would look much more attractive in economic analyses.

Second, provide transition funding and incentives. The EU spends billions on subsidies for the fossil fuel industry. If you do not believe me, listen to our episode in Season three on this topic. It is scary. Why not shift equivalent funding into supply chain transformation? Create dedicated funds that companies, especially those in process industries such as steel or chemicals, can access for supplier engagement, product redesign, or logistics transformation.

Third, adjust regulatory requirements around financial reporting. Currently, companies must justify investments to shareholders using traditional financial metrics. What if regulations required companies to report on carbon intensity, resource efficiency, and circularity with the same rigour as financial performance? And there is something to be said about the GAAPS, but I will cover this in my book.

AImee: [00:11:25] The research also found that regulatory compliance activities compete with implementation efforts. How should policymakers address that?

Daniel: [00:11:35] Simplify. Consolidate. Rationalise. The EU has created a complex web of overlapping requirements: CSRD, EU Taxonomy, Carbon Border Adjustment Mechanism, and an upcoming supply chain due diligence directive. Each individual has merit. Collectively, they're overwhelming.

Policymakers should create a single, unified framework for sustainability reporting and regulation. One set of requirements, one reporting standard, one compliance process. Cut the bureaucracy dramatically. Here, I would use a generative AI to sift through all regulation on European and member state levels to cut throught the gordian knot regulators have created.

And focus that framework on outcomes, not processes. Don't require companies to describe their governance structures, stakeholder engagement processes, and risk assessment methodologies. Require them to report actual emissions, reduction trajectories, and implementation progress.

AImee: [00:12:25] What about the geographic dimension? The research found that companies with broader international presence perform better.

Daniel: [00:12:35] The sweet spot is regulatory alignment on outcomes with flexibility on processes. All regions should mandate similar emission reduction targets and timelines. Wouldn’t that be something meaningful for the next COP? But allow regional variation in how companies achieve those targets, reflecting different economic contexts, technological capabilities, and supply chain structures.

AImee: [00:13:20] Any recommendations about regulatory timelines?

Daniel: [00:13:25] Yes. Stop pushing net-zero targets to 2050 or 2045. The research examined whether 2040 was achievable with current approaches. The answer is no, not with current approaches. But that doesn't mean we should extend the timeline – it means we should change the approaches.

Policymakers should set aggressive targets – net-zero Scope 3 by 2035 – and then restructure everything else to enable companies to achieve them. Aggressive targets create urgency. Urgency forces innovation. Innovation drives transformation.

Extended timelines create complacency. "We have 25 years" becomes an excuse for inaction today. And as Daniel Kahneman pointed out, climate change, due to it’s long timeline, is the perfect storm for the human brain. We can not compute these time horizons. So, let’s make them more tangible. Think about the AMOC, Moma and MIT…

AImee: [00:14:10] Should policymakers address the organisation paradox – where larger companies struggle more?

Daniel: [00:14:20] Interesting question. One could argue that's an internal company problem, not a policy concern. But larger companies represent a disproportionate share of emissions. If they're systematically constrained from action, that's a policy-relevant problem.

Policymakers might consider size-differentiated regulatory approaches. Not lower standards for larger companies – that would be perverse – but different compliance mechanisms that acknowledge organisational complexity.

For example, smaller companies report annually using simplified frameworks. Larger companies might submit five-year transformation plans with interim milestones and greater flexibility in how they demonstrate progress.

The goal is to reduce the bureaucratic burden that amplifies barriers in large organisations whilst maintaining accountability for results.

AImee: [00:15:15] Let's turn to business leaders. They're the ones who actually have to implement these changes. What should they do differently?

Daniel: [00:15:25] Business leaders need to rethink how they approach supply chain sustainability fundamentally. And I'm going to be very direct here: if you're treating this as a compliance exercise, you've already lost.

And for once: Look into the faces of your children. If you are a Corporate Exec in a large company, you will be between end forty to end fifty. Your offspring will be in their 20s to thirties. According to most scientists, the AMOC will collapse within the next 10-20 years. Do you want this world for your kids? And if the CO2 levels drive global temperature up to 2.5 to 4 degrees, this will happen by the end of this century. Which means your potential grandchildren will be in the 60s - human society, at that point in time in most areas will not be a great place to retire in. And forget Mars or the moon, the wet dream of Elon, this environment sucks even more.

So, the companies that will succeed in achieving net-zero aren't those with the best sustainability reports or the most sophisticated carbon accounting. They're the companies that actually transform their supply chains to drive net zero in the largest pocket they are responsible for. And transformation requires different approaches than compliance. Let’s talk abou this, and you will recognize some of this from the examples we used in prior episodes:

First recommendation: Create dedicated transformation teams with absolute authority. Not a sustainability department that produces reports and advises operations. A transformation team that can make decisions, allocate resources, and drive changes across functions.

AImee: [00:16:15] The research showed that organisational size amplifies barriers. How should large companies address that?

Daniel: [00:17:20] Large companies need to decentralise decision-making whilst centralising coordination. Set clear emission reduction targets centrally. Then push decision authority to business units, regions, and even individual facilities.

The German team doesn't need headquarters' approval to switch suppliers. The Chinese facility doesn't need a committee to approve logistics changes. Give clear boundaries – stay within these parameters, hit these targets – then trust your people to find solutions.

And create mechanisms for rapid knowledge sharing. What works in one region should be implementable elsewhere within months, not years. The research showed that geographic diversity is an advantage. But only if companies actually leverage their global footprint to share and scale innovations.

AImee: [00:18:10] What about incentive systems? The research suggested those are misaligned.

Daniel: [00:18:15] Most companies have incentive systems that reward financial performance exclusively or overwhelmingly. Then they wonder why sustainability initiatives don't get traction.

Modify incentive systems to make carbon metrics count. And I don't mean 5-10% of variable compensation. I mean 30-40%. Make carbon performance as important as financial performance in determining bonuses, promotions, and career advancement. And here is a secret: Your teams will still focus on revenue, profit, cost etcetera et cetera. Whether the bonus is 100% focused on this or 50%. Trust me, I’ve seen this before over and over again. And if you do not believe me, read literature about incentive systems. You will be positively surprised what works.

And don't just reward the sustainability team for emissions reduction. Reward procurement for choosing low-carbon suppliers, operations for implementing efficient processes, product development for designing sustainable products, and logistics for optimising transportation.

Sustainability cannot be the job of one department. It has to be everyone's job. And people do what they're paid to do.

AImee: [00:19:10] The research showed that traditional cost-benefit analysis kills climate investments. What should companies do about that?

Daniel: [00:19:20] Restructure your evaluation frameworks. Traditional cost-benefit analysis, using conventional discount rates and traditional time horizons, systematically undervalues sustainability investments.

Companies should develop extended business cases that include factors conventional analysis ignores:

• Internal carbon pricing that reflects true environmental costs

• Regulatory risk scenarios that consider likely future policies

• Reputational value and brand enhancement

• Employee engagement and talent retention

• Supply chain resilience and optionality

• Future carbon tax avoidance

Suddenly, that "expensive" sustainable supplier looks like the obvious choice when you factor in regulatory risk, carbon pricing, and supply chain resilience.

AImee: [00:20:15] Should companies abandon cost-benefit analysis entirely?

Daniel: [00:20:20] No. Financial analysis matters. Companies need to be economically viable. But the evaluation frameworks need to evolve. Include longer time horizons – 10 or 15 years instead of 3 to 5. Use lower discount rates for sustainability investments, reflecting their different risk profile. Monetise non-financial benefits where possible. Who said, that you only have to work based on the financial governance systems. See them as a minimum threshold, and then go beyond it.

And create parallel evaluation frameworks. Some investments compete in traditional financial markets – expand this factory, launch that product. Sustainability investments operate differently. They're buying long-term survival, regulatory compliance, and societal licence to operate. Evaluate them differently.

AImee: [00:21:05] What about the standards paradox? Should companies reduce their focus on measurement and reporting?

Daniel: [00:21:15] Be strategic about compliance. Do only what is necessary to satisfy regulatory requirements. Then redirect resources to implementation.

And here's a controversial recommendation: consider strategic non-compliance with voluntary standards. If you're not legally required to report to CDP, or adopt SBTi, or achieve B-Corp certification, think carefully about whether those frameworks help or hinder your transformation efforts.

Every hour spent on voluntary reporting is an hour not spent on emission reduction. Every pound spent on consultants perfecting your sustainability report is a pound not invested in supplier transformation.

Be ruthlessly focused on impact over optics.

AImee: [00:22:15] Won't that create problems with investors and stakeholders?

Daniel: [00:22:20] Possibly. But here's what you say: "We're focused on actually reducing emissions rather than perfecting our reporting. Our Scope 3 emissions are down 25% over the past 3 years. That matters more than whether we've adopted every voluntary framework."

Stakeholders want results. Some will care deeply about reporting standards, mainly those with no real-world experience. But increasingly, investors and customers are recognising the difference between compliance theatre and actual transformation. Position yourself on the side of transformation.

AImee: [00:22:55] The research found that technology investments don't automatically deliver emissions reduction. What should companies do differently?

Daniel: [00:23:00] We’ve talked about it: Avoid digital displacement – the tendency to substitute technology for operational transformation. Don't invest in carbon accounting software unless you're also investing in the operational changes that reduce the carbon you're accounting for. While I am not getting paid by them in any way, I recommend Carbmee, a great no-nonsense reporting company from Germany. Visit them in Berlin or Munich and be amazed.

Use technology strategically to enable transformation, not replace it. Carbon tracking is valuable if it identifies opportunities and drives decisions. It's wasteful if it just produces dashboards that nobody acts on.

And be especially wary of technology vendors promising easy solutions. There are no easy solutions. Any vendor claiming their software will achieve net-zero for you is selling digital snake oil.

AImee: [00:23:45] What about supplier engagement? That came up repeatedly as critical for Scope 3 emissions.

Daniel: [00:23:50] Supplier engagement is essential, but companies approach it backwards. They create supplier codes of conduct, require sustainability reporting, and send questionnaires. Then they wonder why nothing changes.

Flip the model. Partner with suppliers on transformation. Some companies are creating supplier transformation funds – dedicated capital that suppliers can access for sustainability investments. Others provide technical assistance, sharing expertise in energy efficiency, process optimisation, or renewable energy procurement.

The most sophisticated companies help suppliers find and implement solutions, then write those improved practices into supply contracts. It's collaborative transformation, not compliance enforcement.

And yes, there will always be suppliers that need the approach: "you must reduce emissions by X%" otherwise we desource you." It is quite boring, intellectually not challenging, but if on the other side there are brutes that only listen to blunt threats, give them what they need.

AImee: [00:24:45] Any recommendations about engaging smaller suppliers who lack resources?

Daniel: [00:24:50] Focus your efforts. You cannot deeply engage 1,000 suppliers. But you can deeply engage the 50 suppliers who represent 80% of your Scope 3 emissions. Work with them intensively. Fund their transformation. Share expertise. Then those 50 suppliers can engage their suppliers using similar approaches.

Create a cascade model where transformation flows through tiers. It's slower than mandating change, but it actually works.

AImee: [00:25:30] Let's address the elephant in the room. Can companies actually achieve net-zero Scope 3 emissions by 2040? Or even 2035?

Daniel: [00:25:40] Not with current approaches. The research proves that conclusively. Standards implementation, economic assessment, and regulatory frameworks are all negatively correlated with progress.

But with transformed approaches? Possibly. Because, what is the alternative? It is terrifying. Achieving net-zero Scope 3 emissions isn't a project or programme. It's a fundamental transformation of supply chain strategy, operations, governance, and culture.

Companies that treat it as less than that – as a compliance exercise, a reporting challenge, or a technology implementation – will fail. The research proves it. The negative correlations across standards, economics, and regulation demonstrate that conventional approaches don't work.

AImee: [00:27:40] Is there hope?

Daniel: [00:27:45] There needs to be optimism. The research revealed systematic barriers, yes. But it also showed that those barriers are human constructs. We created these standards, these evaluation frameworks, these regulatory approaches. Which means we can change them.

And some companies are already succeeding. They're the ones who've abandoned conventional wisdom and embraced transformation. They're achieving 20%, 30%, and even 40% reductions in Scope 3 emissions, not by perfecting their reporting, but by fundamentally changing their supply chains.

The question isn't whether net-zero is possible. The question is whether enough companies, policymakers, and academics will challenge conventional approaches and embrace transformation paradigms. Then net-zero will happen, because the alternative is gruesome.

AImee: [00:28:30] Any final thoughts as we close this episode?

Daniel: [00:28:35] Yes. To everyone who's been with us through all seven episodes: thank you. These haven't been comfortable conversations. We've challenged fundamental assumptions about how sustainability should work.

But here's what I hope you take away: if you're frustrated that your sustainability efforts aren't delivering the impact you expected, you're not wrong. The system is broken. The approaches that seemed logical and scientific – measure more, analyse carefully, regulate comprehensively – are actively preventing the transformation we need.

But that's actually good news. Because once you understand why current approaches fail, you can design strategies that succeed. And that's what the next generation of supply chain sustainability will look like: transformation-focused, implementation-heavy, compliance-light, and ruthlessly focused on actual emission reductions rather than perfect reporting.

The climate doesn't care about our sustainability reports. It cares actually about nothing that we do. In reality, over the last 500 million years, temperatures climbed to levels even higher than those we fear today. It resulted in massive changes of the ecosystems, whole levels of fauna and flora went extinct, and then something else raised its head from the primordial morast and oceans and started again. For us, the only negative side of this is, that this time it will be us, the human species and most remaining mammals, that will be wiped off the earth in large troves. As always, some pockets will survive, and the whole thing will start again. But - is this really what we want? Are we so set in our ways, that we see the slow moving train wreck of our own demise in front of us, but are not able to operate the track switch to change our destiny? If we are not, it may be the right direction human kind should go, after it already made so many other species extinct and polluted this earth. Maybe Charles Darwin would argue, that we were not the fittest animal to survive, and that we found the extinction condition , that made us into fossils, to be dug up in a couple of millennia or aeons.

AImee: [00:29:40] You do it again Daniel. Let’s stop this doomsday talk. Rather tell us what comes next for Season Four?

Daniel: [00:29:45] We have one more episode planned. Episode Eight will bring everything together with a discussion of what all this means for the future of supply chain management and corporate sustainability. We'll talk about the skills leaders need, the organisational capabilities that will matter, and what successful companies will look like in 2035 when net-zero is achieved – or not.

Until then, remember: we're not measuring our way to net-zero. We're not analysing our way to net-zero. We're not reporting our way to net-zero. We're transforming our way there. And transformation requires fundamentally different approaches than we've been using.

Stay safe, be bold, and see you in two weeks.

These are the Supply Chain Dialogues, produced and copyrighted by Helmig Advisory in 2025.

[00:30:35] [End of Episode]