As part of the European Green Deal, the European Commission proposed a legally binding target of net-zero greenhouse gas emissions by 2050. And it’s up to all European companies to play a role.
The greening of Europe
As of October 2020, close to 500 European companies have committed to science-based greenhouse gas emissions reduction targets—more than North America and Asia combined. And in 2019, 882 of Europe's largest companies invested €124 billion—a full 12% of their capital expenditures—toward reducing their carbon footprint. This move delivered an estimated 2.4 gigatons of lifetime emissions savings.
A reality check on progress
But it is still early days. Four trends are creating an imperative—and an opportunity—for swifter action.
- The pace is off on emissions targets. Estimates suggest that European companies must double investment for the EU is to reach its net-zero carbon target by 2050. Delaying action is costly. The negative impacts on society are estimated at $0.6 trillion per year in 2020.
- The business case has clearly matured. Switching from coal to gas and renewable energy in manufacturing could unlock tens of billions of dollars in value by 2025, while significantly reducing greenhouse gas emissions.
- Low-carbon solutions fuel competitiveness. In the short term, low-carbon investments occurred naturally in response to rising energy costs, trade barriers and global overcapacity. In the medium-term, low-carbon solutions help European businesses strengthen their global position.
- The buying public demands action. More than half of European consumers (56%) say they give more preference to purpose-driven brands following the COVID-19 crisis. A similar percentage also now prefers sustainable products and services.
A delicate balance
As much as European companies want to respond to these imperatives, they know that some investments made to lower emissions today will not pay off for years. To accelerate Europe’s energy transition, businesses need to play both the short game—by investing in technology and fuel switching—and the long game—by positioning for new opportunities which will emerge from shifts to sustainable initiatives like electric mobility.