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How do we turn net-zero commitments into reality?
5-minute read
December 20, 2022
The carbon-intensive world outside my window
Aviation emissions were already rebounding in 2021, and the IEA expects them to soon surpass their 2019 level.
Thanks to the pandemic, I now mostly work at my home in east London. My desk has a view of the planes that land at London City Airport. The skies were virtually empty during lockdowns, but no longer. The regular hum of small, twin-engine jets arriving from European financial hubs is a sign that, to some extent at least, normal business has resumed.
Direct emissions from flying account for around 2% of the global total, but because these occur higher up in the atmosphere, they tend to be more damaging. The airline industry has an aspirational goal to reach net zero by 2050, but the flightpath to getting there is unclear. Many of the required technologies are still in the pilot phase, and some industry leaders are concerned about the pace of investment.
For now, air travel remains a carbon-intensive activity.
Even though net-zero commitments are proliferating, the truth for many is that decarbonization has not been happening fast enough—if at all.
A growing net-zero consensus among corporations
Air travel is no exception: Much of the world economy continues to rely on carbon. But despite signs that COP27 was not an unalloyed success, the consensus around the need to get to net zero by 2050 is building. Country-level net-zero commitments now cover 91% of the global economy (at purchasing-power parity). And the World Bank estimates that carbon pricing schemes now impact almost a quarter of global emissions. Our recent research shows, too, that an ever-greater number of companies are taking net zero seriously.
Executives at these committed companies aren’t just setting blunt goals for their successors’ successors to deal with. They typically put in place other measures that signal real intent. More than 83% hold themselves accountable with short-term intermediate targets, for example. That's imperative, given that emissions cannot still be rising after 2025 and need to have almost halved by 2030 if the 1.5-degree target is to be kept alive. And eight in ten develop clear and communicable transition plans in line with the Task Force on Climate-related Financial Disclosure (TCFD) framework.
But action, not ambition, is what counts. Based on trends in emissions reduction over the past decade, fewer than one in ten companies in our analysis would hit net zero by 2050. Even when we accelerate projected rates of decarbonization to account for expectations that necessary technologies will scale, many companies will fail to get there.
Making targets a reality
To get to net zero, incumbent firms need to cut emissions much faster. They must also want to decarbonize; given that half of the G2000 have neither a full net-zero target nor one that even covers their own operations, this can’t be taken for granted. A destination not specified is unlikely to be reached.
The strategic goal offers a direction. More specific decarbonization measures target specific actions and allow for progress to be made. Setting further goals is useful: to switch fuel sources to renewables, for example, or to improve energy efficiency, insulate buildings and electrify ground transportation fleets.
Doing all these activities—from refurbishing buildings to replacing vehicles—requires investment. The money required to rewire everything for net zero is not trivial. Decarbonizing the fundamentals of the global economy will cost trillions. For steel production alone, we’re looking at a two-trillion dollar expense, according to WEF and Accenture analysis.
All of these activities require investment
It’s all money wasted if it’s not spent in the right places, however. Companies can’t expect to cut their carbon emissions if they don’t know where it is coming from. Setting firm targets may be the easy bit. Measuring and monitoring emissions is harder; interpreting the data and drawing insights about the optimal way to act, even more so.
This requires digital technologies and an appreciation that carbon data is worth collecting, worth drawing insights from and worth integrating into core business decisions.
Regardless of approach, though, what matters is that companies appreciate that carbon data is core business intelligence. Treating it as a peripheral concern will not be enough to meet the net zero challenge.
26%
of surveyed leaders agreed that they had clear, reliable data to underpin their ESG KPIs.
The sky’s the limit
Reaching net zero isn’t easy. This is why so few companies are currently on track. It requires money, materials, measurement and mindset shifts.
Putting all the pieces together is a big challenge. But as net-zero targets proliferate and companies—along with all other stakeholders—focus on the goal, the path to getting there is becoming clearer.
And as this happens, carbon-intensive practices—and companies—will increasingly come to seem out of place. So, who knows, maybe in a couple of decades, those planes I see will be emissions-free.
