Why I think the momentum for net zero emissions is growing
February 9, 2022
[4]-MINUTE READ
Like many consumers, I’ve become more committed to reducing my environmental footprint in the past few years. I was already aware of sustainability issues, having dedicated my professional career to the topic, but it has become clear we cannot wait to act.
My wife and I installed solar panels on our roof, insulated the attic and bought an electric car. We are eating less meat and buying sustainable produce.
As a researcher and a concerned citizen, it’s heartening to see that businesses are also more committed to action on climate change. The COP26 Climate Conference in Glasgow in 2021 saw various corporate commitments—on finance, biodiversity, coal, deforestation and renewable energy.
Many businesses want to do their bit to keep the average rise in global temperature to within 1.5 degrees centigrade. ‘Net zero,’ balance between the amount of greenhouse gas produced and the amount removed from the atmosphere, is now discussed in many company earnings calls.
In Europe, it’s a topic in about 50% of the calls and the same is true for about 20% of those in North America and the Growth Markets (based on our analysis of the companies in the Forbes Global 2000). This is an apparent acceleration in the last two years.
Net zero goals
When we looked at more than 1,000 of Europe’s largest listed companies’ commitments to reduce greenhouse gas (GHG) emissions, we found that almost 30% have set a net zero target for 2050 or earlier. The average target year for these organizations is 2043. Many of these companies are large emitters, meaning that these targets cover two-thirds of emissions of these 1,000+ companies.
These are serious and far-reaching commitments. A net zero goal doesn’t only include emissions from a company’s operations, known as scope 1 and scope 2 emissions. These companies also commit to reaching net zero emissions that arise upstream in a supply chain and downstream when the product or service is used.
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Most businesses are also not reducing emissions quickly enough. If current rates of reduction don’t accelerate, only 9% of companies will meet net zero in their operations by 2050
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We also found these commitments work. In our sample, companies without targets saw their collective emissions increase in the last decade.
By contrast, the companies with net zero targets shrank their emissions by 10% on average.
It’s not easy being green
When my wife and I had to replace the gas boiler in our house three years ago, we asked the installer if we could fit an electric heat pump instead. He quickly dismissed the idea— he said the technology wasn’t ready. We went with his advice and now have a new gas boiler—more efficient than the old one, but still fossil-fueled and emitting CO2.
Most businesses are also not reducing emissions quickly enough. If current rates of reduction don’t accelerate, only 9% of companies will meet net zero in their operations by 2050 (and almost half of them will miss their pre-2050 target).
This means 91% of companies need to accelerate their change now.
Few recognize the scale of the transformation needed to cut GHG emissions
After the installer dismissed the suggestion of placing an electric heat pump, I started looking into what it would take to make this possible.
Quite a lot, it turned out. We would need to replace our double glazing with triple glazing, further insulate the house and ideally install floor heating. Considering the associated complexity, disruption and costs, we decided to do this in steps over several years.
For businesses, the journey to net zero emissions cannot happen overnight either. But there is little time. Most companies will need to double the pace of emissions reduction this decade and accelerate even further beyond 2030.
This is only possible through wholesale changes that affect every part of the business: the product and service portfolio, manufacturing processes, distribution channels, customer service, supplies and even the markets that the company chooses to operate in.
Reaching net zero by mid-century is possible with immediate, concerted action
The good news: Some companies are showing that it is possible. Nine percent of the European companies we analyzed have cut their emissions in half over the past decade. This is the pace of emissions reduction that all companies need to achieve to reach zero emissions by 2050. The group of businesses leading the way is diverse, including companies from various sectors. Among them are electric utilities, for example. Many started shifting their portfolio to renewable energy over a decade ago and have made steady progress.
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By acting together to cut these emissions, everyone wins. Collaboration can be the flywheel that helps the whole European business community reach zero emissions on the right side of 2050.
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We can only achieve this pace of emissions reduction collaboratively. For most companies, the most significant emissions footprint of their activities results from their supply chain and the use of their product (scope 3). These emissions are also another company’s scope 1 emissions.
By acting together to cut these emissions, everyone wins. Collaboration can be the flywheel that helps the whole European business community reach zero emissions on the right side of 2050.
The COVID-19 pandemic has shown that businesses can transform at speed and scale—amazing things were done in a few days or months, while it would have taken years before. We need the same strong, collective action to keep chances to keep average global temperature rise to 1.5⁰C.
