If we are to limit the catastrophic effects of the climate crisis, immediate and deep decarbonisation across industries is essential.
Whilst we’ve seen a rapid increase in net zero commitments globally, with emission-reduction aims in place in countries representing 90% of global GDP, meeting these targets will require an estimated investment of $50 trillion over the next two decades. Yet, the specific plans on how we get there are not clear.
The recent IPCC report also shared that financial flows are three to six times lower than what we would need to limit warming to 2 degrees by 2030, let alone 1.5 degrees. Whilst there is enough global capital, this must be targeted towards decarbonisation technologies. And critically, we must see collaboration across governments and companies to incentivise and drive this investment.
So-called “Hard-to-abate” sectors have been seen as one of the biggest challenges to tackle, as heavy transport, steel, cement, construction and mining are complex to decarbonise. This is not because we don’t have solutions for these industries—we do—it’s because decarbonisation technologies for these sectors tend to be more expensive and complex than those for others.
How do we solve this problem? The only way to decarbonise these sectors is through collaboration across the entire value chain. These problems are too big and complex for one single company to solve on its own, and that’s where Xynteo’s Europe Delivers partnership comes in. By fostering collaboration between companies, we’re aiming to move the needle on sector-wide transformation. It takes an ecosystem.
Although the decarbonisation efforts have mostly focused on suppliers, demand side players should also consider the role they can play in the value chain – as the emissions of suppliers are included in their scope 3 emissions. We’ve seen some great proof points in Europe already. In the steel sector, manufacturers in Europe now partner up with steel buyers to secure demand for low-carbon steel – beyond getting support from government for technology pilots. By collaborating, they create the steady longer-term demand they need. This makes easier for them to raise finance for their low-carbon or net-zero projects. It is a great example demonstrating that an ecosystem approach is vital to enable decarbonisation of complex value-chains/sectors, with players from supply, demand, policy, technology and finance to work together.
We have recently launched another successful cross-sectoral coalition in India - Build Ahead. Together with Godrej Construction, JLL, JSW Cement, Lodha, SED Fund and Shell India, the coalition is committed to accelerating the decarbonisation of India’s construction sector by enabling increased use of low-carbon cement and other building materials. To reach net zero – this is a key sector we must decarbonise, and Build Ahead provides a unique opportunity to create good growth at scale.
Decarbonising for people and planet
Decarbonising strategic sectors is crucial if we are going to avoid the worst effects of climate change, but a myopic focus on decarbonisation ultimately will not serve us well. As Chairman of ABB and Europe Delivers, Peter Voser shared, “In the end, all our projects can have a profound societal impact – and that’s our ultimate stakeholder, our ultimate customer, and our most exacting judge.”
People and planet need to go hand-in-hand. Even seemingly small shifts at the top of a value chain have society-wide impacts, and it’s imperative that we consider the impact of our choices on the lives and livelihoods of the people all along the supply chain.
Moving forward, I hope business will play an even stronger leadership role in our efforts to keep the momentum going on tackling climate change. But a just transition will require businesses to collaborate as well—with other private-sector companies, with governments and with the people they serve. The only way to preserve prosperity for our economy and our society is to work together.
A call for climate finance
Critical to scaling these projects, if of course finance and a targeting of global capital towards decarbonisation technologies. When leaders met in Glasgow last November for COP26, the world watched to see how the conference would further the effort to decarbonise strategic sectors. By the end of the week, there were some positive signs – including the fact that we saw a much stronger presence from business at this COP, which is going to be crucial in the fight to end climate change.
Still, targets are just targets. Whether or not we are able to deliver on the decarbonisation agenda depends on how willing we are to put our resources and global capital to work for a just, decarbonised future. Climate finance is a central challenge to decarbonisation, affecting individual firms, supply chains, and nations alike. It is also at the heart of the COP27 agenda this November.
As leaders head to Sharm El Sheikh, Egypt, I hope to see more conversation not only about what governments can do to shore up climate finance, but also what the private sector can do to create a viable market for climate-smart innovation.
Stay up to date on Xynteo by following us on social media. LinkedIn I Twitter
Or contact us to find out how we can help your leaders and organisation create planet-positive and inclusive growth.