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Industry now needs to step up, if Net Zero is to be achieved

Economic growth
By Paul Hodges on 31-Oct-2021

Net Zero is clearly the key issue of our time. With COP26 about to start, 3 key elements need to come together to ensure success.  Political leaders have to agree to meet the Net Zero targets, and to provide $100bn/year to help poorer nations fund the changes needed. But nothing will happen on the ground unless companies then adopt their own Action Plans to meet the targets. 

The urgency of the issue is clear, as the US special envoy John Kerry noted last month:

“If we are going to hold the rise in the Earth’s temperature to 1.5 degrees, we must reduce emissions significantly between 2020 and 2030. This is the decade of decision.”

Behind the scenes, it is also clear that progress is being made by the main players. As Diederik Samson, chef de Cabinet for chief EU negotiator Frans Timmermans has noted:

“A month ago, it seemed that we were racing at high speed into a brick wall. But since then, we have found a small door in the wall. Now we have to find the key to open it.”

Neither of the first two objectives are easy to achieve.  But it does seem that the G20 are likely to agree to take “immediate action to keep 1.5 degrees within reach”. And the 3 main players – the EU (plus UK), USA and China – have reasonably aligned agendas:

  • The EU sees moves to a Net Zero economy as creating the opportunity for a reboot of its economy, based on the €1.8tn Recovery & Resilience fund now in place
  • China sees a similar opportunity to gain global market leadership in the Net Zero economy, whilst also avoiding social unrest by continuing to reduce pollution
  • The USA under President Biden sees an opportunity to demonstrate real progress in creating new, higher-paying jobs to counter former President Trump’s focus on coal

There also seems to be movement on the second issue, providing support for the transition in the coal-based Emerging Markets. If they continue with a ‘business as usual’ scenario, there is little chance of reaching Net Zero by 2050, whatever progress is made by the 3 major players.

Essentially the West and China are now adopting a ‘carrot and stick’ approach:

  • President Biden has agreed further support for the proposed $100bn fund to support the EM’s adoption of renewables
  • China, which has been the main funding source for EM coal-based projects – has now said it will stop funding them.

But none of this will matter unless companies move on from talking about Net Zero to doing something about it. As Queen Elizabeth noted of the politicians last week:

“It’s really irritating when they talk, but they don’t do.”

The key Next Step is for boards to now set Net Zero targets, based on the International Energy Agency’s detailed transformation path.  It highlighted:

  • The Net Zero targets – limiting the rise in global temperature to 1.5⁰C, and reducing net CO₂ emissions to Net Zero by 2050 – are achievable
  • But as the chart confirms, companies now need to move quickly from words to action and develop their own Action Plans

This also makes very good business sense, as the CEO of Stellantis (the world’s 4th largest car company) noted in July:

“The transformation period is a wonderful opportunity to reset the clock and start a new race”.

And so the key Next Step is for businesses to introduce Challenge Workshops for their key staff, to develop the new business models and strategies that are required for success.