Each year, ENGIE Impact releases a Net Zero Report — diving into issues around corporate readiness, challenges to implementation, and the major decarbonization issues companies and cities are facing. In anticipation of the upcoming 2023 Net Zero Report, here is a primer with preliminary insights based on initial research, surveys and analysis.
The inarguable truth is that we are in the midst of a global climate emergency.
In the summer of 2022, during record high temperatures across Europe, the city of Seville, Spain announced Zoe as the first named heat wave. In Greenland during that same month, 18 billion tons of ice sheet melted — enough to cover all of West Virginia in a foot of water. In the United States, there was extreme flooding in Kentucky and droughts across the West.
The environment is sending us signals, and the frequency of catastrophic global weather events will only increase — especially if governments, corporations and individuals do nothing.
A 2022 study by the Royal Society of Chemistry suggests the collective cost of the world’s countries not transitioning to wind, water and solar energy by 2050 is in the tens of trillions of dollars.
Every quarter that a corporation waits to develop or put a decarbonization plan into action is another quarter of increased costs and unrealized savings.
The cost of climate inaction is a real, bottom-line cost. And available decarbonization levers are good for the bottom line now. There is no reason for climate action to be pushed to tomorrow, so today we must work to understand the barriers to implementation and how to overcome them.
In ENGIE Impact’s 2022 Net Zero Report, we identified gaps between the aspirational targets and vision established by corporate leadership and the on-the-ground reality of implementation. We saw that companies are optimistic about their ability to decarbonize, but the managerial and operational fundamentals necessary to enable the Net Zero transformation are not yet in place.
In our forthcoming 2023 Net Zero Report, we see some progress to indicate that gap is closing, but there is still much work to be done. To keep this progress moving in the right direction, we’ve identified several of the main causes for the gaps, and the common barriers to implementation.
Most government, city and corporate leaders have a passion and sense of urgency for climate action. They’re aware of the environmental issues, as well as the ever-increasing shareholder pressures to deliver an effective decarbonization strategy.
Similarly, many corporate executive teams have spent the time to understand their organizational needs and opportunities. But unlike many other projects, there is not a point in a decarbonization journey where the leadership can stop being involved and simply hand it off. According to the initial findings of our Net Zero report, 57% of senior leadership have decarbonization targets linked to their performance review. While that is encouraging, if almost half of senior leadership lacked performance targets linked to revenue goals, employee retention, or budget management, that could raise concerns. We also need to ensure the carbon-based incentives match — if not exceed — financial based incentives. If an executive gets a 2% bonus for meeting decarbonization goals and a 20% bonus for meeting financial goals, their work may also reflect that disparity.
Conviction and involvement from leadership must carry all the way through to site-level implementation, energy management, and ongoing reporting.
Effective leaders don’t only help develop the decarbonization strategy, they are also involved — perhaps even more intimately than they’re accustomed to for other corporate projects — in creating and participating in the implementation plan.
With different global regions, or even states within the U.S., facing varying levels of energy maturity, it can be difficult for an organization to match what they want their decarbonization strategy to include with what may be locally available — especially for emerging economies and regions still highly dependent on fossil fuels.
Some of this difficulty likely stems from the fact that less than half of organizations have a global, centralized sustainability team to coordinate and drive execution transversally, and only about 40% have one centralized source for their decarbonization data.
While there will not be one universal solution for an organization’s global decarbonization efforts, if regions and individual sites are fending for themselves — without some centralized support and data — it becomes nearly impossible to identify cross-region opportunities and efficiencies.
Learn how Henkel successfully partnered with ENGIE Impact to develop and deliver emission reduction at speed and scale.
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Securing funding for large-scale decarbonization efforts can be challenging. Only about one-third of organizations say they currently have innovative finance models in place — such as green bonds or finance as a service — to facilitate their investment in decarbonization, but nearly 70% plan to adopt more innovative financing by 2025.
Exploring potential pilot programs and financing options, understanding how efficiencies can come at scale, and analyzing cost savings compared to current programs will help organizations understand and adopt increasingly diverse financial models. Ultimately, making data-driven financial decisions — with solid data around Scopes 1, 2 and 3 — organizations can better understand the financial levers available and mitigate financial risks.
Many companies are rightfully hesitant to invest in some emerging, potentially unproven technologies due to the high initial cost and general uncertainty, with about 30% saying the risk associated with investing in innovative decarbonization technologies is a major barrier.
There may also be technological roadblocks where there simply isn’t the machinery or software available yet to do what needs to be done.
But current technological limitations are not an excuse for inaction. Behavioral changes, stop-gap investments in proven technologies, or various partnerships can help reduce current carbon consumption while research and development continue.
Good things come to those who take action.
The United State Congress recently passed the Inflation Reduction Act — shifting their decades-long trajectory of inaction slightly. But not only is there still more to be done, there is immense political uncertainty. With the mid-term elections approaching and another potential flip in party power, what progress will be undone — by climate deniers, by procrastinators, by ideologues — is yet to be seen.
The ever-vacillating politicking should not stop corporates from rising above the confused messaging to protect a better future. Governments, cities and corporations that have not yet started on their decarbonization journey can no longer delay, knowing their inaction brings tremendous human and financial costs. For those organizations who have begun, yet are facing roadblocks to implementation, know you’re not alone and there are solutions.
Whether through innovative technologies, new partnerships, novel financial approaches or expanded talent management, each barrier can be overcome to ensure we’re all on the path to Net Zero.
Learn how ENGIE Impact can help implement your decarbonization strategy.