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.
And with that normality, emissions.
Aviation emissions slumped as countries locked down and borders closed. But they were already rebounding in 2021, and the IEA expects them to soon surpass their 2019 level. 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 pilot phase, and some industry leaders are concerned about the pace of investment.
For now, air travel remains a carbon-intensive activity.
Net zero in focus
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. We studied the largest 2000 companies by revenue, finding that over a third (34%) now have a full net zero target (covering Scopes 1, 2, and 3). This is a seven percentage-point increase since December 2021—or a relative rise of 26% in under a year.
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—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 TCFD framework.
Even though net zero commitments are proliferating, the truth for many is that decarbonisation has not been happening fast enough—if at all.
But action, not ambition, is what counts. Even though net zero commitments are proliferating, the truth for many is that decarbonization has not been happening fast enough—if at all. 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, still many companies will fail to get there.
Making targets a reality
If net zero is to be achieved, incumbent firms need to cut emissions much faster. They must also want to decarbonise; 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 sums required to rewire everything for net zero are not trivial. Decarbonising the fundamentals of the global economy will cost trillions. In the case of steel production, at least two trillion dollars, in fact, according to WEF and Accenture analysis. That’s just for one material.
But this is an investment, not just a cost. And there are signs that the money is beginning to flow. According to the IEA, global investments in energy efficiency amounted to US $560 billion in 2022—a 16% rise from the year before. The payback on these investments is also likely to be faster in a time of higher energy prices.
This is 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. Given that last year only 26% of surveyed finance leaders agreed that they had clear, reliable data to underpin their ESG KPIs, it’s likely that the measurement challenge remains a major barrier to overcome.
This requires digital technologies—from sensors, to cloud, to automation—to do properly. But just as important, it requires an appreciation that carbon data is valuable—and worth collecting, worth drawing insights from and worth integrating into core business decisions. There are different ways to display this; some companies apply internal carbon prices to capital investment proposals when assessing return-on-investment projections, for example.
Regardless of approach, though, what matters is that companies appreciate carbon data to be core business intelligence. Treating it as a peripheral concern will not be enough to meet the net zero challenge.
The sky’s the limit
Reaching net zero is not easy. This is indeed 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.
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