Which Businesses Are Leading The Way On Climate Action?
Utility companies are leading the way in reporting and cutting carbon emissions.REUTERS/JEAN-PAUL PELISSIER
By Emily Farnworth, Head of Climate Change Initiatives, World Economic Forum
The basic facts regarding the current trajectory of emissions are sobering. Since 2015, global emissions have continued to rise well beyond any trajectory that will allow us to stay below a 2 degrees Celsius rise.
Many accuse businesses of not doing enough to reduce emissions, which is too often the case. A subset of businesses, however, is bucking this trend. Some companies are pioneering pathways to low carbon operations – others now need to follow.
This is according to data the World Economic Forum commissioned from Point380, a specialist data analytics firm, to provide further insights on the data in a new report, The Net Zero Challenge. Point380 reviewed data from about 2,700 companies that have been reporting their carbon emissions to CDP, a non-for-profit organization that monitors global emissions, since 2015 to determine what progress they have made on reducing emissions since the historic Paris Agreement was achieved.
The analysis revealed some interesting trends.
First, it showed that the companies that reported data are on track for keeping warming to below 2 degrees Celsius, though not 1.5 degrees Celsius. We cannot know whether there is any causation between reporting and improving performance, but this does suggest that companies that are measuring emissions are also starting to reduce them.
Are some sectors doing better than others? The answer is yes, it seems so. Looking into this in more detail provides an insight into the current transition to a low-carbon economy that is starting to take shape.
One key area driving this shift is decarbonisation in the power sector. There is undoubtedly a story around companies becoming more energy efficient, too, but it is clear that low-carbon power is playing a large role.
Emissions from the leading power utility companies have fallen dramatically. This is a result of a combination of smart policies that signal a price on carbon and drive a shift away from carbon-intensive energy sources like coal, supportive incentives to invest in renewables and bring down the price of technology, and a demand signal from major power users such as those in the RE100 initiative that make a commitment to source 100% of their power from renewable sources.
The reduction in emissions from the power sector is having a positive, indirect impact on the sectors where the use of electricity is a big proportion of their emissions – such as the health care, consumer goods and finance sectors.
Increased emissions in information technology and real estate sectors is primarily a direct result of growth in these sectors, which indicates a need for a low-carbon growth strategy. However, these sectors currently make up a small portion of total emissions, so their growth is not currently contributing in a significant way.
Reductions have been harder to achieve in those sectors where emissions are linked to the use of fossil fuels for heating or that are generated as a result of industrial processes. The energy, industrial and materials sectors need to accelerate technology shifts that will improve energy efficiency and enable the switch to alternative low-carbon fuels or electric power sources. They also need to reduce the emissions generated by their industrial processes through the development of cleaner processes and more effective carbon capture, storage and use techniques.
The Energy Transitions Commission has outlined that it is technically and economically possible for these sectors to reach net-zero emissions by 2050 at a cost to the economy of less than 0.5% of global GDP. The transition of the energy and industrials sectors to provide low carbon products and services will undoubtedly go hand in hand with the global industry transition that is needed.
Raising ambition on climate action will be a priority for the World Economic Forum’s Annual Meeting in Davos, Switzerland, in January and for the Forum’s work in the year ahead. For example, the new Mission Possible Platform – a partnership between the Forum and the Energy Transitions Commission, which focuses on hard-to-abate sectors – provides one platform to do this, with many more partners needed to support the acceleration of the shift. The business community must also develop a definitive methodology for standard ESG principles that companies can adopt, an initiative the Forum’s International Business Council is supporting.
Today’s leadership in the race to reduce emissions comes from forward-thinking companies, smart policies and public investment in the power sector. For example, Dalmia Cement in India has set a goal to become carbon negative and has the lowest cement CO2 intensity in the world, producing 500 kg of CO2 per ton of cement, compared to a global average of 900 kg. In another example, the Italian multinational energy corporation Enel has set a carbon-neutral ambition for before 2050, a 2030 target certified according to the latest Science Based Targets criteria, and an ambitious global investment plan to consolidate its position in renewables generation.
These best practices and others need to be mainstreamed to produce the future of clean energy, mobility and materials to ensure all businesses are in line with delivering on the Paris Agreement.
