‘Businesses are not doing enough to tackle climate change’ is a frequently voiced accusation. And while it is true that there is still a long way to go to deliver the emissions reductions necessary to avoid catastrophic consequences, it is important to be more specific about which businesses need to do more, and what they need to do. Some businesses are already doing a great deal. Understanding who they are, what they are doing and why they are doing it is important, because they are the ones pioneering pathways to low carbon operations for others to follow.
The facts regarding our current emissions trajectory are sobering. It is not anywhere near where it needs to be. Since 2015, global emissions have continued to grow on a path that will not allow us to limit warming to below 2˚C.
Have you read?
But although this is the overall picture, a subset of businesses are bucking this trend.
The World Economic Forum commissioned Point380, a specialist data analytics firm, to review data from around 2,700 companies that have been reporting their carbon emissions to CDP since 2015 in order to determine the progress they have been making since the Paris Agreement. It revealed some interesting trends.
These firms are an influential leadership group, and although they are not yet making reductions commensurate with limiting warming to below 1.5˚C, they are on track for keeping warming to below 2˚C. It is difficult to prove causation between reporting and improving performance – but we can conclude that those 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 leading power utility companies have fallen dramatically. This is the 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 an increasing demand from major power users - such as those committed via the RE100 initiative to sourcing 100% of their power from renewable sources. The reduction in emissions from the power sector is also having a positive, albeit indirect, impact on the sectors where the use of electricity is a big proportion of their emissions – such as the healthcare, 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 them to develop low-carbon growth strategies. However, these sectors currently make up only a small portion of total emissions.
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 says 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. A shift by the energy and industrials sectors to providing low-carbon products and services will undoubtedly go hand-in-hand with the global industry transition that is needed. Efforts by the new Mission Possible Platform provide a forum in which to do this, although many more partners are needed to support the acceleration.
Today's leadership in the race to reduce emissions comes from forward-thinking companies, smart policies and public investment in the power sector. This needs to be replicated by countries and companies in the race to produce the future of clean mobility and materials in order to ensure all businesses are on track to deliver on the Paris Agreement.
Further information about why leading companies are taking steps to address climate change, what policy measures are working and how multi-stakeholder efforts can help accelerate action across value chains will follow in a series of reports by the World Economic Forum in partnership with The Boston Consulting Group.