Growth in a net zero world

The need to decarbonize has now moved center stage for us all. By the end of COP26, over 200 countries had announced decarbonization commitments and plans, along with a range of pledges around funding clean technology, decreasing reliance on coal, phasing out fuel subsidies and stopping deforestation.

Government action, at both a national and international level, has therefore set the playing field for companies, in many cases radically transforming the landscape they currently operate in.

The onus is now on companies, particularly in asset-intensive industries such as energy, oil & gas, chemicals, industrials, construction, steel and cement, to transform their business models and operations if every country’s Net Zero pledges are to be delivered on.

For example:

The UK is focusing on sector-specific policies, and emphasizes the role of business in delivering its targets.
Germany will need to significantly restructure its industrial economy while ensuring that its citizens don’t have to bear the economic cost of transition.
The French government has announced plans to expand nuclear power to support its Net Zero targets.
Japan’s Net Zero ambition has decarbonization of the power sector and electrification of other industries at its core, as well as commitments to hydrogen and ammonia to build on its automotive sector strengths.

Major oil companies, from Shell and ENI to BP and Equinor, have made significant decarbonization commitments. Total Energies has committed to reaching Net Zero by 2050 in its operations (Scope 1 & 2) and decreasing the greenhouse gas (GHG) intensity of its products (Scope 1, 2 and 3) by 60%, while also setting several intermediate key milestones.

Many may be cynical and view these commitments as greenwashing that will not have a lasting impact. However, shareholders, stakeholders, citizens and regulators will be carefully watching to ensure real progress against these lofty commitments. They will hold companies to account. Company CEOs and management teams need to demonstrate a real commitment to the cause, and have well thought-through plans to ensure they are able to deliver on their promises. They need to do it now, fast.