Companies Are Catalyzing the Net-Zero Economy
Recent reports and real-world developments foretell both the dramatic energy system transformations required to decarbonize the global economy and the looming, increasingly disastrous consequences of moving too slowly. Despite doubts from some government and private-sector players, leading corporations are profitably reorienting their own businesses and offerings to a net-zero future.
A recent series of roundtables hosted by RMI and the World Business Council for Sustainable Development (WBCSD) highlights how companies are using data, advanced computing, technology, and finance as levers to unlock low-carbon pathways. These examples of rapidly scalable private-sector innovation are building up the foundation for the net-zero economy.
Sizing up the Challenge
In June, the International Renewable Energy Association (IRENA) released its World Energy Transitions Outlook: 1.5°C Pathway, just six weeks after the International Energy Agency’s (IEA) Net Zero by 2050 report. Both publications reinforce the need for dramatic shifts in how we procure and use energy across all sectors of the global economy. To have a meaningful chance of limiting global warming to the Paris Agreement’s 1.5°C (2.7°F) target, we must slash global greenhouse gas emissions in half by 2030 on the path to net zero by 2050.
These reports highlight the need for urgent action at a critical moment. Leaked drafts from one of the working groups of the UN’s Intergovernmental Panel on Climate Change recently revealed scientists’ increasing concerns that human-caused warming will push Earth’s natural systems past critical tipping points, after which self-reinforcing feedbacks may lead to rapid and irreversible warming. In fact, the climate is already changing, with 1.1°C (2.0°F) of warming recorded since the start of the Industrial Revolution. But as IRENA and IEA point out, a rapid energy transition is not only achievable, but it will drive economic growth and job creation as low-carbon solutions scale.
Immense pressure now rests on businesses, governments, and other institutions to not only pursue rapid decarbonization, but to do so in an equitable and just way. For many, the pace of change seems overwhelming or unattainable. But those assumptions are based on outdated conceptions about the future being an extension of the recent past and about the slow unfolding of previous economic transitions.
What these perspectives miss is an unprecedented confluence of social, economic, and technological trends. Leading corporations are leveraging these developments to accelerate the shift to a low-carbon future. As IRENA notes, such innovative solutions “are reshaping the energy system and opening new possibilities for a decarbonized future much faster than expected.”
Innovating for a Net-Zero Future
RMI and WBCSD recently hosted a series of corporate roundtables to highlight how leading companies are leveraging specific catalysts to decarbonize quickly and profitably. The series of 1.5°C Insight Briefs that framed the discussions describes how these catalysts—particularly data transparency, artificial intelligence (AI), technology, and finance—make the net-zero transformation more achievable and beneficial than many decision-makers realize, despite the speed and scale of the transition.
Companies Participating in the Roundtable Series:
Among the panelists were several WBCSD members and partners in the Safe Operating Space (SOS) 1.5 Project, which provides a detailed framework for businesses in developing and executing their decarbonization strategies. Below, we share a few examples of how our panelists are leveraging these catalysts to unlock new pathways for profitable decarbonization.
Data Transparency and Advanced Computing
Across all sectors, continuing advances in data science and the exponential growth of data collection enabled by the Internet of Things (IoT) are enabling a wide range of new opportunities. A striking example lies in the quest of companies like Google and Microsoft to power their data centers 24/7, in real time, with 100 percent renewable energy.
These efforts include AI-enabled optimization of computing load and renewable energy resource dispatch to minimize the emissions profiles of data centers. By simultaneously working with utilities and grid operators to access more granular data, these companies are pioneering new software to predict clean energy supplies and match them with their own demand. The truly catalytic power of these solutions, however, lies in their potential to rapidly scale through adoption by customers, partners, and even utilities. Both Google and IBM are already pursuing carbon-intelligent cloud computing systems that customers can use to prioritize clean electricity for their own workloads.
Advanced data and computing are also enabling breakthroughs in the building, industry, and materials sectors. Dow Chemical, for example, is partnering with Microsoft to use AI to accelerate materials development and efficiencies in process engineering. They are focusing particularly on lightweight materials that are essential for renewable energy technologies and decarbonizing transportation through improved efficiency. By shortening turnaround times for development, these approaches can create faster iteration cycles for low-carbon technologies. IBM Research is similarly using AI to foster materials discovery for improving the efficiency of carbon capture at “point sources” such as power plants or industrial facilities.
IBM is also using AI to help decarbonize supply chains by linking disparate data sources so companies can optimize their supply chains’ environmental impacts. Data-driven supply chain decarbonization is also the goal of WBCSD’s Value Chain Carbon Transparency Pathfinder, which is creating a comprehensive methodology and technical infrastructure for sharing granular, consistent, and verified product-level data on primary emissions across value chains.
The rapid cost and performance improvements of wind, solar, and batteries alongside advancements in areas like AI, automation, IoT, and manufacturing are leading to new, disruptive technology combinations that further enable profitable decarbonization. Even low-cost solar photovoltaics are opening new pathways beyond just decarbonizing the power sector. First Solar, for example, is exploring ways to use cheap, renewable energy to enable previously cost-prohibitive clean technologies such as green hydrogen, desalination, and distributed energy systems.
Electrification of mobility, buildings, and industry is contributing to continued demand for low-cost clean energy, further reinforcing its cost improvement. In the industrial sector the payback for electrification is driven not only by the promise of cheap, clean energy, but by more efficient processes that integrate electric-drive motors, IoT sensors, automation, and robotics. Market leaders like ABB have built rapidly scaling business lines to help customers electrify efficiently. Similarly, AT&T is expanding its efforts to use connectivity solutions to support customer decarbonization efforts, including by helping manufacturers partner with tech companies to optimize process operations.
Finally, new technology paradigms are spurring the revitalization of traditional processes. Electric vehicles, for example, will revolutionize personal mobility while creating an opportunity for auto manufacturers to completely redesign their manufacturing processes for greater overall efficiency. Volkswagen hopes to use the new wave of vehicles to pursue a more systems-level manufacturing approach that better leverages robotics, IoT, and integrated supply chains while thinking more critically about the entire life cycle of its cars, from materials and shipping to power, utilization, and recycling.
Finance and Capital Transitions
Financial institutions are driving a coordinated response to the growing physical and transition climate risks, accelerating actions from policymakers and investors that favor low-carbon solutions over legacy technologies and businesses. To survive these systemic shifts, leading companies must simultaneously manage stranded asset risk while identifying new ways to create and capture value in a low-carbon world.
Financial institutions such as BNP Paribas are actively changing their investment strategy to de-risk their holdings. Others such as Rabobank are de-risking by developing new instruments and opportunities to encourage low-carbon approaches among their clients and customers. Transformative investment guidance, such as BlackRock’s yearly climate change letter, has been instrumental in initiating change. Now, demand is surging for corporate strategy, investment targets, and quarterly goals in service of the capital transition.
In response, asset-heavy companies like BP and LafargeHolcim are pursuing parallel paths to optimize the transition away from high-emissions assets while developing and testing new business models, technologies, and opportunities better aligned with a zero-emissions economy. Others like Iberdrola are in later stages of implementing low-carbon strategies and are now actively lobbying for policies and regulations that will help speed the transition. As more capital moves into these new spaces, the pressure on policymakers is rising to adopt more ambitious climate policies, further raising the transition risk for companies that lag behind.
At the same time, competition for the best projects is getting fierce as investors and asset managers strive to develop “climate aligned” portfolios. The volume of clean energy projects simply won’t match this accelerating demand overnight, and companies still need to apply diligence and de-risk each investment. BP, for example, reports becoming more discerning in where it invests, funding only the most profitable renewable energy projects. This shift in investment mentality signals a new, mature phase of low-carbon investing, one in which investors race to find and capitalize on the best projects.
Forging the Path
It is essential to our collective prosperity that companies begin the journey toward new, lower-carbon approaches to value creation. Competitive advantage and future growth await those who forge the path, while those who delay action risk potentially spiraling costs and diminishing opportunities in a net-zero economy.