If a glass is half full, you’d have to be a pessimist to call it half-empty. But if it’s only a fifth full, there really isn’t much to be optimistic about, is there?
Here’s the context: Fewer than one in five companies (18%) are currently on track to reach net zero emissions by 2050, Accenture said in a new report, released today. Moreover, over a third (38%) of companies say they “cannot make further investments in decarbonization” in the current environment.
Alea iacta est, then, ahead of COP28 in Dubai. The dice have been thrown.
In fact, the fight against climate change has been lost before it even started. Even today, only half of global companies have some sort of net zero plan in place. You don’t need to be a math wizard to come to the obvious conclusion: Business won’t save us from climate change, no matter what rosy statements come out of Dubai this month.
But readers of Impact Report know that we are no doomsday prophets. We help businesses get better rather than shout them down on the way to the era of global boiling. So we reached out to Stephanie Jamison, author of the Accenture report and the company’s global sustainability services lead, to find out if there is anything left to be optimistic about. Usually, if you ask a consultant to solve a problem they identified, they are bullish on solutions, and this was no exception. “We do believe there is a business growth opportunity,” she said. Right. But how?
Getting out of a hole begins with knowing which one you’re in. Not surprisingly, it is the oil and gas industry that is at the origin of the failing road to net zero, as its emissions keep rising instead of falling. Just 8% of companies in this industry are on track to meet their net zero targets, Accenture found. And it’s trickling down from there, as the problem many other industries face, including health, natural resources, consumer goods, and automotive, is that they all depend on the energy sector.
One obvious step for companies to get on track, then, is to switch from fossil fuels to pretty much anything else. The crucial intermediary for that is the utilities sector. And they are a good partner indeed, Jamison noted. More than two-thirds of utilities are decreasing their emissions (although not all are on track to hit their net zero targets despite their declining footprint).
“Those that are delivering are the power utilities, especially the Europe-based ones,” Jamison said. “They’ve gotten into [the energy transition], grown their revenues, and developed the muscle. But they need to go faster, and do more.”
Jamison was most bullish on green hydrogen as an alternative energy source utilities could deploy. Produced by splitting hydrogen molecules, it has so far been too expensive for broad adoption compared to other green energy sources. But thanks to a new wave of government subsidies and tax credits, green hydrogen may be taking off, Jamison said. The U.S. Inflation Reduction Act and a similar Canadian plan foresee attractive tax credits for hydrogen investments, above and beyond the ones that gave EU companies an early lead. It has meant that many European companies such as Nel, Iberdrola, and Tree Energy Solutions have announced investments in North America.
The two other levers Jamison sees are deploying AI in heavy industries and using green-minded consumers as a springboard in light industries.
Take the last one first: According to Jamison, some 25% of consumers are willing to pay a premium for a “green” product. If you team up with your ecosystem partners—as Apple did with its new carbon neutral watch, or EV-manufacturer Polestar is planning with its Polestar 0 project—you can successfully develop and sell net zero products, she said. Doing so puts you on the “S curve” of making clean technologies viable, allowing the development of net zero products with no price premium later on.
Finally, there is AI. “In the heavy industry, oil and gas need to become more productive in core operations,” Jamison said. “That will require digital tech.” In other words, if you can’t replace oil and gas as energy sources, you should at least minimize it by using an AI analysis to tell you where you’re wasting energy, and where you could do without.
Will it all be enough to get back on track, on time? I doubt it. But there’s really no harm in following these best practices anyway, is there? They are bound to make companies more competitive over the long term and make sure they are seen as part of the solution, rather than the problem, by future generations of consumers and regulators. So let’s get on with them.
Separately, I’ll be interviewing Guillaume Le Cunff, CEO of Nespresso, next week in an exclusive virtual conference for Impact Report readers and Fortune Connect members. I’ll ask him about how becoming a B Corp has set Nespresso on the path to doing its part for the climate and society. The event takes place Monday, Nov. 20, at 11:30 a.m. ET/17:30 CET. You can sign up here.
Impact Report is going on the road. We’re off next week for Thanksgiving, and after that, you can find us at the Fortune Global Forum in Abu Dhabi (Nov. 27-29) and the Fortune pre-COP dinner in Dubai (Nov. 29). If you’ll be on-site in Dubai and would like to attend, send me a note. I’ll head back over to Geneva for family reasons afterward, but I’ll be following the COP action. And while we’re at it: My new newsletter, CEO Weekly Europe, launches Nov. 29. You can sign up here.
More news below.
Peter Vanham
Executive Editor, Fortune
peter.vanham@fortune.com
This edition of Impact Report was edited by Holly Ojalvo.
ON OUR RADAR
P&G, Mondelēz, and Ferrero among the world's deforestation offenders (INBOX)
A new report released today by Rainforest Action Network (RAN), an environmental advocacy group, assessed major global brands in their efforts to end forest destruction and rights abuses in their supply chains. Going by the scores they handed out, there won’t be a valedictorian in this year’s class.
Procter & Gamble emerged last, with Mondelēz, Ferrero, and Nissin Foods also scoring an F. Scoring in the middle of the pack among their peers were Nestlé, PepsiCo, Kao, Colgate-Palmolive, and Mars with D's. The highest score received was a C, by Unilever. You can read the full report here.
Our take: We’re no experts in forest destruction and human rights abuses, so we won’t get into the merit of the assessment. But for the business world to continuously improve, pressure from advocacy groups like RAN can be useful, especially if the criticism is precise and shows where improvements can be made.
Coca-Cola, REI, and Sephora among the Retail Sustainability Awards winners (Retail Leader)
From the stick to the carrot: Coca-Cola, REI Co-op, and Sephora are among the retail brands and companies that are doing best on sustainability initiatives, Retail Leader said this week. The trade publication handed these retail brands its inaugural sustainability awards.
Coca-Cola got recognition for moving to the more environmentally friendly rPET bottles, REI for its sustainability practices across the board, including “requiring all brands to measure their greenhouse gas emissions and set reduction targets,” and Sephora’s director of sustainability Desta Raines got an individual prize. One of her flagship programs is to give “empties a second life” as many beauty product packaging is nonrecyclable.
Our take: As long as it’s based on rigorous analysis and not greenwashing, these kinds of prizes have an important signaling function for consumers, media, and executives. We’re all for it if they stand the test of time.
