The net-zero challenge: Matching action to ambition

Recent research by PwC US has shed light on a persistent sustainability challenge. The study looked at the corporate filings and reports of 214 of the world’s largest public companies, as well as global data sources, to see how much progress businesses in 11 sectors were making toward net-zero commitments. The research showed that a majority of companies were holding firm to their timelines (53%) or even accelerating them (37%). And yet, analysis of decarbonisation plans showed that businesses in ten of the 11 sectors will likely not meet their short-term emissions-reduction targets—an execution gap reflected in the infographic above. One likely cause of that gap is a tendency on the part of sustainability teams to focus on easy-to-complete projects while kicking thornier ones down the road. Another is the emergence of technologies such as generative AI, which exerts enormous energy demands that companies—particularly those in tech, the only one of the 11 sectors that’s on track to meet net-zero commitments—may not have incorporated into their decarbonisation plans.

The findings point to a stubborn reality: achieving decarbonisation at scale is hard. Three actions can keep companies from falling behind. 

1. Do the math. Companies that perform only high-level estimates of their emissions, and what it will take to reduce them, will lack enough detail to produce an effective decarbonisation plan. Such a plan needs to clearly identify the specific actions to be taken and then carefully calculate how much carbon each action will abate, how much each will cost (including human capital), how long each will take to implement, and the extent to which grants, tax credits or incentives might offset costs. What’s more, those calculations must be based on accurate data on current and future emissions across the company’s value chain.
2. Take the long view. There’s nothing wrong with easy wins—reducing office workers’ electricity consumption, say—but to hit a net-zero commitment, companies need to undertake initiatives with longer payback periods (transitioning to renewable energy sources for industrial facilities, for example). Fewer than 25% of the companies in the PwC study disclosed emissions-reduction projects with a payback period of more than ten years. Earmarking financing for sustainability initiatives can be key; so can pinpointing an internal cost of carbon. Ultimately, CFOs need to consider the capital costs of decarbonisation projects with the same rigour they apply to other long-term initiatives.
3. Make decarbonisation an all-of-business endeavour. Sustainability initiatives typically span geographies, require alignment across business functions, and involve coordination with third parties and regulators. But when market conditions and business priorities shift, decarbonisation plans can wind up on the back burner. The companies that stay the course find ways to embed sustainability throughout the business—incorporating it into product design, for example, and enlisting the support of the tax function, which can leverage credits, grants and other incentives that can increase the ROI of decarbonisation moves.