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April 2, 2021

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The new measure of corporate success

For decades, global leaders have failed to respond to climate change with appropriate urgency, even though the science has long been clear. Now, the problem has become so acute that it is impossible to ignore, and those in positions of power are under growing pressure to start making up for lost time.

For businesses, the pressure is no longer coming only from protesters, but also from shareholders, customers, investors, lenders, employees, policymakers, and every other stakeholder with a true understanding of the climate threat. From supply-chain disruptions to lethal conditions for outdoor workers, the risks to business are multiplying.

From now on, CEOs will need to answer four key questions: What will my market look like in a net-zero-emissions world? What is my business model for succeeding in that market? What changes should I make now to prepare for success? What supporting conditions will I need, and how do I go about securing them?

CEOs who act early can secure competitive advantages and capture major economic opportunities for their companies. The global shift toward a net-zero global economy is already underway, auguring a complete transformation of almost every sector, with some players reaping major rewards while others commit to major write-downs.

As the energy transition continues to accelerate, climate commitments increasingly will be seen as table stakes for doing business. Climate champions will surge ahead of the laggards, and this first-mover advantage will cascade across the economy, starting in the sectors with a relatively straightforward path to decarbonization: electricity, transportation, and buildings. Progress here will then enable similar transformations in industries that are harder to decarbonize, such as shipping, steel, cement, and aviation.

In fact, climate leaders are already emerging even in these more challenging sectors. In shipping, Maersk has committed to deploying a carbon-neutral vessel by 2023. “Fast-tracked by advances in technology and increasing customer demand for sustainable supply chains,” the company reports that it “is accelerating [previously announced] efforts to decarbonize marine operations.”

Similarly, in aviation, Airbus is leading the way with plans to deploy a carbon-neutral hydrogen-powered aircraft by 2035.

Such decarbonization ambitions in hard-to-abate sectors should be a signal to CEOs everywhere that the net-zero transition is already here.

Increasingly, business leaders are recognizing that the risks of being left behind will grow larger by the day.

The imperative to achieve net-zero emissions is not merely about positioning one’s company for survival; it will also be good for business. Chief executives can start implementing initiatives that will actually save money, by reducing waste, increasing circularity, and improving energy efficiency.

Michel Fredeau is managing director and senior partner at Boston Consulting Group. Jules Kortenhorst is CEO of the Rocky Mountain Institute. Copyright: Project Syndicate, 2021. www.project-syndicate.org




 

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