How business can bridge the gap and achieve net zero

Within the past year, a rapidly growing number of household-name businesses have announced net-zero targets. Their pledges punctuated an immeasurably difficult year with hope; there is a powerful symbolism when major players in oil and gas, automotives, airlines and other industries with a traditionally high carbon footprint commit to rapid decarbonisation. 

These decisions are critically important steps, but we also recognise that much more is needed. Recent PwC analysis shows that as of February 2021, only about 8% of the world’s largest companies represented by the Global Fortune 500 have pledged to become net zero. This sobering statistic leaves the overwhelming majority of companies out of the climate action narrative and imperils our ability to mitigate the worst effects of the crisis. The disconnect between high-profile pronouncements and low participation rates is just one of a series of gaps between our climate hopes and on-the ground realities and needs. Bridging these gaps must be a priority for business leaders in 2021.

The current pace of change is far behind the pace we need. Emissions levels remain too high. By 2030, global carbon emissions must be cut in half, yet between 2009 and 2019, average emissions rose by 1.5% per year. Compounding this challenge, the rate of decarbonisation is still too slow. New analysis from PwC’s Net Zero Economy Index, which tracks progress among the G20, shows that a decarbonisation rate of 11.7% is required to keep warming within 1.5°C. To get there, countries with the highest rate of decarbonisation in 2019 will need to double their efforts moving forward, and those with the lowest rate may need up to a 10x improvement.

Business commitments to net zero lag those of government. Already, more than 50% of countries, states and cities, amounting to more than 50% of global GDP, have set targets to achieve net zero by 2050—and more will likely make pledges in the months and years ahead, including the US under President Biden. Moreover, many countries are taking steps to introduce policy interventions directed at business. Examples include bans and phaseouts of polluting activities, fossil fuel subsidy reforms, tax reforms, new product and fuel standards, and mandatory ESG and climate risk disclosure. And it is clear that there is more—much more—to come. 

The reality is that a country cannot meet a net-zero commitment without transforming its economy and industries therein. With regulation evolving hand-in-hand with investor pressure, businesses are increasingly coming forward with net-zero commitments. Others should assume that they will be required to do so, in one form or another, as governments move to deliver on their commitments and as shareholders and customers increase their demands for such action. And success can’t solely be judged on emissions reductions: governments and businesses will also need to ensure a “just transition” for those sectors, regions and communities that will be most negatively impacted.

Some business leaders may feel that they should wait and see or postpone bold action and investment. But there will likely come a time in the not-too-distant future when the countries in which they operate will have little choice but to make these decisions on their behalf. The pressure to act will continue to grow exponentially.