In the fight against climate change, decarbonization companies are on the front lines, aiming to reduce their carbon footprint and achieve net-zero emissions.
This article dives deep into the growing trend of corporate decarbonization. We’ll explore the motivations behind this movement, the challenges faced by these companies, and ultimately, their crucial role in mitigating climate change.
What is Decarbonization?
Decarbonization is the process of reducing carbon emissions into the atmosphere with the goal of achieving a low-emission circular economy. This is also an important structural change to remove carbon from the production process.
In recent years, decarbonization companies play an increasingly important role in the journey towards a net zero future.
Decarbonization Trend in Businesses
Like the digital transformation trend that has taken place in the past few decades, decarbonization is predicted to be a “great potential” for the global market.
Mr. Rama Variankaval, who has worked at JPMorgan Chase for 20 years. At the end of 2020, he was assigned to the corporate finance advisory department with the responsibility of leading JPMorgan’s decarbonization campaign, according to CNBC.
“At any given time, there will be certain trends that will have a big impact on the economy,” Variankaval told CNBC. During his years at JPMorgan, Variankaval’s job was to identify and study key trends to “control resources and balance finances accordingly.”
He believes that the decarbonization companies and campaigns will be successful because many organizations and countries around the world have issued a set of regulations to reduce greenhouse gas emissions, which have a strong impact on businesses.
The trend of “green investment” is growing strongly, with investors focusing on ESG factors whenever considering investing in companies.
The fact that big companies have begun to prioritize decarbonization has impacted the behavior of financial regulators. In 2020, JPMorgan officially opened its Carbon Transition Center, which is responsible for building and implementing the bank’s climate and sustainability goals.
On the other hand, the Biden administration’s climate bill signed in August 2022 continues to set the trend, accelerating capital flows into decarbonization technologies and low-carbon fuel sources such as solar, wind, green hydrogen, sustainable aviation fuel, carbon capture, and several other sectors.
In addition, about $50 billion is invested in climate technology companies each year through private capital and venture capital funds.
Some Examples of Decarbonization Companies
There are many examples of very recent path-breaking steps by businesses in advance of any obligation to take action to decarbonize. Some of these decarbonization companies have been financially assisted by governments or the EU but all have been partly funded by private companies taking a risk on their investment of money and management time.
Large companies across the globe realize that the gravity of the climate crisis obliges them to act. But moving from today’s reliance on fossil fuels to a business with a negligible carbon footprint is hugely demanding, particularly for companies facing shareholder demands for quick investment returns.
Best Practices
The Torres Winery, headquartered not far from Barcelona, is the largest producer in Spain. Still family-owned after five generations, its vineyards produce a wide variety of wines, including some of the very highest quality. The company’s planning for a transition to a low carbon world, and its actions to address the impact of climate change on both the amount and quality of its production, seem to me to be exemplary.
About 80% of the impact of wine making on greenhouse gas emissions arises away from the vineyard itself. Torres often has an important place in the sales of its suppliers and so it is able to exert productive pressure on the CO2 emitted by the chain of the businesses that it works with.
Another example, the US payments processing company Stripe recently asked for bids for a pot of 1 million dollars that it had set aside to pay other companies to collect and permanently store CO2. Winners included a Swiss company that captures CO2 from the air and then injects it into basalt rock. The rock is chemically altered by this action, permanently sequestering the gas. Stripe is doing what we all need to do, thinking about ways in which it can counterbalance remaining emissions once it has taken all the actions it feasibly can to reduce its carbon footprint.
These examples illustrate the second phase of the long journey towards decarbonization. The first was the rapid growth in investments in wind and solar across the world, increasing the production of green electricity.
ENEL Green Power was one of the most important actors in this global movement, accompanied on the journey by the many companies that decided that their electricity purchases came from exclusively zero-carbon sources.
In general, the business world now needs to ensure that the momentum is maintained, showing governments and the rest of civil society that decarbonization is both technically and financially feasible.
The Difficulties of Decarbonization Companies in the World
Economic difficulties hinder the decarbonization efforts of businesses.
In fact, heavy industry companies around the world acknowledge that the current difficult macroeconomic landscape is declining efforts to decarbonize their businesses.
According to a new research report by auditing and consulting firm Accenture (UK), nearly 40% of heavy industry companies worldwide said that they could not invest more in the decarbonization process due to the unstable macroeconomic environment.
Nearly two-thirds of heavy industry companies surveyed said that major efforts to cut carbon emissions would no longer be economically attractive until the end of the decade. However, more than half of heavy industry leaders see revenue growth as the main driver that makes the economics of decarbonization efforts more attractive.
In a separate report, published on November 16th 2023, the consulting firm found that only 18% of the world’s 2,000 largest companies are on track to achieve their goal of bringing their carbon emissions to net zero by the middle of this century. However, 37% of companies are committed to achieving this goal, up from 34% last year.
Europe stands out from the rest of the world in terms of decarbonization efforts, with 61% of companies surveyed aiming for Net Zero, compared to 28% in North America and 30% globally. However, according to Accenture’s analysis, only 24% of European companies can actually achieve this goal by 2050.
Conclusion
In short, companies should prioritize decarbonization to get ahead of reporting mandates, improve trust and transparency with customers, investors, and other stakeholders, and make necessary contributions to the international effort to fight global warming.
See more: Achieving Decarbonization with Integrated Strategies
