The latest insights from the We Mean Business coalition

We’ve taken stock of corporate climate action and business knows what it needs to deliver the clean energy transition

When incentives align, we have seen how fast the clean energy transition can move. Over the past decade, the deployment of wind, solar, heat pumps and battery technologies have confounded all forecasts. Solar generation capacity has been doubling every 2–3 years since 2000, sales of electric vehicles sales reach new highs each year, and heat pumps are on an exponential growth curve.

These are some of the findings of the Corporate Climate Stocktake (CCST), led by We Mean Business Coalition, and supported by the UN Climate Champions and Bain & Company.  

Our process was launched in May in support of the Global Stocktake (GST) process – the UNFCCC led report card on progress since the Paris Agreement. As nations prepare to meet in Dubai this year for COP28, the culmination of the first UNFCCC Global Stocktake represents a critical moment to course correct and to accelerate climate action where it is most needed. The Synthesis report released last week confirmed what we already knew, “the world is not on track to meet the long-term goals of the Paris Agreement.” Amongst a series of insights, the report finds, “achieving net zero CO2 and GHG emissions requires systems transformations across all sectors and contexts, including scaling up renewable energy while phasing out all unabated fossil fuels, ending deforestation, reducing non-CO2 emissions and implementing both supply- and demand-side measures.” Ultimately, the GST concludes “much more action, on all fronts and by all actors, is needed now.”

One set of actors that are most certainly moving fast are those companies at the forefront of clean technology transitions.  Just as nation states are taking stock, so is business.  

In contrast to the global stocktake, which focusses on country-level emissions, the Corporate Climate Stocktake examines the pace of clean solutions adoption within economic sectors. The aim is to provide a forward-looking business perspective on the progress in transiting the energy system away from fossil fuels and into clean solutions. Covering the vast majority of global emissions, the CCST is capturing evidence from business leaders at the forefront of driving the change in their industries:  to understand the pace of change in each sector, the barriers they are facing, and what our most ambitious companies need from governments to go faster.   

Is corporate climate action moving fast enough?    

The Corporate Climate Stocktake has already taken evidence from surveys and interviews with more than 300 business leaders and industry experts across 8 sectors – shipping, aviation, road transport, power, hydrogen, steel cement and agriculture.  The emerging picture is one of frustration. While there are signs of accelerated progress in every sector, business leaders are concerned about the pace of transition. 

The challenge for many companies is that while they may be strongly committed to the phasing out of fossil fuels, the wider transition of the energy system is not within their control.  Across every industry, business leaders taking part in the CCST are pointing to a range of transition barriers which are slowing the rate of investment in clean technologies – from availability of infrastructure to the realities of commercial incentives. We know from speaking to companies directly that regulation remains the single most important accelerator of change. 

Shifting gears and changing course 

Achieving the global energy transition at the scale and pace that science tells us is necessary, depends on businesses leaders taking risks, driving innovation and transforming their industries.  Renewable energy producers like Ørsted and Iberdrola have transformed the power sector while experiencing strong growth and profitability. EV manufacturers are disrupting the car industry by capturing ever larger shares of new vehicles sales while steadily improving margins. And in the world of advanced chemicals, innovators like Solvay have harnessed the low carbon revolution by meeting new demand for lightweight and specialty materials. 

But many companies cannot accelerate clean energy investment without wider changes in their market environment. Those at the frontier of the transition need to get much louder and more precise about what they need from governments to keep ahead of the curve.  Across sectors, the CCST is highlighting the need to shift as well as accelerate our approach to climate action. Achieving the scale and focus for investing in the transition requires addressing a series of complex coordination challenges.  

A focus on accelerating demand for clean solutions sector-by-sector   

Our research looked at eight sectors individually to really understand the unique opportunities and challenges companies face there. Amongst the clearest messages we heard was the importance of this sectoral approach. Businesses, investors, NGOs and governments need to work together intensively, sector by sector, to define rapid and realistic decarbonisation pathways in each market. 

For governments that means implementing strong sector-specific strategies to create demand for zero carbon solutions. Target setting is no longer enough, governments need to be looking at economy wide measures like carbon pricing, sector specific standards and directly supporting the development and deployment of clean technologies and their supporting infrastructure in key sectors.   

Systematic, sectoral collaboration between business and government to overcome barriers to the clean energy transition 

Even those industries that rely most on fossil fuels are demonstrating the building blocks of collaborative approaches. A year ago, the TRATON GROUP, Daimler Truck, and the Volvo Group kicked off a European charging infrastructure joint venture to tackle emissions from road freight transport, calling on the entire industry to join their effort. In some sectors, business is organising to overcome the barriers to decarbonisation. Through a wide variety of initiatives the Global Maritime Forum has brought together the global maritime industry and its stakeholders to find new solutions. This hard work has influenced giants like Maersk who welcomed their first green methanol vessel this week and collaborate with Amazon to move their goods using alternatives to fossil fuels. For the transition to happen at the scale and pace required, both public and private sectors need to invest in the transition. This requires much more systematic collaboration between business and government. Where this is happening, the transition is gathering pace.  

But more is needed. To truly see clean technologies adopted at pace and scale depends upon the painstaking process of understanding where technology development is headed, identifying the barriers, and setting out what will enable business to direct capital flows where it is most needed.  

Strategic, aligned public private interventions   

International cooperation is essential, but it doesn’t need agreement across all nations. In many sectors of the economy, government-led sectoral institutions are often too big to function effectively. What is needed is neither grand alliances around the goals of net zero nor big-ticket multilateral diplomacy; it is the painstaking pragmatism of smaller groups of governments and businesses, from every part of the world, willing and able to advance change. We need business and governments to implement joint plans side-by-side locally, nationally and internationally.

The clean energy transition will only happen at the pace the world needs with effective international co-ordination. When learning is shared, and when actions are coordinated to accelerate innovation and the diffusion of technologies through global markets, industries can move rapidly. History offers us impressive examples such as energy supply diversification during the 1970s oil crisis or the rapid innovation in both developing vaccines and getting critical supplies to communities during the recent Covid response. Governments need to come together to support industry in making this transition – to play the coordinating role that only governments can.  

This requires a major leap forward in global energy governance. The system of national goals negotiated through the UNFCCC is the foundation of our collective response to climate change. But this foundation on its own is not enough. An effective sectoral framework must tackle this underlying international coordination problem in the hardest-to-abate sectors. Creating the right incentives means working in small groups, in tightly defined sectors, and across industry and government boundaries. We need to think creatively about how we create change. We must dare to do things differently. 

The corporate climate stocktake will continue gathering insights from leading businesses through to October.  The focus of the next phase of the CCST will be to support business in articulating transition barriers and what they need from governments and international institutions to accelerate clean energy investment. When governments meet at COP28 the focus needs to be on the practical and specific measures that are needed to advance clean solutions in each of the major sectors of our global economy. The world invests 1.8 trillion in the energy system – 60% of which comes from private companies and investors.  We need to make this investment count. 

If you want to make your company’s voice heard through the Corporate Climate Stocktake there is still time to get in touch ([email protected]).