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In 2015, the Paris Agreement created a global deadline of 2050 for reaching net zero carbon dioxide (CO2) emissions. Now, after yet another year marked by extreme weather, from intense droughts in the Western U.S. and Europe to deadly flooding in Pakistan, world leaders are convening at COP27 in Egypt this month with an understanding that the urgency to reduce emissions continues to rise. In fact, a recent report from the United Nations found that countries were falling well short of their commitments and called for a “system-wide transformation.”
The international treaty’s consensus is vital and laudable, but the reality of meeting a net zero deadline as a planet is incredibly complicated. Not every company, industry and region can decarbonize simultaneously. The transition requires an orchestrated sequence in which many companies move faster to drive the creation of new economics, technologies and infrastructure. That, in turn, enables other companies to implement them in time to hit the Paris Accord targets and to support customers’ and suppliers’ own net zero commitments.
"It goes without saying that the conservation of the global environment is important,” says Tak Ishikawa, President and CEO of Mitsubishi Heavy Industries America (MHIA). “Similarly, economic efficiency cannot be ignored. Instead of choosing one or the other, we will use all our strengths to find a solution that balances the two. I think this is exactly the world we are aiming for in carbon neutrality."
This is why MHI and a growing number of companies have committed to reaching net zero emissions in 2040, a full decade ahead of the Paris Agreement.
When it comes to corporate net zero goals, 2040 is the new 2050.
“Reaching net zero goals early is the best way to support both our customers and our industries as they move toward their own targets.”
The biggest emissions are the hardest to track
Before companies can develop realistic emissions-reduction plans, they must be able to identify and measure all the CO2 emissions related to their operations. That task alone presents challenges and complexities that heighten the urgency to act sooner rather than later.
It is relatively simple for companies to track the emissions they create directly – for example, by burning coal to make steel. These are known as Scope 1 emissions. Scope 2 refers to emissions generated by energy that companies purchase, which also are relatively easy to measure.
Scope 3 emissions cover indirect carbon emissions created throughout a company’s value chain, from the CO2 that vendors emitted creating raw materials to the methane released after discarded products decompose. These are far more elusive to measure. Unfortunately, they account for the bulk of most organizations’ carbon footprint: Corporate supply chains and consumer use of a company’s products generate 80% to 90% of overall CO2 emissions.
Tackling Scope 3 emissions will be a key component of meeting 2050 net zero goals. For that to be possible economy-wide, major corporations will need to tackle the challenge in the near term.
No one will reach net zero on their own
Increasingly, organizations are banding together to promote and fund the innovations that will make it possible to decarbonize on schedule. Governments are supporting the push for greater urgency as well with impactful initiatives such as the recent Inflation Reduction Act. It’s the largest investment to combat climate change to date – roughly $370 billion worth of incentives to slash CO2 emissions in the U.S.
Being clear and accountable about goals will be important for building public trust and driving the collaboration and innovation necessary to hit aggressive targets – while helping others reach theirs.
Individual companies like MHI are stepping up as part of their expanding sustainability efforts. MHI has already taken measures to save energy and decarbonize in ways that reduce its Scope 1 and 2 emissions. To address Scope 3 emissions, it plans to help bring its customers’ emissions as close to zero as possible, and then to zero out remaining emissions by 2040 through reductions from carbon dioxide capture, utilization and sequestration (CCUS) – MHI recovers the world’s largest share of CO2 from exhaust gas. Leading the way lays the groundwork for other companies throughout the world to follow suit.
To make this change happen on time, the company is directing 80% of its investments, or approximately $2 billion a year for the next decade, toward fighting climate change, including research and development. “Companies like MHI are in a position to generate meaningful change further along the supply chain,” says Ishikawa. “Reaching net zero goals early is the best way to support both our customers and our industries as they move toward their own targets.”
Actions speak louder than words
Many companies have made ambitious promises to reduce carbon emissions. Pressure is growing to ensure those pledges are more than rhetoric. In February of this year, a report from NewClimate Institute and Carbon Market Watch found that many leading companies have made misleading net zero pledges that put them on track to reduce future emissions by just 40%.
Responding to findings like these, and to investors’ intense interest in sustainability, the U.S. Securities and Exchange Commission has proposed new rules regarding the disclosure of climate-related risks, including greenhouse gas emissions. Similarly, the European Commission has engaged in ongoing negotiations over the terms of enforcement for its own set of ESG rules.
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Given the growing scrutiny, companies will need to demonstrate tangible progress. By 2030, MHI expects to reduce its Scope 1 and Scope 2 emissions by 50% compared to 2014, and to cut its Scope 3 emissions by 50% from 2019 levels, which will include reductions from CCUS. Being clear and accountable about goals will be important for building public trust and driving the collaboration and innovation necessary to hit aggressive targets – while helping others reach theirs.
As more and more companies achieve the first wave of CO2 emission reductions, they’ll trigger this important sequence of decarbonization – fulfilling 2040 targets, paving the way to 2050 pledges and ultimately making net zero worldwide a reality.
