The business community is now on the front lines of the fight against climate change. Hardly a day passes without a major company announcing a new emission goal, net-zero target, or climate initiative.
While worthy in and of themselves, these individual efforts will not deliver the drastic reductions in emissions we need. Too often they are long-term, aiming for 2050, and omit interim goals. Or they are focused narrowly on getting the organization’s house in order, initiating a carbon footprint analysis and identifying point solutions to abate emissions.
Systems approaches: Our last, best hope?
Amidst these fragmented efforts, there is a growing realization that achieving the Paris Agreement ambition of holding global warming close to 1.5C is only possible by making rapid and profound changes to the core systems that underpin modern life: energy, mobility, industrials, food, and more. It is difficult to overstate the magnitude of what’s needed or the pace at which it must happen.
Achieving changes of the requisite speed and scale demands non-linear, disruptive shifts within and across each of these systems. That, in turn, requires finding points of leverage that can create reinforcing feedback loops or create tipping points in markets and technology adoption. Urgently catalyzing these exponential systems changes is perhaps our last, best hope for averting the most devastating impacts of climate change.
Working across systems to speed decarbonization
As we wrote in a Deloitte Insights article, some of the most powerful and impactful opportunities to address the climate crisis and create new value lie at the intersection of emerging low-carbon systems. An array of climate solutions currently faces critical bottlenecks or fragmented approaches. In many instances, supply and demand are mismatched or operate on different time horizons.
For example, many consumers resist buying electric vehicles because charging stations are not widely available but charging providers balk at installing more infrastructure without clearer evidence that it will get regular use. At the same time, an electrified vehicle has maximum emissions impact only if it is charged with renewable electricity and manufactured with circular, low-waste processes using sustainably extracted raw materials. We need to understand these dependencies more fully across systems to prioritize the right sets of actions at the right times.
A systems-based strategy for a low-emissions future
Where should you start, and what does the journey look like?
Begin with a systems view. Set aside existing frameworks about what your industry looks like and who your competitors are. Instead, consider how the economy is likely to be reconfigured as it moves toward a low-carbon footing.
Understand where value is likely to be created—and destroyed. Business value in the low-emissions economy is likely to increasingly derive from four sources:
- Using less. Implementing sustainable production and consumption, increased energy efficiency, and reduced waste: building retrofits, smart heating and lighting, HFC-free refrigeration, etc.
- Emitting less. Providing clean alternatives to carbon-intensive processes: renewable energy, electric vehicles, green steel, etc.
- Regenerating, restoring, and repairing. Removing carbon and restoring natural capital: nature-based solutions, reforestation, regenerative agriculture, direct air capture, etc.
- Measuring, verifying, valuing, and tracking. Monitoring progress toward net zero and ensuring transparency: unified climate standards, emissions lifecycle analysis and Scope 3 assessments, reporting and compliance, etc.
It’s just as important to understand what services and assets may cease to be viable. The clock is ticking on high-emissions business models. In fact, our research shows that climate inaction may cost the US economy nearly $15 trillion by 2070
Move quickly. We are in a race against time. But for those with legacy business models built on carbon-intensive processes, inertia is a powerful force to overcome: Shifting away from proven and still-profitable activities into new and uncertain areas can seem impossible. Unsurprisingly, many are seeking to manage the transition by taking small steps, creating optionality, and extending the timeline over which the shift will play out.
Such a go-slow strategy is fraught with risk. We’ve already seen the economics of one critical segment—electricity generation—tip critically in favor of renewables in many markets. Other areas are likely not far behind: Electric powertrains will soon surpass their internal combustion counterparts on nearly every relevant performance dimension, for example. We are already seeing the beginnings of a sea change in financial markets, with investments increasingly flowing to climate-friendly businesses and away from carbon-intensive models that lack a clear path toward a lower-emissions footing. And as capital allocations accelerate from both the public and private sectors, and regulatory requirements grow more stringent, a host of nascent solutions—from direct-air carbon capture and green hydrogen to biofuels and decarbonized cement—could move rapidly down the cost curve.
Join us. At Deloitte, we’re committed to putting human-centered sustainability at the forefront of all we do for our actions to meet our carbon reduction commitments as well as the work we do with clients to transform to a low carbon and equitable future. We invite companies, NGOs, investors, public sector agencies, and others interested in advancing the adoption of low-carbon systems to reach out to explore possible ways we could collaborate.
