More than 30% of the world’s largest polluters believe they will still be reliant on fossil fuels into the 2050s, even as clean technology cost decreases drive unprecedented adoption, according to the latest Corporate Climate Stocktake.
The stocktake, published today by the We Mean Business Coalition, is based on surveys of business leaders in 300 of the world’s largest emitters in the power, transportation, cement, steel, agriculture and hydrogen sectors.
Most of them have set targets to achieve net zero emissions by 2050 or sooner, and yet, more than a third think they will still need fossil fuels by then, pointing to a range of “transition barriers” holding them back.
That said, regulatory pressure to decarbonise is seen as key to accelerating the transition, with over 70% of companies surveyed naming government regulation as the most important driver, far above consumer pressure (37%) and investor pressure (25%).
Corporate leaders know that government action is crucial to phase out fossil fuels, which is why they are urging regulators to set ambitious targets in the run-up to COP28.
Infrastructure, cost and raw materials supply hold back progress
Barriers to the transition include a lack of infrastructure to support sustainable fuel production (particularly in shipping), consumer behaviour and concerns around electric vehicles and higher costs for zero carbon technologies.
“In steel, zero-carbon technology has achieved commercial scale, but costs are 20% higher than conventional methods. Businesses do not anticipate cost parity with traditional blast furnace production any time soon, complicating large-scale deployment in this globally competitive sector,” note the authors as an example.
In aviation, the development of Sustainable Aviation Fuel (SAF) is taking longer than desired, despite the expected availability of 100% SAF engines by 2030, and many initiatives to accelerate deployment, including a long-term purchase agreement recently announced by Microsoft.
“A further ramp-up in low-carbon fuels will be needed to hit aspired 2030 production levels of 56-65 million tonnes; planned production capacity is currently only at 12 million tonnes,” warns the report.
Additionally, business leaders expect difficulties in finding enough low-carbon inputs to increase sustainable production. The stocktake points particularly to clinker substitutes for the cement industry, but a recent BCG report suggests that sustainable raw materials demand could also quickly exceed supply in the fashion sector. (Companies like Zara owner Inditex have made sustainable sourcing a priority in their net zero strategies.)
Corporate Climate Stocktake: Business model and workforce challenges
In certain cases, business models remain misaligned with sustainability goals: that’s the case of agriculture, where demand and prices for beef, palm oil, and soy continue to rise, incentivising deforestation instead of land preservation, says the report.
This will likely be yet another obstacle to the large-scale roll-out of regenerative agriculture for large food companies.
Finally, only 30% of power sector leaders believe they have the workforce they need to meet their net zero goals, pointing to the crucial need to re-skill workers and attract the right talent.