assumed there is a financial trade-off for reducing emissions in operations, and for good reason: decarbonizing operations can be complex and capital intensive. We’ve also seen companies try to decarbonize operations through a stand-alone program that isn’t fully integrated with the core business, which can limit both the potential for emissions reductions and a healthy balance sheet. Now, however, we see leading organizations integrate cost and carbon reductions simultaneously. Our analysis shows that companies are already seeing results: up to 40 percent reductions in emissions and up to a 15 percent improvement in financial performance (Exhibit 1). By 2030, incumbents can, on average, abate 20 to 40 percent of emissions while also reducing their production costs (Exhibit 2). A reduction
— chain—and tap adjacent value pools—have an opportunity to secure early demand for net-zero offerings and benefit from low-cost financing. Decarbonize and improve cost competitiveness In the past two to three years, we’ve seen an increasing number of companies set ambitious decarbonization commitments. To date, more than 6,000 companies have signed up through the Science Based Targets initiative to achieve an average reduction of 49 percent in Scope 1 and 2 emissions and 28 percent in Scope 3 emissions by 2030. 4 Now companies face the steep challenge of making the reductions a reality. Many organizations have begun their decarbonization journey by looking to cut emissions from operations. Traditionally, some leaders have
Web <2023> <Pub-IncumbentDecarb-rj> Exhibit <1> of <3>
Exhibit 1 Companies across industries can reduce carbon emissions and improve
financial performance at the same time. Illustrative financial improvement and CO2 reduction, %
Advanced industries: Automotive player
Global energy and materials: Chemical player
Travel and logistics: Logistics player
Other industries: Healthcare provider
30–35
Production cost improvement
10–15
5–10
5–10
5–10
5–10
CO₂ emissions reduction
10–20
30–40
McKinsey & Company
4 Scope 1 emissions are direct emissions that occur from sources that are controlled or owned by an organization; Scope 2 emissions are indirect emissions associated with purchased energy; and Scope 3 emissions are indirect emissions resulting from activities along an organization’s value chain. Science Based Targets initiative dashboard, accessed September 26, 2023; US Environmental Protection Agency.
Accelerating the journey to net zero
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