— Embed decarbonization in all processes. Eventually, decarbonization should be embedded in all critical processes. Incumbents will have different areas of focus, based on their sector and where they are in the value chain. Metals, chemicals, and mining companies might focus on plant design and related capital expenditures, whereas technology and component companies might emphasize product design and embedded emissions. For example, a large industrial-equipment manufacturer has set various decarbonization KPIs across all areas of the organization, from embedded emissions in procurement to share of recycled material in product design. Moving quickly to embed decarbonization objectives in all processes, in some cases, can help companies achieve cost efficiency faster and give the organization a head start on building new capabilities. — Stay agile in decision making and capital reallocation. By 2050, about 90 percent of total global emissions can be reduced with existing climate technologies—however, many of these technologies are not currently cost competitive, and only 10 to 15 percent are considered commercially mature. 7 As markets evolve and new climate technologies become commercialized, leaders should remain flexible in their decarbonization plans and capital allocation, with an eye toward cost savings and value creation. — Use supply chain partnerships to accelerate the next wave of emissions reductions. Companies can also build long-term strategic partnerships with technology providers to help them grow and capture economies of scale, which can, over time, lead to cost reductions on emerging climate technologies for the buyers. For example, electrolyzers, which are key to producing clean hydrogen, are increasingly in demand. Proactive companies are partnering
accountability from leadership, as well as the ability for leaders to continuously reevaluate the decarbonization strategy as input costs change (energy prices, for example) and new technologies become commercially available. However, many incumbents—including those in harder-to-abate sectors—have advantages, such as the ability to engineer large-scale production processes, technological know-how, and investment flexibility. In our experience, companies successfully integrate cost and carbon reductions through a few approaches, from assessing carbon emissions on a granular level to embedding decarbonization in all processes: — Make fact-based decisions through full carbon transparency on an asset and product level. Leading companies look for carbon and cost reductions on a granular level, down to all assets and product offerings, and operate with full carbon transparency for stakeholders and customers. For example, a leading chemicals player calculates detailed product carbon footprints for approximately 45,000 products, which enables the company to create viable decarbonization pathways and offer their customers a better understanding of a product’s carbon footprint. Based on our analysis, such a granular approach can save companies an additional 10 to 20 percent in costs on average. 5 — Focus on capturing the first 20 to 40 percent of emissions. We are seeing companies integrate cost and carbon reductions in several ways, from improving energy efficiency to reducing waste to designing products more efficiently. 6 However, companies often struggle to understand which measures will yield the most savings and how to focus engineering resources and financing.
In our experience, leading companies focus on capturing an initial 20 to 40 percent of emissions while also reducing costs.
5 Based on net present value. 6 For more, see Laura Corb, Anna Granskog, Tomas Nauclér, and Daniel Pacthod, “Full throttle on net zero: Creating value in the face of uncertainty,” McKinsey, September 20, 2023; and Peter Crispeels, Mikael Robertson, Ken Somers, and Eric Wiebes, “Outsprinting the energy crisis,” McKinsey, April 21, 2022. 7 International Energy Agency; McKinsey Sustainability Insights.
Accelerating the journey to net zero
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