virgin plastics. 11 One way to move quickly on new offerings is to do “parallel scaling”—that is, initiate additional growth waves before the first one is complete. 12 Enter new value pools The net-zero transition can generate vast business- building opportunities for organizations. Since 2015, six decacorns and 135 unicorns have been created within the sustainability space. 13 However, building green businesses isn’t just a game for start-ups. As markets transition to green offerings, new value pools will emerge—in many cases, upstream or downstream of a company’s current value chain position. There is an opportunity for incumbents to enter these new value pools, provided they move quickly and strategically. Incumbents might not be naturals at building disruptive ventures. However, in recent years, we have seen incumbents flex a few advantages in building new green businesses, from securing strategic partnerships to attracting low-cost financing, while also embracing the speed and agility of a start-up. That said, entering new value pools has challenges. It often requires, for example, a new set of capabilities and new types of risk management. Companies can consider a set of actions to mitigate risks while scaling new ventures: — Use the core business to secure captive demand. A critical hurdle for new ventures is to find early-stage customers and partners to secure demand. Maersk, for example, has taken a few steps to create both supply and demand for green shipping fuels. The company has announced plans to invest in a green ammonia facility, along with ferry operator DFDS, and recently set up a green methanol company. 14 Such ventures support the company’s
of delivering net-zero products, chemical company BASF has worked with energy developers to support the construction of large offshore wind farms. — Tap financial partners and asset-level project financing. To transform the core business around new net-zero offerings, many companies will need to build new plants and facilities. Creating this infrastructure could require billions of dollars in investment. Companies can rethink how they access funding. To finance the construction of its first plant project, H2 Green Steel has raised more than €1.8 billion in equity from a broad group of investors. 9 Energy company Ørsted has financed its transition to becoming the world’s leading offshore- wind power producer through a strategy that includes operational cash flows, debt issuances, investment partners, and risk management. 10 — Finance new offerings by improving margins in the core. New net-zero offerings can come with uncertainty in still-evolving markets. A stable and cash-generating core can help keep the business foundation stable while transitioning to the new offerings. To maximize this potential, companies can look to cut costs and improve margins in the core business.
— Execute fast to capture premiums. Green premiums won’t be around forever. We
anticipate that there will be shortages of green products in multiple industries through 2035 (for example, steel, copper, plastics, and cement). Getting ahead of value on the cost curve could set companies up for green premiums in the short term and robust market share going forward. We are already seeing green premium opportunities in steel and recycled plastics. For example, high-quality recycled plastics reached an average premium of up to 60 percent over
9 “H2 Green Steel raises €1.5 billion in equity to build the world’s first green steel plant,” H2 Green Steel news release, September 7, 2023. 10 “Ørsted’s renewable-energy transformation,” McKinsey, July 10, 2020; “Funding strategy,” Ørsted, accessed October 4, 2023. 11 Marcelo Azevedo, Anna Moore, Caroline Van den Heuvel, and Michel Van Hoey, “Capturing the green-premium value from sustainable materials,” McKinsey, October 28, 2022. 12 For more, see Rob Bland, Anna Granskog, and Tomas Nauclér, “Accelerating toward net zero: The green business building opportunity,” McKinsey, June 14, 2022. 13 McKinsey analysis of PitchBook and HolonIQ data.
Accelerating the journey to net zero
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