Climate Change

How business can bridge the gap and achieve net zero

Business leaders need to act now to meet the demands of science, government, investors and society at large.

Within the past year, a rapidly growing number of household-name businesses have announced net-zero targets. Their pledges punctuated an immeasurably difficult year with hope; there is a powerful symbolism when major players in oil and gas, automotives, airlines and other industries with a traditionally high carbon footprint commit to rapid decarbonisation. 

These decisions are critically important steps, but we also recognise that much more is needed. Recent PwC analysis shows that as of February 2021, only about 8% of the world’s largest companies represented by the Global Fortune 500 have pledged to become net zero. This sobering statistic leaves the overwhelming majority of companies out of the climate action narrative and imperils our ability to mitigate the worst effects of the crisis. The disconnect between high-profile pronouncements and low participation rates is just one of a series of gaps between our climate hopes and on-the ground realities and needs. Bridging these gaps must be a priority for business leaders in 2021.

The current pace of change is far behind the pace we need. Emissions levels remain too high. By 2030, global carbon emissions must be cut in half, yet between 2009 and 2019, average emissions rose by 1.5% per year. Compounding this challenge, the rate of decarbonisation is still too slow. New analysis from PwC’s Net Zero Economy Index, which tracks progress among the G20, shows that a decarbonisation rate of 11.7% is required to keep warming within 1.5°C. To get there, countries with the highest rate of decarbonisation in 2019 will need to double their efforts moving forward, and those with the lowest rate may need up to a 10x improvement.

Business commitments to net zero lag those of government. Already, more than 50% of countries, states and cities, amounting to more than 50% of global GDP, have set targets to achieve net zero by 2050—and more will likely make pledges in the months and years ahead, including the US under President Biden. Moreover, many countries are taking steps to introduce policy interventions directed at business. Examples include bans and phaseouts of polluting activities, fossil fuel subsidy reforms, tax reforms, new product and fuel standards, and mandatory ESG and climate risk disclosure. And it is clear that there is more—much more—to come. 

The reality is that a country cannot meet a net-zero commitment without transforming its economy and industries therein. With regulation evolving hand-in-hand with investor pressure, businesses are increasingly coming forward with net-zero commitments. Others should assume that they will be required to do so, in one form or another, as governments move to deliver on their commitments and as shareholders and customers increase their demands for such action. And success can’t solely be judged on emissions reductions: governments and businesses will also need to ensure a “just transition” for those sectors, regions and communities that will be most negatively impacted.

Some business leaders may feel that they should wait and see or postpone bold action and investment. But there will likely come a time in the not-too-distant future when the countries in which they operate will have little choice but to make these decisions on their behalf. The pressure to act will continue to grow exponentially.

Climate tech is an umbrella term for a handful of sectors where innovative digital technologies are being deployed to address climate change.

Venture capital investment in climate tech, 2013–19 growth by category, CAGR

Tap each bubble or click on legend items to learn more

  • Mobility and transport

    Low-GHG air transport, shipping, light and heavy duty road transport; micro-mobility electric vehicles; batteries/fuel cells

  • GHG capture and storage

    Removal and storage of greenhouse gases (GHG) from the atmosphere; systems for monitoring and managing the carbon footprint of organisations or governments

  • Heavy industry

    Low-GHG alternatives to traditional inputs (e.g., chemicals, steel, plastics); transformative circularity; recycling and materials efficiency solutions

  • Food, agriculture, land use

    Food production methods that replace carbon-intensive animal-based products; low-GHG farming practices; low-GHG fertilisers; reforestation

  • Built environment

    High-efficiency fittings, fixtures, and heating and cooling; smart management of energy consumption; low-GHG construction processes

  • Energy

    Renewable energy generation; grid management; production, development and distribution of alternative fuels; high-efficiency, energy-intensive electronics

  • Climate/earth data generation

    Recording or analysis of earth and climate data for use in reducing emissions; low-GHG satellites and sensors

Boardrooms are being asked not just for targets but also for climate transition plans. Already more than US$50tn assets under management (AUM)—close to half of total AUM—is currently held by investors that have pledged to drive decarbonisation. Corporate boards and banks are being asked to present not just targets but their transition plans to reach net zero. Asset owners and managers are increasingly awake to the threat of significant value erosion and multiple compression on carbon-intensive assets, and to the value creation upside for companies pioneering products and services aligned with a net-zero future. 

To address these demands, business leaders need a credible approach—and even those with existing net-zero commitments need a plan to tackle the toughest decarbonisation challenges. Many, for example, are notably vague when addressing how the company will transform their value chain emissions, such as downstream emissions from products, services and investments. Of the 160 companies in the Climate Action 100 initiative (chosen for their significant greenhouse gas [GHG] emissions), 43% now have net-zero pledges in some form. But just 10% of these companies’ targets directly address their most material Scope 3 (value chain) emissions—which means most will need to go further.

This requires a wholesale transformation, one that touches every part of a company’s business and operating model. Building on a net-zero ambition, companies have to ensure accountability at the top, realign their corporate growth strategy with net zero, adapt their operating model and supply chain to support the transformation, invest in innovation, provide the necessary financing, and prioritise transparency and engagement. Success will require that the CEO, the CFO, the chief innovation officer, the chief risk officer and other top corporate leaders join the sustainability chief, alongside a substantial investment in the right skills.

Although the magnitude of change required may seem staggering, technology has the potential to upend the status quo and catalyse radical improvement. Net-zero commitments can boost the odds of those breakthroughs taking place, because each commitment represents a new customer in need of solutions to help meet its goals. Consider, for example, the One World Alliance of airlines, which committed to net zero by 2050. Making that pledge meant betting on zero-emission aircraft technologies that don’t yet exist at scale—in this case, commercial passenger aircraft that can be run on sustainable aviation fuels and green hydrogen in the next ten to 15 years.

Venture capital investment in climate tech increased 4,200% between 2013 and 2018, though 2019 experienced a small drop-off, concomitant with wider VC investment trends.

Venture capital investment in climate tech, US$mn

2013 total: 418
2016 total: 5,616
Greenhouse gas capture and storage: 68
Climate / Earth data generation: 76
Built Environment: 589
Energy: 685
Heavy industry: 594
Food, agriculture, land use: 895
Mobility and transport: 2705
2017 total: 12,157
Greenhouse gas capture and storage: 28
Climate / Earth data generation: 244
Built Environment: 530
Energy: 540
Heavy industry: 723
Food, agriculture, land use: 1349
Mobility and transport: 8739
2018 total: 18,227
Greenhouse gas capture and storage: 91
Climate / Earth data generation: 180
Built Environment: 1532
Energy: 1107
Heavy industry: 848
Food, agriculture, land use: 1999
Mobility and transport: 12467
2019 total: 16,270
Greenhouse gas capture and storage: 149
Climate / Earth data generation: 371
Built Environment: 696
Energy: 989
Heavy industry: 1031
Food, agriculture, land use: 2617
Mobility and transport: 10413
  • Greenhouse gas capture and storage
  • Climate/earth data generation
  • Built environment
  • Energy
  • Heavy industry
  • Food, agriculture, land use
  • Mobility and transport

The technology we need will come from a wide array of organisations, including new and emerging companies. Notably, as we found in a recent study, the rate of early-stage investment into climate tech is growing fast—in fact, five times faster than the rate of venture capital investment more broadly. During the past seven years, the aggregate funding for climate tech companies, the rate of start-up creation and the average size of funding have all increased. Between 2013 and 2019, early-stage venture funding for climate tech companies reached US$16.3bn—an increase of 3,800%. Corporate investors are becoming particularly important actors.  

This embrace of innovation offers a path to progress, and that’s good news as we embark on what will be the decisive decade for climate action. Society will expect business leaders to act: According to the Edelman Trust Barometer 2021, 66% of respondents believe CEOs should take the lead on creating change, instead of acting only when governments impose change. Achieving aggressive net-zero goals will build on this momentum (whereas failure to act will erode it). Leaders will have to pull the future into the present in order to execute a profound and rapid transformation the likes of which the world has never seen, but urgently needs.

Read more articles by Colm Kelly on strategy+business.

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Celine Herweijer

Celine Herweijer

Global Innovation & Sustainability Leader, Partner, PwC United Kingdom

Tel: +44 (0)20 7213 5703

Colm Kelly

Colm Kelly

Global Leader for Purpose, Policy and Corporate Sustainability Partner, PwC Ireland (Republic of)

Tel: +41 58 79 29 123

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Matthew Wetmore

Matthew Wetmore

Global Industries & Sectors Leader and National Managing Partner, Clients & Markets, PwC Canada

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