Two weeks before the leaders of the world and business meet in Dubai for Cop 28, a sobering reality is settling in. The world’s efforts to combat climate change are falling short.
“Whatever measures one looks at for progress to date, we just aren’t where we need to be,” said Rich Lesser, global chair of Boston Consulting Group, while speaking at a virtual event hosted by Fortune.
Global emissions, which are continuing to rise by 1.5% a year, must be trimmed by 7% annually until 2030 to limit global warming to 1.5 degrees Celsius, which was the target agreed by countries who signed the Paris Agreement in 2015. This cut to emissions, if achieved, would be unprecedented and surpass the pace of emissions reductions experienced during the shutdowns of the pandemic.
More than 70,000 world leaders, business executives, climate activists, and other stakeholders will meet in Dubai beginning November 30 for the United Nations Climate Change Conference. Business plays a critical role in the energy transition away from fossil fuels like oil and coal to renewable sources like wind and solar. But only 20% of the top 1,000 companies have targets to reduce their emissions to 1.5 degrees Celsius, a sign not enough leaders are taking climate change seriously.
Climate change is especially polarized in the U.S., where in recent months, there’s been a political backlash against the strategies companies and investors are encouraging to lower carbon emissions. This may influence how leaders are talking about ESG today, but perhaps not how they act. “I think the companies that have been leaders, I have not seen them backing away from their commitments,” said Lesser. AstraZeneca CEO Pascal Soriot agrees. “In the U.S., companies tend to be less vocal about what they do but they are very engaged,” he said.
And then there’s the issue of financing. Lesser said the world is only financing about half of what’s required to seismically shift our energy production, resulting in a $2 trillion gap.
“While on the one hand we are short of where we need to be, on the other hand, we have shown the capacity in the past to drive technology faster, scale it faster, and lower costs,” said Lesser.
“This is probably one of the most exciting transformations that we have in our companies,” said PepsiCo Chairman and Chief Executive Officer Ramon Laguarta.
Just a week earlier, the maker of Lay’s potato chips and Gatorade sports drinks met with 100 of its top suppliers, a conversation that’s typically focused on costs. But Laguarta said there is now a lot of focus on a more sustainable way to source ingredients, part of the PepsiCo Positive vision to achieve net-zero emissions by 2040.
“It is a big cultural shift in how we are dealing with our suppliers and finding common solutions that are win-win across the value chain,” said Laguarta.
Packaging, he conceded, is a big challenge that vexes the consumer packaged goods industry. There has been more progress in Europe, with good frameworks and infrastructure in place to encourage circular packaging. But the U.S. is lagging and consumer education isn’t as high as it should be.
One way to reduce greenhouse gas emissions is through molecular recycling, which breaks down hard-to-recycle plastic waste for new products. That’s a critical shift as each year, 460 million tons of plastics are produced globally and only 15% of that is collected for recycling.
Eastman Chemical is investing $2 billion to build recycling facilities that can help address the plastics problem. And it has gotten commitments from companies like PepsiCo. “It is very capital intensive,” said Mark Costa, CEO of Eastman Chemical. “If you don’t have commitment downstream to have certain economics, the odds of making these investments is incredibly low. There’s just too much risk.”
While many companies focus on reducing Scope 1 and Scope 2 emissions, Scope 3 is perhaps more critical, as they are the emissions that are both upstream and downstream of a company’s activities. An estimated 80% of carbon emissions from packaging is upstream.
“If you don’t go after Scope 3 and you don’t figure out a collaborative system to address it, we have zero chance of getting to where we need to be in 2050,” said Costa.
When speaking to bankers, S&P Global Trucost CEO Richard Mattison said he consistently hears that Scope 3 is fraught with challenges. There is a lack of transparency and the data can be hard to understand.
“We are short on transparency and short on investment, unfortunately,” said Mattison. While there is $700 billion in investment dollars available for renewables, that figure must be doubled to get anywhere near net zero.
He encouraged suppliers and private companies to view transparency as an opportunity, not a risk.
“We see that renewables are the story of the future,” said Mattison. “Under none of our scenarios, do we see fossil fuels be the dominant part of the global energy infrastructure going forward beyond 2050.”
The health care sector produces 5% of global carbon emissions, even more than the airline industry. The rates are even higher in developed economies in Europe and the U.S. To create change, pharmaceutical giants like AstraZeneca, hospitals, and others across the health care sector are working collaboratively to cut emissions.
“We have ambitious targets, but we work together as a private sector,” said Soriot. “Because at the end of the day, more than 90% of our emissions come from Scope 3.”
Healthier people also tend to result in a healthier plant. Take the example of early health screenings. When patients are diagnosed earlier for illnesses such as cancer or kidney disease, they can be treated before being hospitalized, which in turn reduces carbon emissions.
Janti Soeripto, President and CEO of Save the Children US, is among the advocates calling for faster change. Nearly two billion children, four out of every five kids on the planet, are experiencing the effects of climate change.
Children born today are seven times more likely to experience heat waves than prior generations and three times more likely to be subjected to droughts, floods, or crop failures, according to Soeripto. Food insecurity and poverty are also worsened by climate change.
“Children did nothing to create this crisis and bear the brunt of it clearly,” said Soeripto.