This week, European Council leaders meet in Brussels for their regular
council session. High on their agenda will be the Green Deal Industrial
Plan — a raft
of funding incentives and deregulation proposals designed to ensure that the
bloc does not lose ground to the US or China in the cleantech race.
The plan was unveiled by European Commission President Ursula von der Leyen
in her speech to the World
Economic Forum in January. It followed hot on the heels of President Joe
Biden’s Inflation Reduction
Act,
which similarly introduced incentives for companies manufacturing or investing
in green technology.
While it is great to see the EU adopting more of a US-style, carrot approach
to environmental innovation — rather than its traditional stick of heavy
regulation — the focus on cleantech firms arguably distracts from the hard yards
the rest of the private sector has to cover to effectively decarbonise and
support the EU’s ambitions to reach net-zero greenhouse gas emissions (GHGs) by
2050.
The private sector has an overwhelming responsibility for global emissions,
being the largest contributor in terms of both direct GHG emissions and
emissions from energy usage. According to the International Energy Agency,
in 2017 65
percent
of CO2 emissions from fuel combustion came from the industrial and energy
sectors. Government support for clean, renewable technologies is a fantastic
boost in the race towards net zero; but it is ultimately incumbent on
private-sector companies to step up and embrace these technologies.
Based on current climate actions, the planet is predicted to be about 2.7°C
warmer than pre-industrial levels by 2100. If temperature rises are to be kept
below the disaster threshold of 2.0°C — let alone the ambitious 1.5°C
target set out in the Paris Agreement — then companies will need to set
actionable net-zero targets. These targets should not be viewed as simply window
dressing, but rather an essential part of doing business, — like a pension plan
or health and safety policy.
In 2022 Elopak, the company where I serve as CEO,
set ambitious emission-reduction
targets
— approved by the Science-Based Targets initiative — with the ultimate aim
of becoming a net-zero company by 2050. As part of this, we have committed to a
42 percent reduction in direct emissions by 2030 and a 90 percent reduction
across all the board by the middle of this century.
Reaching these targets will not be easy — particularly as they involve a
significant reduction in scope 3
emissions,
which we have little control over. This includes emissions related to the
extraction and production of raw materials for our cartons, third-party
transport, and other purchased goods and services. Although challenging, it is
precisely this kind of all-encompassing approach that companies will need to
take if we are to live up to the ambitions of legislation such as the Inflation
Reduction Act or the Green Deal Industrial Plan.
I of course urge all companies to follow us in setting science-based, net-zero
targets as an absolute minimum. However, where possible, we can and should go
further. In an ideal world, companies would be reaching net-zero emissions
sooner than 2050 and actively working to eliminate emissions throughout their
value chains and beyond to become climate positive.
The old-fashioned stick of regulation can be helpful in this sense, with larger
companies being required by law to justify decisions — for example, sourcing
non-renewable energy at a factory — that do not support their net-zero targets.
Such firms would then be required to spell out their justification for this
decision, as well as plans for remedying it in the future. This is partially
covered by current EU taxonomy; but regulators could be bolder in forcing
companies to admit to their environmental shortcomings.
However, I would prefer to see the kind of juicy, carrot-based approach
currently being dangled in front of green tech firms; for example, governments
could offer incentives to firms that have actionable net-zero policies and can
prove substantial reductions in emissions. This could include preferential
access to public tenders, tax breaks and subsidised support from experts to help
them reach their goals as quickly as possible.
Ultimately though, it is down to individual companies to step up and make this
happen. Net-zero targets should become standard across all industries and
investors should view a holistic plan for net zero as an indication of a
company’s long-term financial viability. This week’s focus on clean technologies
is laudable; but we cannot ignore the work that needs to be done by less
glamorous industries to meet our climate change goals. It’s time for industry to
pick up the pace.
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Thomas Körmendi is CEO of Elopak — a global supplier of carton-based packaging solutions. Elopak has been carbon neutral since 2016 and was awarded with a platinum sustainability rating from Ecovadis in 2021.
Published Mar 22, 2023 2pm EDT / 11am PDT / 6pm GMT / 7pm CET