Walking the Talk
Net-Zero Targets Are a Bare Minimum for the Private Sector

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.