Sustainability is not only an imperative for companies it’s also a huge opportunity for green business building.
Companies that can innovate and scale during these fast-moving, uncertain times could set themselves up for exponential green business growth, according to a new report from McKinsey.
McKinsey analysis shows that growing demand for net-zero offerings could generate $9 trillion to $12 trillion of annual sales by 2030 across 11 value pools, including transport, power, and consumer goods.
The transition to net zero is under way but not happening fast enough. Growth in climate technologies including wind and solar power and electric vehicles has helped accelerate decarbonisation efforts worldwide. Solutions such as green hydrogen and long-duration energy storage are becoming available and, if scaled, could reduce global emissions even further.
But the pace of scaling these technologies has not kept up with projections for a warming planet. Governments and companies have done an admirable job developing and deploying climate technologies to date but a significant acceleration is required to meet net-zero targets.
As the economic and geopolitical backdrop has changed, market dynamics for green business builders have shifted in both nuanced and fundamental ways. On the one hand, capital markets and public-sector institutions have started to galvanise behind green investments. Policy, including the Green Deal Industrial Plan in Europe and the Inflation Reduction Act in the United States, promises to support companies looking to scale climate technologies. At the same time, inflation, economic uncertainty, and the invasion of Ukraine have all complicated the path to net zero.
Three areas have emerged that should now be priorities for those navigating the challenges and seeking opportunities: building up supply chains (often through cross-sector partnerships), proactively addressing an emerging skills gap, and exploring different avenues for financing and investments.
Many of the unique challenges to scaling green businesses remain: high capital expenditures on physical assets (compared with building digital businesses), higher short-term costs, and customer education and adoption barriers for many sustainable products. However, the urgency to reach net-zero targets has only grown in many markets, and the industrial economy is now being reinvented around a lower-carbon energy system, circular-economy practices, and other emerging models. Companies that can innovate and scale during these fast-moving, uncertain times could set themselves up for exponential growth.
More than 4,000 companies have set or are in the process of committing to emissions reductions and 70-plus countries have set net-zero targets. How quickly would key climate technologies need to scale to help meet such goals?
Based on McKinsey analysis, even mature technologies—including wind and solar power—would need to scale by a factor of six to 14 times faster to remain on track for a 1.5° pathway by 2030.
Actions that have become particularly important for organisations during these volatile times include creatively developing supply chains (including through partnerships), proactively addressing emerging skills gaps in the workforce, and exploring new avenues for financing and investment.
Read the full McKinsey report here.