Bain & Co's Reality Check for Corporate Net Zero Targets
Bain & Company, the London-based global management consultancy, is so often a source of eye-opening sustainability insights from across industries.
One of Bain & Co's most shocking studies yet was published in 2024, in which the firm investigates the growing scepticism many energy sector executives feel regarding net zero targets.
For this report, Bain & Co surveyed more than 600 executives both during and after COP28, gauging insider opinions on the industry's prospects for decarbonisation.
The results show that 62% of these executives now believe the world will not achieve net zero carbon emissions until 2060 or later, massively overshooting the 2050 deadline that most organisations around the world are adhering to.
This marks a significant increase from 2023 when the figure was 54%, which speaks to mounting pessimism within the sector despite all its ongoing decarbonisation commitments.
“The energy transition looks slower as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world,” Bain notes in its survey analysis.
The concertinaed nature of the net zero problem
So, why are these executives are so negative about their industry's sustainable prospects?
According to Bain & Co, high interest rates, inconsistent policy frameworks and tepid consumer demand for green energy solutions are all looming spectres for the industry.
Executives cite the financial viability of energy transition projects as the primary obstacle, with 70% identifying customer unwillingness to pay higher prices as a major challenge (a 14% increase compared with data from 2023).
The report also shows that a 500-basis-point rise in the cost of capital, meaning that the annual revenue required to finance decarbonisation projects may rise by as much as 50%.
As a result, executives are increasingly focusing on projects with a clear path to return on investment, which is not always the case for decarbonisation projects.
"The pace of the energy transition looks to be slowing as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world," says Michael Short, Partner at Bain & Company in Energy and Natural Resources.
Regional dynamics
Aside from its worrying headline statistic, Bain & Co's report looks into the geographical differences found within the clean energy market.
According to the data, North America is the most attractive region for energy transition investments, with 79% of executives ranking it above Europe (65%). The report attributes this to policies such as the US Inflation Reduction Act (IRA), a piece of legislation which has also helped US-based airlines to develop sustainable aviation fuel.
However, 42% of US executives expressed concerns about the clarity of IRA subsidies, with many highlighting the complexity of the rules.
Despite these concerns, the report found causes for optimism in other regions. Executives in the Middle East, Asia-Pacific and Latin America were more hopeful about the contributions that transition-oriented growth businesses in renewables, hydrogen and lithium could make to their companies’ profits by 2030.
The role of technology
The report also finds that generative AI is increasingly seen as a game-changer for operational efficiency. According to Bain & Co's study, 65% of executives expect GenAI to have a significant effect on their businesses by 2030. However, AI’s role in reducing emissions is viewed with scepticism.
“The energy transition is first and foremost about constructing massive amounts of physical infrastructure,” the report stated, reflecting the limited potential of AI to directly address decarbonisation challenges.
While some companies have begun leveraging AI for maintenance and supply chain improvements, most are focusing on applications with shorter paths to return on investment. “Over time, we expect ENR companies to pursue more advanced and potentially higher-value use cases,” Bain predicts.
The outlook for 2025
In no sector does time move faster than in sustainability, so it is important to remember that Bain & Co's research was conducted in late 2023.
As 2025 begins, we might expect the coming months to look a little different than we might have a year ago given all the developments of the last 12 months.
Take COP29 for example - whilst the 2024 conference was the source of some controversy, it's undoubtable that some ground breaking progress was made on climate cooperation.
However, it's hard to ignore the negativity amongst executives present in this report.
"The longer that executives on the front lines of the energy transition grapple with the challenges of putting decarbonisation plans into action," the report says, "the more sober they’re getting about the transition’s practical realities.”
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