Companies are setting increasingly ambitious targets, reporting efforts through the Carbon Disclosure Product (CDP), setting sensible targets through the Science Based Targets initiative (SBTi) and committing publicly to green power procurement by joining buyers association such as RE100.
Through my role, heading corporate PPA and green energy procurement, I talk to committed energy procurement managers or sustainability managers from the largest global corporation daily. I am excited by what I see across various sectors; a rapid growth in the level of commitment, the time and resource invested, as well as the in-house expertise on the topic of decarbonization with very practical approaches being brought forward by companies.
But does that mean that the corporate sector is the most important actor in advancing decarbonization?
Well, I was invited to argue that it is, during a debate hosted by the Energy Council last week (you can access the panel on-demand here), alongside energy and sustainability experts.
I used three main arguments to support this claim:
- The share of energy use and thus emissions from corporates is major, and so the impact of actions from this stakeholder group is absolutely key. We estimated in the 2019 edition of DNV's Energy Transition Outlook that more than 50% of electricity demand comes from industry & services, put simply, the corporate sectors. While corporate Power Purchase Agreement are announced almost weekly, corporates have a long way to go to clean up their electricity supply (with less than 10% of electricity used by the private sector being actively sourced from renewables). Regarding energy efficiency, heat and mobility, the role of the corporate sector is similarly key with commercial buildings representing a significant share of total building energy use, as well as business transportation contributing to more than half of all transportation energy use in some part of the world, such as in the US.
- Second, I would argue that we are going through a major shift in how the purpose of companies is defined. Maximization of shareholder’s value is not good enough anymore, as illustrated during the emblematic Business Roundtable statement in 2019 with more than 200 CEOs agreeing that the purpose of a corporation should no longer be to defend only the interests of shareholders. This means that the social license to operate for companies will depend on their ability to demonstrate positive impact for society at large. Given the severity of our climate crisis, a key component of this positive impact includes major efforts in term of decarbonization. Both investors and direct customers are showing increasing scrutiny and pushing companies towards ambitious targets, as well as actual actions. As a result we will see more investment, innovation and leadership from private companies regarding decarbonization of their electricity use, processes and mobility.
- Finally, I would argue that the impact of the corporate sector is needed to support the continued scale up of clean technology. As the renewable energy sector is shifting to a merchant era, the private sector is well suited to step up. We have seen a drastic fall in the production costs of solar, wind and storage in the last few years naturally leading to a reduction in public support schemes. But as I can see from the appetite among developers towards services such as green energy procurement supporting them to connect with corporate energy buyers, this rapid shift to non-subsidized wind and solar is creating space for other players to step in. The corporate sector is key in supporting the continued growth of the renewables energy sector, as well as other clean technologies.
However, there were also excellent arguments from the debate participants on the other side, highlighting that regulation has been driving those technology developments and is the backbone necessary for any consistent and general impact from the private sector.