Business Leaders Call On Governments to Accelerate Net Zero Transition

A new report, The Business Breakthrough Barometer 2024, found that business leaders are concerned that the next wave of large-scale investments in the net zero transition are at risk if governments don’t take action.

The report from the World Business Council for Sustainable Development (WBCSD) in partnership with Bain & Company, the Breakthrough Agenda and the Marrakech Partnership and based on responses from 250 executives of leading businesses worldwide with a combined market capitalization of more than $2 trillion, concludes that an overwhelming 91% of executives see the transition as an investment opportunity. However, only 1% of businesses believe the transition is on track.

Businesses Ares Doing Their Share, But Need Help

The report emphasises that achieving plans to halve emissions by 2030 and meet the 1.5°C climate target hinges on private sector investment.

The report shows that businesses have been investing substantially in the net zero transition. Three-quarters (74%) of businesses surveyed have increased their investments in the net zero transition over the past three years, motivated by growing commercial opportunities in their industry, with one in three (35%) committing more than half of their capital investment.

However, two thirds (66%) of business leaders identify the lack of a strong investment case and slow scale-up of infrastructure as the most urgent barriers to accelerate large-scale investment.

Businesses cite that macroeconomic challenges are delaying project development, with 50% inflation in plant capital expenditure costs and rising renewable energy prices, slow permitting processes, uncertain revenue models, limited low-carbon fuel supply, long grid interconnection queues and slow roll-out of charging networks; all putting the next set of investments needed to achieve net zero goals at risk.

Nine in ten (90%) of those surveyed say they would invest more if governments implemented policies to address sector-specific barriers.

According to the report, businesses are frustrated that current policy and market structures fail to reward low-carbon investments, and in difficult to decarbonize sectors highlight the need to move beyond a reliance on voluntary demand which is not increasing at the pace needed for sectors such as steel, cement, aviation, shipping and chemicals.

Business leaders also overwhelmingly (85%) say greater international coordination is highly important for the net zero transition, but only a quarter (25%) say it is currently effective.

They point to the need for deeper and more effective coordination among major economies particularly on harmonized definitions and standards, demand mandates, fit-for-purpose international trade rules and cross-border infrastructure.

Barriers

The report looks at five key barriers – investment case, infrastructure, technology, supply constraints, and customer behaviour—and assesses businesses’ perspectives on whether the conditions are right for the pace and scale of investments required. In 11 key sectors, that account for over 70% of global emissions, including power, cement and concrete, steel, and shipping, only the battery industry has the necessary conditions to attract sufficient investments to stay on track for net-zero targets.

Despite significant barriers, the report cites a number of positive examples of business investment over the past year including:

• Steel companies committing billions to build hydrogen-fuelled plants to produce low-carbon steel. Planned capacity rose 150% in the last year, although this is still not sufficient to be on track to align with 1.5°C.
• Orders for methanol-fuelled ships grew by 80% from 2023 to 2024 as shipping companies future-proof their fleets; however, the supply of green fuels is not scaling rapidly enough.
• Airlines’ use of Sustainable Aviation Fuel is expected to grow 165% from 2023 to 2024, although costs are two to three times higher than conventional fuel, and businesses are concerned about limited feedstocks.

Where governments are implementing more ambitious policy measures, there are clear signs that this is accelerating corporate action, with a number of countries highlighted by businesses as creating the conditions for investment and market opportunity.

• Business has doubled global green hydrogen capacity since 2023 in response to government auctions.
• Forthcoming EU mandates requiring the use of Sustainable Aviation Fuel and an uptick in clean fuels policies in other markets have increased energy providers’ focus on production.
• “EV swing states” like Vietnam, Malaysia and Indonesia are doubling or even quintupling year-on-year electric vehicle sales due to strong local policies coupled with access to finance.
• Tax incentives through the Inflation Reduction Act have made the US an attractive investment location for multiple sectors including hydrogen, batteries and chemicals.
• Businesses view city-level regulation, such as in Paris, New York and Singapore, as the primary drivers for lower carbon investments in buildings due to their faster decision-making ability, integrated urban planning and public-private partnerships.

"Businesses and governments are certainly making progress." said Cate Hight, partner at Bain and Company, in a statement. "The technologies are available, and we see strong policy, including standards, subsidies and direct investment, in place in some geographies; these are putting wind in the sails of the investment case for energy transition.

"However, we’re not moving quickly enough. This year’s barometer is a clear message from business that additional policy support is crucial to set the market conditions necessary to enable a clear business case for adoption of lower carbon technologies, at scale, in this crucial decade.”