Heavy industry leaders can break economic stalemate within only three years by reinventing decarbonization strategies, a new Accenture report says.

The authors suggest that three years of intensive cross-industry collaboration can transform industrial decarbonization from an economic barrier to a driving force for net zero action.

What does the heavy industry want?

Accenture’s Powered for Change report highlights the importance of heavy industry reinvention in achieving global net zero targets through surveying leaders.

The world’s largest emitters are interconnected with manufacturing industries like pulp and paper, aerospace, defense, automotive, industrial equipment, life sciences, and consumer goods.

To address the issue at an enterprise level, the report identifies a broad set of decarbonization levers that enable and accelerate progress. These include improving energy efficiency, switching to renewables, implementing green IT, reinstating business models, and removing carbon.

However, the economics of decarbonization and structural misalignment between industries are at the core of what’s constraining progress, the report reiterates.

The heavy industry requires improved access and availability to affordable, low-carbon energy:

• Four out of five (81%) leaders expect to need more than 20 years to have sufficient zero-carbon electricity to decarbonize their industry, with energy providers primarily focused on decarbonizing their operations
• 95% leaders expect to need at least 20 years to deliver net zero products or services at or close to price parity with high-carbon alternatives
• Just over half (54%) say that manufacturers’ future purchasing intentions give them enough confidence to invest in decarbonization
• Two in five (40%) leaders said they can’t afford further investment in decarbonization in the current economic climate
• 63% said their priority decarbonization measures won’t be economically attractive before 2030.

The three pathways:

Most organizations use a three-year strategic planning cycle. While three years will not be enough to achieve net zero most fully, the report lays out what must be accomplished during this crucial timeframe to eliminate the economic growth trade-offs and advance net zero. The report outlines three crucial pathways for necessary actions for organizations to achieve net zero within a three-year strategic planning cycle, despite the limitations of this timeframe.

i. Target green premiums to finance the first phase of industrial decarbonization: Light industry must lead in this initiative. Absorbing upfront costs of decarbonization and knowing which green products to target are key to unlocking future savings. 52% of executives in heavy sectors view revenue growth as the primary path to improving the economic business case for the top three decarbonization priorities.

ii. Scale low-carbon power and hydrogen more quickly to guarantee affordable, secure supply: According to Accenture, if the potential of green hydrogen and solar power is fully realized, the levelized costs of these energy sources could decrease by 74% and 77% by 2050, respectively. This can result in lower costs for green industrial products. Additionally, almost two-thirds (64%) of oil, gas, and power companies believe their industrial and logistics customers are willing to enter long-term decarbonization partnerships, collaborating to initiate a virtuous circle.

iii. Drive down the capital and operating expenses related to low carbon infrastructure: It is essential that cost reductions, which are mostly in the control of heavy industry, are fully realized to drive decarbonization. For example, there is significant cost reduction potential (49% by 2050) in green steel, with reduction in construction and equipment costs a key lever.

Key findings on investments in decarbonization:

• Fewer than one in five companies (18%) are currently on track to reach net zero emissions in their operations by 2050
• 38% say they cannot make further investments in decarbonization in the current economic environment
• Investments in energy-intensive heavy industries like steel, metals, mining, cement, chemicals, and freight and logistics contribute to 40% of global CO2 emissions

Accenture Analysis:

Released ahead of COP28, the study analyzed net zero commitments, decarbonization activities, and emissions data for 2,000 global companies.

It surveyed over 1,000 executives across 14 industries and 16 countries. The aim was to understand the challenges and priorities of industrial decarbonization shortly.

Accenture’s analysis in Destination Net Zero found the following:

• The number of companies that have set targets for net zero has risen to 37%, up from 34% last year
• Despite reason for tempered optimism, half (49.6%) of the companies that disclose emissions data have presided over increasing emissions since 2016
• One-third (32.5%) are cutting emissions, but on current observable trends, are not on track to reach net zero in their operations by 2050

Quotes:

“The rapid, affordable decarbonization of heavy industry requires collective action across the value chain and urgently compressed transformation. We believe this can break the economic stalemate by inspiring new levels of growth and help accelerate net zero in just three years of focus,” said Stephanie Jamison, Global Resources Industry Practice Lead and Global Sustainability Services Lead, Accenture. “If heavy industry is burdened with the full cost of decarbonization and fails to meet net zero targets, all industries will fail.”

“It is promising to see an increase in public commitments to net zero targets again this year, but the adoption of key decarbonization measures is not uniform, with some companies still unable to master the basics,” said Jean-Marc Ollagnier, CEO of Accenture for Europe, Middle East and Africa.

“To provide the business growth that is necessary to put net zero back within reach, these imperatives must be executed in parallel and scaled to meet the moment, starting right now. Stakeholders around the world—across industries and governments—must come together to create a new frontier for the economics of decarbonization, giving the heavy industry a firm foundation for reinvention,” he said.