Emissions trends and country commitments are far from meeting the Paris Climate Agreement goals. Although we have seen improvements, there are still many companies lagging. Based on the BCG report, power, industrials, transport, and agriculture sectors emit >80 %of total greenhouse gases, and the average global temperature has been among the highest for the last five years, according to the United in Science 2021 report.
Companies will need to take more radical actions to achieve net-zero operations before 2050. Some of them will require no less than the complete transformation of their core business.
In How to Avoid a Climate Disaster, Bill Gates says, “My basic assumption about climate change comes from a belief in innovation. The conditions have never been more clear for backing energy breakthroughs. It’s the power to innovate that makes me hopeful.” According to Gartner, in the last nine months, the percentage of the 2,000 global largest companies with net-zero targets rose from 20% to 33%.
Things are moving forward, and existing as well as emerging technologies, can reduce 65% of emissions needed for the net-zero goal. Companies need to make a commitment now and move more aggressively to net-zero. Are they able to do so? We caught up with a few of our experts, Slavisa Djokic, Senior Engineering Lead, Nemanja Timotijevic, Engineering Lead, and Gabriela Mate, Engineering Lead, who have deep know-how and experience in building projects that will accelerate our journey to net-zero to find out their views.
Source: United in Science 2021 report
HTEC: Imagine a globally net-zero climate-resilient future. How does the maritime industry contribute to this goal?
Slavisa: “We are working on initiatives that are very much focused on building a climate-resilient future. Currently, one of the industries we are focusing our efforts on is maritime. Lowering CO2 emissions and making the maritime vessels carbon neutral is a huge task for every shipowner, every technical manager, and every captain. It comes in multiple steps, and those steps need to be obvious. Let’s not forget that reducing CO2 emissions in maritime was not considered to be a priority back in the day and even in the near past. The regulations were imposed around 2020.”
Gabriela: “And regulations are getting stricter with each day. Up until this moment, there were regulations on eco-zones where the emissions are strictly regulated. Starting from next year, the officials will introduce taxes for emissions and start to charge penalties to companies who do not abide by those regulations.”
Slavisa: “But huge steps are being taken in terms of changing the people’s mindset, including their awareness of the costs of shipping, the key role of zero-emission vessels and fuels, and how they can move away from the use of fossil fuels. So, in my view, transition to zero-emission shipping is not only about what we will get when there are no emissions, but also about changing the mindset of the people who are working with these maritime vessels which run on dirty fuels.”
HTEC: What breakthroughs in engineering have you seen that inspire you about the greener maritime industry?
Slavisa: “This is interesting because, recently, Gabriela and I were making jokes that, in the future, vessels will run just on the wind. And this is not far from the truth. But there are many ground-breaking technologies that are piloting right now, from rotor sails that use the winds to power the turbines all the way down to creating hydrogen fuels. But right now, shipowners and the technical managers are experimenting with biofuels — it’s more of a mixture with the classic fuels. But we are really expecting that soon vessels will be running on biofuels alone — hydrogen, ammonia, and the other experimental stuff.“
HTEC: In the McKinsey Report on the energy transition, “The transition (to net-zero emissions economy) will have universal, significant, and uneven effects across sectors, geographies, communities.” But at the same time, there’s the opportunity for growth depending on how companies approach it. From your experience, what are some of the questions that business leaders face in terms of strategy and growth?
Slavisa: “To lower carbon emissions, it isn’t enough just to impose restrictions. Shipowners also need to see some business value in this initiative to make some initial steps and then move towards achieving this goal.”
Gabriela: “For instance, carbon trading is a new business — it’s kind of a stock market for carbon credits where any eco-friendly project which is reducing CO2 emissions across industries can apply for these carbon credits and then resell their credits to someone else who is producing CO2 in their businesses.“
Gabriela: “But when it comes to the strategy and the growth for industry leaders, I think that with existing technology, it is not possible to accomplish net-zero even by 2050. I think that the industry leaders who want to achieve net-zero transition by 2050 really must invest in researching new technologies and inventions which will enable this. Because when we are talking about the CO2 emissions, I mean, we have different scopes of CO2 emissions (Scope 1, scope 2, scope 3). But to accomplish scope three, and be totally carbonless, is very hard. This is the moment for businesses and the government to come together and leverage the power of digital to scale their ambitions and create a more sustainable future for all.”
HTEC: In your experience, which companies in which sectors are thinking about net-zero the most? Which of them is already moving the needle?
Nemanja: “Net-zero is a global trend that is having an impact on all industries today. Some of the technological giants are already deep in implementing their net-zero emissions strategies like Shell, Siemens, Volkswagen, and American Airlines. According to the recent statistics, at least one fifth of the world’s 2000 largest public companies have committed to meeting net-zero targets. So, it’s there; it’s happening. On the other hand, an interesting fact is that some of these companies are failing to lower to reduce carbon emissions based on some studies. And among those are companies like Google and Amazon. Why is this the case? I believe that they have set too audacious goals. That’s how these companies usually work, set a bar very high and then find a way how to accomplish that goal.“
HTEC: The key takeaways for supply chain leaders from the COP26 (the United Nations Climate Conference of Parties) in 2021 is that supply chains will come under scrutiny as they fall under the scope of 3 corporate value chain emissions of greenhouse gases. The spotlight on chief supply chain officers is significant because their activities account for most emissions in the value chain. CSCOs need to double down on their efforts to reduce emissions. In your view, what are the steps they need to take to drive improvements?
Nemanja: “Let’s just touch base on the scope 3 emissions and what they are correlated with. Scope 3 emissions are the most challenging to measure, yet in some companies, they can account for over 95% of total emissions. And a huge amount of that percentage is correlated with the supply chain. I think CSCOs are starting to recognize that hybrid solutions, AI, process mining, and execution management play critical roles in helping them achieve this. In the past, one of the main goals of chief supply chain officers was to lower the costs and, therefore, boost profits. But today, they need to put sustainability above profits. And there are a few ways how they can do that, from exploring completely new business models that can amplify resiliency, deploying machine learning AI to do a lot better pattern recognition and work optimization, to investing consistently in the near and long-term potential of automation.”
Slavisa: “We do also see a lot of creativity here because research initiatives were not actually a priority for any of those companies. Of course, profit is the priority. But we see a lot of emerging researchers and teams across companies being assigned a task to embrace new technologies to be at least one step closer to making their businesses greener than their competitors’ businesses. Even a 1% of decrease is significant.“
HTEC: What do you foresee being the biggest challenges or obstacles to achieving our net-zero aspirations?
Nemanja: “Good question. I would say that are four main challenges to achieving net-zero: Carbon accounting, a supplier emissions data gap, people’s engagement, and industry alliances. When we talk about carbon accounting, carbon accounting that is currently performed is not that adequate because it usually only takes Scope 1 and Scope 2 emissions into consideration. In this way, companies fail to capture processes needed for the robust carbon accounting that takes scope three emissions into account. This is what we are lacking today. When it comes to the gap in supplier emissions, data organizations that work with suppliers usually don’t obtain their data directly from suppliers. Instead, they use emission estimations based on some broad level data they have and therefore miss the opportunities that could transform sustainability. Also, to be able to pivot to a net-zero business, leaders need to drive effective change management, communicate with, educate and engage their people before it is too late. Finally, leaders need to prioritize their efforts, and choose wisely which alliances they want to build leverage to enable new initiatives that will pave the way for net-zero”.
Gabriela: “There are also technical difficulties to get green energy on — biofuels and hydrogen fuels are not available yet. They are all in a testing phase. The industry is not there yet. Also, the facilities, for example, in ports, are not designed and adapted to use those fuels. There are lots of buildings and facilities which will have to be built, and we know that the construction industry is polluting significantly – it will take more pollution to get less pollution. It’s a vicious circle, but the future looks promising with all the technological advancements and collective awareness that is rising each day.”
HTEC: Companies have a choice to go beyond the immediate ESG compliance checklists set by regulators and gain an early-mover advantage by adopting sustainable tech approaches now. What competitive advantage opportunities exist for first-mover engineering-driven companies?
Gabriela: “Since there are many new regulations and taxes coming up, companies are trying to find ways how to avoid these taxations and additional payments and market themselves as green companies, which means that they will be more eco-friendly than their competitors. And this gives them a pretty good advantage on the market because all the consumers will choose to buy from green companies having in mind the scope of three emissions, their adverse impact on the environment, and all the limitations it entails. So, I think that it’s very good to think ahead and be as green as possible as soon as possible.“
HTEC: Gartner expects carbon footprint measurement technologies to see significant adoption as organizations broaden their focus to all three emission types and increase reporting transparency. “Ultimately, every organization will have to invest in carbon accounting tools,” said Annete Zimmermann, vice-president of Gartner Research. Name three innovative technologies that you believe will be key enablers of net-zero
Gabriela: “We in HTEC are involved in developing tools which are measuring the actual emissions, and we do face different challenges there. But I think that every company should have a CO2 footprint tracking tool not just because of the taxations and an obligation to report these CO2 emissions to the regulatory bodies, but also to raise awareness. Also, the persons who are responsible for business development should have these figures in mind when they are taking future steps. They should plan their future net-zero strategy having in mind the footprint of their actions. Whether we are using innovative or traditional technology, it’s important that these tools have wider usage because, just like with social networks — If you are alone on it, it’s useless. But if everyone is using it, then it’s very useful. So, wider usage would enable us to track the scope 3 emissions. Otherwise, it’s not possible.”
HTEC: What new or existing HTEC partnerships and contracting approaches could improve or are already improving outcomes? What would you say is the HTEC’s role in helping businesses ride the Net-Zero wave?
Gabriela: “Currently, on one of the initiatives, we are developing tools which track CO2 emissions whose primary goal is to have reporting on CO2 emissions and emission estimations for future upcoming voyages. This way, we are helping end customers, cargo owners, and charterers to find the greenest possible vessels for their cargo. Although we see much of the improvement, there is so much to be done before 2050, and we have all the knowledge and deep-water skills to help them up their pace to meet the deadline in this race to net-zero.“
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