The 3 Percent Solution: Driving Profits Through Carbon Reductions

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A new report from WWF and CDP—The 3% Solution: Driving Profits Through Carbon Reductions—helps U.S. businesses chart a new path forward. This path is tremendously profitable, practical and helps curb climate change.

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The 3 Percent Solution: Driving Profits Through Carbon Reductions

  1. 1. 00Driving Profits Through Carbon Reduction
  2. 2. 11SOURCE: SourceWhat is the size of the US gap?How much of the gap can be closedprofitably by the US corporate sector?What else needs to be done?
  3. 3. 22Increasing global temperature 2o C abovepre-industrial levels will cross a thresholdtriggering long-term, irreversible anddangerous effects6 oC2 oC0 oC
  4. 4. 33A daunting goal no doubt…but6 oC2 oC0 oCprofitablyachievable
  5. 5. 44In the US, roughly 62% ofcarbon emissions come fromthe corporate sector4.2 Gigatons CO2US Corporate Sector Annually in 2010
  6. 6. 55Therefore the goal is to lower carbonemissions by a proportional share ofprojected 2020 emissions3.0 Gigatons CO2US Corporate Sector Annually in 2020
  7. 7. 663%Average annual carbon emission reductionsrequired by US corporate sector between2010 and 2020McKinsey 2012 citing CDP data
  8. 8. 77In 2020, annual emissions would be 1.2 Gigatonsbelow 2010 levels
  9. 9. 88Not only can this goal be achieved,it can be done profitably
  10. 10. 99$780 Billion (NPV)Amount that the US corporate sector couldsave between 2010 and 20200204060801001201401601802002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Series 12010 2020
  11. 11. 1010$190 Billion (PV)Net savings that the US corporatesector could save in 20200204060801001201401601802002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Series 12010 2020
  12. 12. 11110.580.170.14-0.270.14Upgraded TechnologyCombined Heat and PowerBehavioral ChangesSolar PV1.0 – 1.2 160-190853040-705Up to $190 billion in 2020 alone from savingsopportunities can be captured across four keyinvestment areas16%233%Average ROI76%325%GHG ReductionsGtCO2e (2020)NPV OpportunityUS$ Billion (2020)
  13. 13. 1212Energy Efficiency and Behavior Changesrepresent the bulk of the leversEnergy EfficiencyIndustrial(270 Mt CO2epotential)Commercial(210 Mt CO2epotential)Transport(100 Mt CO2epotential)• Steam systems• Motors• Energy & Steam WasteRecovery• Industrial Buildings• CommercialBuildings• Lighting• HVAC• Efficiency in DieselHeavy Duty Vehicles• Low Global WarmingPotential in MVAC• Bioethenol• Monitoring energy use• Changing vehicle routes• Process improvements (e.g., lean, six sigma, kaizen)• Identifying and stopping leakagesTechnology Upgrade(580 Mt CO2e)Behavior Changes(135- 270 Mt CO2e)Combined Heat andPower (CHP)(170 Mt CO2e)
  14. 14. 1313Annual Cost SavingsUp to $190 Billion(in 2020 NPV @ 8%)Annual GHG ReductionsUp to 1.2 Gt CO2(in 2020)
  15. 15. 141414We’ve created a portfolio of actionitems that companies can take inorder to fully capture all the netpresent value (NPV) positiveopportunities
  16. 16. 1515CarbonProductivityPortfolio
  17. 17. 1616
  18. 18. 1717SOURCE: SourceCarbonProductivityPortfolio
  19. 19. 1818S&P 500 companies reporting to CDP that setGHG reduction targets achieved an averageof 9 percentage points better return oninvestment (ROI) than those without goalsGHG Targets21%30%Without GHG TargetsSource: Carbon Disclosure Project; Global Insights World Industry Service (Capex data);; McKinsey analysis
  20. 20. 191979%US companies reporting to CDP saw a higher ROIfrom investments targeting GHG emissionreductions than their average investment portfolioMcKinsey 2012 citing CDP data
  21. 21. 2020Company2010emissionsCompany business asusual (BAU) emissionsforecast for 2020Expectedchange insectoremissions2010-2020Expectedgrowthrelative tosector 2010-2020Sectorreductionopportunity2010-2020Company Data Industry DataWe have created a simple calculator to helpset goals for carbon reductions
  22. 22. 2121ResultsEstimated Costs (PV)Estimated Savings in 2020 (PV)Estimated Savings 2010-2020 (NPV)2020 Emissions TargetExpected Emissions ReductionsThe calculator can guidecompanies to create their 2020carbon emissions target
  23. 23. 2222CarbonProductivityPortfolio
  24. 24. 2323Non-Utility Corporate Sector2.2%Utilities3.8%5.0% 5.8%(+ 1.6 Percentage Points)(+ 0.8 Percentage Points)To capture all the GHG reduction opportunitiesidentified, an increase in capital expenditures isnecessarySource: Carbon Disclosure Project; WIS; Team analysis
  25. 25. 2424Capital ConstraintsLow-hanging fruit, bundling, ongoing operational improvementLow Management PriorityEmployees, customers, and competitors shift the impetus to managementLack of ExpertiseCreate central management, leverage external providers, use front lineengagementThere are ways around thebarriers that exist
  26. 26. 2525The potential toreduce lies largelywith corporateoperations butalso with thesector’s influenceon utilities andconsumersCorporate Influence on ConsumersUtility Sector1.2 GtNon-Utility Corporate Operations2020butcan be magnifiedby the corporateinfluence onutilities, consumers, andgovernments0.4 Gt0.6 Gt
  27. 27. 2626SOURCE: SourceCarbonProductivityPortfolio
  28. 28. 2727The utility sector holds tremendous potential forreducing emissions on a large scale2020 EmissionreductionsMtCO2e 290440Total1,500EfficientOperations80Build-out ofRenewablesCorporateDemandConsumerDemand690Areas of externalinfluenceAreas of internalinfluence
  29. 29. 2828CarbonProductivityPortfolio
  30. 30. 2929Corporations and utilities have asignificant impact on consumer’scarbon reduction potentialSource: Global GHG abatement curve v3.0; DOE; Electrolux; Lawrence Berkeley National Laboratory; ACEEE220Mt CO211Mt CO254Mt CO2176Mt CO2123Mt CO2Residential Solar PVReduced Air TravelReduced Car EmissionsImproved Energy ManagementIncreased Appliance Efficiency584Mt CO22020
  31. 31. 3030CarbonProductivityPortfolio
  32. 32. 3131GovernmentNGOsIndustry AssociationsCross IndustryR&D Partners© WWF-Canon / Richard Stonehouse, NIH, NREL, SIIASuccessful companies collaborate with stakeholders
  33. 33. 3232Waiting to take action hassignificant costsThe window is closing…
  34. 34. 3333If we take action now…2010 2020 2030 2040 2050
  35. 35. 3434Starting in 2020 will require thecorporate sector to digdeeper…2010 2020 2030 2040 2050
  36. 36. 3535…Waiting until 2030 is not an option2010 2020 2030 2040 2050Game Over90.4 Gt91.5 Gttotal emissions 2010 thru 2050
  37. 37. 3636This is an opportunity disguisedas a crisisopportunity
  38. 38. 3737

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