Sector News

BCG-WEF Project: The Net-Zero Challenge

January 22, 2023

Winning in Green Markets: Scaling Products for a Net-Zero World

To realize the ambitions set out in the Paris accord, a massive technology shift is needed across all economic sectors. Non-fossil solutions already exist to mitigate most global emissions. 1 For many green materials, products, and processes, however, costs are higher than for their gray counterparts. Fortunately, this cost challenge is far from insurmountable, and early movers show us what it takes to win in fast-growing green markets.

In our new report, coauthored with the WEF Alliance of CEO Climate Leaders, we explore how other companies can take a similar path by identifying, creating, and scaling green businesses.

The cost issue is particularly challenging in industrial sectors. Consider green technologies to decarbonize aviation. Air transport with 100% hydrotreated ester and fatty acid (HEFA) biofuels is expected to increase cost per ton-kilometer by roughly 8%, while reducing emissions by 50% to 90%. And a fully net-zero fuel such as power-to-kerosene, which is in the pre-industrial phase and not yet scaled, would increase fares by a factor of almost 2.

The cost disadvantage is not set in stone. As green technologies scale, their cost disadvantage is likely to decline. In the US, for example, solar has reached cost parity with both coal and natural gas. Meanwhile, the total cost of ownership of both commercial battery and hydrogen electric vehicles is expected to drop below that of internal combustion engine vehicles within the first half of this century. And in Europe, green steel may reach cost parity with gray steel as early as next decade.

There is an untapped market for green. A June 2022 BCG sustainability consumer survey found that while less than 10% of consumers purchase on sustainability just to “save the planet,” the number of consumers in any given category who would opt to make sustainable choices increases roughly twofold to fourfold (to 20% to 43% of consumers) when sustainability is linked to other benefits such as health, safety, and quality. And those percentages increase another twofold to fourfold (to roughly 80%) when barriers such as convenience, information, and cost are addressed. Companies that figure how to deliver additional benefits and reduce points of friction can gain access to a major untapped consumer market.

Commitments to decarbonize will create further momentum in green markets. As of November 2022, 1,957 companies had set certified, science-based emissions reductions targets, and a further 2,103 had committed to set them—a significant increase in many sectors. As companies translate these commitments into action, “green premium” markets are beginning to emerge. Players in different sectors have begun introducing low-carbon materials and services to the market—and are capturing price premiums for them.

Scarcity is likely to be an issue for some critical green inputs. There is a notable gap between the commitment of downstream players to decarbonize their upstream value chains and the commitment of upstream players to provide the low-carbon materials needed to meet these targets. This divergence in commitment level creates a major risk of scarcity for some green materials.

To create a compelling green offering and to secure the resources necessary to deliver it, both downstream and upstream companies need to rethink their go-to-market approach and take six critical actions. READ MORE



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