A quarter of companies worldwide across industries have managed to reduce their carbon footprint and make meaningful financial gains that benefit them and their employees, shareholders and stakeholders, the fourth edition of the 'Carbon Emissions' report published by management consultancy Boston Consulting Group (BCG) and AI sustainability software company CO2 AI states.

About 25% of the 1 864 companies surveyed are realising financial net benefits of 7% or more of their yearly revenues from reducing emissions in line with their ambitions. This is an average of $200-million a year in financial benefits per company that are being realised, says BCG X MD and partner and Climate and Sustainability data and digital solutions leader Diana Dimitrova.

"While decarbonisation is vital for everyone worldwide, the agency of organisations must be in place and this is often measured in financial returns. Some companies are able to meet both climate and financial goals," she notes.

"This is where the transition is coming into balance. There is a way to decarbonise and generate benefits in the way the market system is set up," she emphasises.

This is very good news because, even if all countries worldwide meet their Nationally Determined Contributions to reducing greenhouse-gas emissions, the world will only limit warming to more than 2 °C above preindustrial levels.

Further action will be needed to limit warming to within 2 °C above preindustrial levels, she says.

Current commitments and actions are insufficient to achieve the goal of limiting global warming to below 1.5 °C above pre-industrial levels. Urgent action and support are needed to ramp up implementation of emissions mitigation efforts, says BCG X MD and senior partner and Global Climate and Sustainability leader Hubertus Meinecke.

A significant amount of capital, about $3-trillion to $5-trillion a year, will be required to transition the world to net-zero by 2050.

"Those who move first will probably have an advantage," he emphasises.

Specifically, about 80% of the work to decarbonise the world's economy needs to happen within companies' suppliers, or Scope 3 emissions.

"These companies need to decarbonise as well. This may seem complex, but driving change within suppliers can be done similar to how [automotive manufacturer] Toyota drove quality improvements across its supply chain despite not manufacturing most of the components it uses to make cars," Meinecke points out.

Companies that are emerging as leaders by doubling down on the energy transition are not only realising profits, but are also aiming to become leaders in their industries within the next 15 years, he adds.

Another key aspect of organisations that is emerging among leaders in decarbonising their operations is that they often identify what they require to decarbonise and then build new companies to provide these services, he notes.

"Bottlenecks are often difficult to unlock. But, companies that solve the issue for themselves can also solve it for other companies and often build businesses around this. The original companies are offtakers of this new company, while the new company supplies the broader industry.

"Companies can build sustainable new businesses out of their efforts to decarbonise," says Meinecke.

Meanwhile, companies generate the financial benefits from decarbonising from lower costs and taxation, notes Dimitrova.

"Decarbonisation provides companies with an advantageous tax structure, as well as intangible benefits in addition to the tangible benefits. Lower costs are arising from replacing equipment with more efficient equipment or from using other energy sources to help to reduce costs and carbon footprints.

"The focus on decarbonisation is also helping in other ways, such as companies rationalising their footprints, which leads to cost and carbon savings, or companies focusing on reusing their scrap materials and/or using less inputs, which also provide immediate carbon and cost benefits," she explains.

"For the first time this year in the report, we are seeing 25% of companies striking the balance between decarbonisation and generating financial gains in a neat way," she adds.

MEASUREMENTS & ACTIONS
The BCG and CO2 AI 'Carbon Emissions' report shows that progress on climate issues is stagnating, with 9% of companies globally, and 7% of companies in Africa, saying that they comprehensively report Scope 1, 2 and 3 emissions.

This is lower than the 10% globally that said they report comprehensively on emissions in 2023.

Only 16% of companies surveyed have set targets across all scopes, down from 19% in 2023.

In terms of reducing emissions in line with ambitions, 10% of African companies reported achieving this, which is slightly below 11% of companies globally managing to reduce emissions in line with ambitions.

This is similarly lower than 14% of companies that reported reducing emissions in line with ambitions in 2023.

The top five countries that are leading in terms of the measuring, reporting and meeting reduction targets metrics are China, Brazil, India, Japan and the US, says Dimitrova.

However, a broad range of organisations around the world are seeing benefits from decarbonising. These are not limited to countries or regions that are leading or implementing regulations to drive decarbonisation.

For example, a driver of decarbonisation efforts in Brazil is that companies are implementing changes to address risks posed by climate change without regulations being in place, she says.

"Countries and regions that are experiencing daily impacts from climate change are also meaningfully investing. This points to the recognition of risks and investing to protect against them," she explains.

Notably, 43% of the companies surveyed in Africa reported significant benefits from decarbonisation, which is well above the average of 25% of companies globally gaining value from decarbonisation.

Further, 9% of African respondents are reducing emissions along the 1.5 °C Paris Agreement pathway, which is also above the survey average of 8%.

"The drop in measuring, reporting and reducing emissions in this year's report was a bit of a surprise because these are foundational for companies to decarbonise. However, a bigger surprise was that companies have started to figure out how to satisfy their financial requirements and their obligations to the planet," says Dimitrova.

"We now have the data that says companies can reduce costs and be good global citizens. This is often what is needed to justify investments . . . and this is what chief sustainability officers and chief procurement officers have been asking for," she notes.