Two Degrees of TransationBusinesses are coming together to lead on climate change. Will you join themJanuary 2018 World Economic Forum2018 – All rights reserved No part of this publication may be reproduced or transmitted in any or by any means, including photocopying and recording, or by any ination storage and retri system.The views expressed are those of certain participants in the discussion, and do not necessarily reflect the views of all participants or of the World Economic Forum.REF 160118 - case 00039955ContentsScale Matters in the fight for a below 2Celsius temperature rise 3Reinventing businesses 4Bridging sectors 7Creating sustainable value chains 9Harnessing data and connectivity 11Financing change 12Alliance of CEO Climate Leaders – Members as of January 2018 14Acknowledgements 15Endnotes 163Two Degrees of TransationClimate change will shape the way in which we do business for decades. Business has a vital role to play in curbing its effects by limiting carbon emissions, but success isn’t just about action from individual companies. To create change on a level large enough to halt climate change, businesses – and whole sectors and value chains – will need to consolidate efforts.This paper reveals what is already happening, bringing together examples from around the world of smart working, new thinking and innovation. It highlights examples that others can follow, and that will make transation happen faster than ever before.Hopefully these examples will inspire you to find out more about what your company can do to deliver transational change and beat climate change. The Alliance of CEO Climate Leaders towards a new way of doing businessThe Alliance of CEO Climate Leaders is a group of chief cutive officers who believe the private sector has a responsibility to get involved in cutting greenhouse gas emissions. This includes leading the way towards a low-carbon economy, which helps people and communities stand up to the effects of climate change. This coalition, created by the World Economic Forum, aims to speed up companies’ search for answers to climate change across all their work. Nations are coming together to curb climate changeThe world is uniting to fight climate change. The Paris Agreement, signed in December 2015, aims to keep a global temperature rise this century well below 2 Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 Celsius.1aAlongside this, the United Nations Sustainable Development Goals for 2030 also include commitments to limit climate change.Emissions will need to have peaked by 2020 to keep the planet on course for the below 2Celsius target and net-zero emissions by 2050. Each country that signed the Paris Agreement has committed to its own targets, Nationally Determined Contributions NDCs. However, these are not enough by themselves. The private sector has an important role in showing how to bridge the gap.Scale matters in the fight for a below 2Celsius temperature riseClimate action organizations are clear about how to step up the pace of change and curb emissions by 2020. The focus needs to be on the biggest sources of emissions. Reflecting this, it is critical that the private sector steps up to the challenge of cutting emissions across a range of areas1b– Energy replacing fossil fuels with renewables as the main source of power– Infrastructure making new infrastructure compatible with climate targets by 2050– Transport making zero-emission transport people’s first choice– Land use ending large-scale deforestation– Heavy industry bringing iron and steel, cement production and chemicals in line with the Paris targets– Finance investing in low-carbon businesses and technologies and driving climate-risk reportingFrom change to transation Many companies are cutting their own emissions. Their action matters, but it won’t be enough by itself to create a low-carbon economy. That calls for change not just at the level of individual businesses, but across the economy. The biggest potential for that transation is in five trends1. Reinventing businesses – companies shifting their mindsets and ambitions to re-invent who they are and what they offer. Only by fundamentally rethinking what kind of business they are can they thrive in a low-carbon future.22. Bridging sectors – businesses from different industries coming together to develop low-carbon products, processes and technologies.3. Creating sustainable value chains – businesses engaging with governments and civil society organizations to develop new approaches to tackle challenges across their value chains.4. Harnessing data and connectivity – exploring how to apply the technology and data behind the Fourth Industrial Revolution to managing natural resources in a more sustainable way.35. Financing change – finding new ways to invest more private-sector money in the low-carbon economy.Alliance members are working in all these areas across the world to build the transation the planet needs. 4 Two Degrees of TransationThe average lifespan of a company listed in the S first, into a petrochemical company and, more recently, into a global health nutrition and materials business. Employees like to say that today DSM stands for ‘Doing Something Meaningful’. Sustainability is a core value as well driving business. DSM is committed to using 50 purchased renewable electricity by 2025 and uses an internal carbon price of €50 per ton of CO2e. It also helps customers to trans by offering solutions for the low-carbon economy. Its product Niaga, uses circular design principles and now, for the first time, people can fully recycle carpet instead of sending millions of tons to landfill each year. Niaga is just one example. Nearly 70 of the company’s sales come from its range of Brighter Living Solutions, innovations that are better for people and the environment. ACCIONA is another business thinking long-term and implementing forward-looking business strategies. ACCIONA used to be a construction and civil engineering company focused on its domestic market. In the last decade, it has transed into a multinational, which offers renewable energy technologies, sustainable buildings and civil infrastructure, and wastewater treatment plants and desalinization facilities. Before 2004, 94 of the business’s earnings were from construction. In 2016, more than 72 came from activities related to renewable energy, water and other environmental services. ACCIONA changed its business model to promote sustainable development and lead the response to a number of connected global trends, including climate change, water stress and increasing Reinventing businesses energy demand. It also understood, however, that these steps represent one of the biggest business opportunities of the century. Transing power generationThe figures are stark burning coal, natural gas and oil for electricity and heat is the biggest single source of global greenhouse gas emissions.5In 2010, these made up a quarter of CO2e emissions. In 2014, 42 of energy-related CO2e came from generating power.6Replacing fossil fuel-based power with renewables is critical, which suggests the need for a radical transation of the systems – and businesses – behind electricity supply.5Two Degrees of TransationThis transation is under way. Companies are rethinking their business models by moving away from fossil fuels and investing in innovative products, renewable energy and energy efficiency.In 2017, Danish Oil and Natural Gas DONG Energy became rsted, completing a switch from oil and gas to renewable energy particularly offshore wind development and battery-stored power. To achieve this transation, rsted has cut coal consumption by 73 since 2006 and will phase out coal completely by 2025. Its carbon emissions have dropped by 52 since 2006, and the company aims to cut them by 96 related to 2006 levels. It now has 25 of the global offshore wind market, providing power to 9 million people, and aims to boost this to 30 million by 2025.7ENGIE is also taking up the reinvention challenge and wants to lead on clean power transation by changing what it does. It has been advocating an ambitious climate policy, adopting an internal carbon price and calling on others to do the same. It has also supported increased disclosure of climate-related financial risks, and is now focusing on low CO2e energy sources like natural gas and renewables, which will represent more than 90 of its earnings8by 2018. ENGIE is investing in solar power generation in Brazil, India, Mexico and South Africa, reaching 700 MW of new solar capacity under construction in June 2017. Since 2016, ENGIE also cut its coal-fired capacity by 60, by closing or selling plants in Australia, Europe, India, Indonesia and the USA. Investors are also reducing their financial support for fossil fuels and reinvesting in clean energy alternatives. ING Group announced that by 2025 it won’t finance utilities sector clients with more than 5 coal-fired power in their energy mix. It will, however, still finance non-coal energy projects for these clients.9Already, it only supports new utilities clients who rely on coal for 10 of their energy or less and have a strategy to cut that to near-zero by 2025. ING Group also supports projects and clients who are combatting climate change. As of November 2017, it had backed renewable energy projects worth more than €29 billion and maintained €4 billion direct loans to renewable energy projects. This amounts to 60 of its utilities project financing. Spanish group, Iberdrola, is also strongly committed to renewable energy. Of its currently installed 48 GW capacity, 29 GW is renewable generation, making it the world leader in wind power with an installed capacity of more than 15 GW.Building up low-carbon constructionCement production produces 5 of global CO2e emissions – a proportion that is likely to rise as increasing urbanization results in more buildings and infrastructure in developing countries.10Reflecting this, the cement industry has a role to play in promoting innovation and new ways of building. Conscious of their climate impact, cement companies have, for many years, taken action to cut their carbon footprint. LafargeHolcim doesn’t just commit to lowering carbon emissions from production, but also develops and provides solutions to limit the carbon emissions of buildings and infrastructure. By 2030, LafargeHolcim aims to reduce CO2e emissions per ton of cement by 40 compared to 1990, and aims to avoid emissions of 10 million tons of CO2e a year during the lifecycle of the products it sells. In 2016, LafargeHolcim created a joint-venture called 14Trees, with UK development finance institution, CDC Group plc. It is centred on DURABRIC, an earth-based low-carbon building material. As a compressed-earth block made of local earth, sand, cement and water, it results in one-tenth of the CO2e emissions of common bricks, while being 20 cheaper per square meter of wall. Furthermore, because it doesn’t need firing, it spares the equivalent of up to 14 trees per house during the production process. DURABRIC has already been used in Malawi, Rwanda, Tanzania and Zambia. Through this joint-venture with CDC Group plc, LafargeHolcim aims to increase production in Sub-Saharan Africa.The chemical sector also plays a critical role in helping to reduce greenhouse gas emissions from buildings and construction. Solvay produces synthetic sodium carbonate also called soda ash, a key raw material that cuts energy consumption in glass manufacturing. More importantly, the 6 Two Degrees of Transationchemical enables reduced emissions along the value chain of buildings. Renovating with double-glazed windows as compared to single-glazed windows avoids up to 3,400 kg CO2e per metre squared over the 30-year lifetime of windows in houses in Europe. This can’t be done without sodium carbonate. It is estimated that for every ton of CO2e emitted to manufacture sodium carbonate, 90 tons of emissions can be avoided by its use in the double glazing, according to a recent joint study by Solvay and Asahi Glass Europe.Clean computingThe rise of digitalization has transed how many companies do business. The ination and communication technology ICT sector contributes approximately 2 of global greenhouse gas emissions, much of which is associated with electricity usage in data centres. A more digitized and connected global economy means demand for data centres is growing.Improving energy efficiency can help decouple growth from emissions and make data centres more sustainable. Furthermore, if data centres run on renewable power and use intelligent cooling systems, they can help create a low-carbon future.In 2017, BT announced it would reduce carbon emissions intensity by 87 by 2030. The company is also aiming to buy 100 renewable electricity by 2020, where markets allow. Last year, it reached 82.11BT promotes energy efficiency through products and services. By 2020, it aims to help customers cut emissions by at least three times its own total carbon impact, which includes emissions from its operations, suppliers and customers. So far it has reached 1.8 times, avoiding 10 million tonnes of emissions in 2016/17, up 32 on the previous year. In 2016, carbon-abating products and services represented 5.3bn, or 22, of BT’s revenue.BT is also working with Ark Data Centres to develop innovative sustainable data centres that use advanced direct fresh air cooling technology. They consume less energy because the free cooling is generally available for more than 99 of the year, subject to weather conditions. This avoids having to re-circulate and artificially cool the centres’ own hot air. It means Ark’s data centres are the UK’s most environmentally efficient. They cost 1.1m per megawatt less to run and produce 6,000 tonnes less carbon than an average data centre. The facilities also run on renewable energy.12At COP23, Microsoft announced a new target to cut its carbon emissions by 75 by 2030. By investing in energy efficiency and sustainable energy projects and technologies, as well as applying an internal price on carbon, Microsoft has had carbon-neutral data centres since 2012. Also, 44 of the electricity these centres use today comes from wind, solar and hydropower sources. Microsoft aims to make that 50 by the end of 2018, and 60 in the next decade. The Future of Internet Power FoIP brings together some of the world’s most influential internet companies, including Hewlett Packard Enterprise, Salesforce, Adobe, Facebook, eBay and Symantec. FoIP’s bold vision is an internet powered by 100 renewable energy. Data centres consumed 2 of US energy in 2014, and with more business now done in the cloud, that number has since grown. Thes