The growing urgency of the climate crisis, coupled with demands from customers, employees, regulators, and others, has pushed many recognizable brands to announce net-zero emission goals. Though these efforts are laudable, it’s increasingly apparent that they may not be sufficient to meet the challenge ahead of us. If we are going to successfully transition to a low-carbon economy with the requisite speed to rise to the challenge posed by the exigencies of the climate crisis, organizations will need to collaborate with a common purpose and in new ways across systems.
Executives should consider adopting approaches that entail working across industries, geographies, and value chains to meaningfully reduce greenhouse gases. Adopting a system-of-systems approach, as articulated in a 2021 Deloitte Insights article I coauthored, can help catalyze seemingly disparate forces to advance a low-carbon economy.
Realizing a low-carbon economy is a transformational effort requiring systems change across the building blocks of modern life: energy, mobility, industry and manufacturing, agriculture and land use, as well as emerging carbon capture technologies. Supportive government policies, innovative financing, and advanced digital technologies will collectively encourage the growth of an emissions-light economy.
Some of the most impactful opportunities to address the climate crisis lie at the intersection of low-carbon systems. But many climate solutions face bottlenecks or fragmented approaches. For example, many consumers resist buying electric vehicles because there are limited charging stations, but charging providers balk at installing more infrastructure without clearer evidence that there will be sufficient demand.
Indeed, several decarbonization technologies are likely to require billions in investment before there is any certainty about viability. Challenges such as these can be overcome by adopting a system-of-systems view that looks at the interdependencies across the core systems of the global economy. By adjusting their view, leaders can aggregate demand, sending clear signals to tip markets or pool risk to accelerate investment.
Consider just one such opportunity that could accelerate emissions reduction: carbon markets. A scaled, high-functioning carbon credit market could incentivize a range of players to reduce emissions and provide funding for early-stage technologies. But we’re a long way from a functioning system. Carbon credits today often have fragmented standards and certifications with few connection points.
Getting there will require cooperation across multiple systems of the low-carbon economy. Carbon credit suppliers—ranging from reforestation projects to direct air capture and more—would have to collaborate with buyers. Financial institutions have key roles to play, potentially providing credit certification, brokerage, and portfolio management. Robust technology platforms could enable rapid execution of transactions. Governments can shape the overlying incentive structure through policy and regulation.
Activating Systems Change
Deloitte’s goal is to advance actions that directly lead to rapid, non-linear shifts in the transition to low-carbon technologies. We know from past transitions that change can happen quickly once tipping points are reached and invite organizations looking to adopt systems approaches to contact us about possible collaborations.
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