Three in five Middle Eastern businesses are delaying their energy transition targets, leaving them in danger of missing the Paris Agreement target of net-zero carbon emissions by 2050, new research from Standard Chartered has revealed.
Zeronomics, a study into the financing of a net-zero world, surveyed the senior leadership of 250 large companies and 100 investment specialists around the world between September and October 2020 and found that:
- 60 per cent of Middle East-based business leaders believe their companies are not transitioning fast enough to reach net-zero by 2050 (55 per cent of companies globally)
- Lack of access to finance is the biggest barrier to progress for Middle Eastern companies, cited as a significant obstacle by 80 per cent (67 per cent globally). The same percentage say a lack of consensus on net-zero definitions and targets is a significant hurdle (63 per cent globally) – Carbon-intensive industries and companies based in emerging markets are struggling most with the transition
- Just 35 per cent of Middle Eastern companies fully support the aims of the Paris Agreement (47 per cent globally)
Barriers to Transition
Many companies based in the Middle East are looking to delay significant action to after 2030, with the 2020s looking set to be a lost decade. Some 20 per cent of business leaders (34 per cent globally) said their companies will make the most progress between 2030 and 2040, while a further 40 per cent (37 per cent globally) said they will take most action between 2040 and 2050.
Most companies are delaying transition because they do not feel they are currently equipped to meet the target. Some 65 per cent (59 per cent globally) said they need extensive organisational change before tackling net zero.
A lack of finance, and a lack of consensus on net-zero definitions, aren’t the only hurdles companies in the Middle East face on the road to 2050. Seventy per cent (60 per cent globally) believe a lack of consistent measurement and reporting standards is hampering progress, while the same percentage (60 per cent globally) say a lack of supply chain transparency, making controlling emissions in the supply chain difficult, is a significant barrier to net-zero.
Meanwhile, COVID-19 is forcing many businesses in the region to focus on immediate survival: A whopping 85 per cent (85 per cent globally) of senior executives say the pandemic has delayed their company’s net-zero transition.
How to fix it
The research also reveals what business leaders believe is needed in order to speed up the transition. 90 per cent (81 per cent globally) believe standardised net-zero measurement frameworks would help transition, underlining the fact that what we have currently, a matrix of different definitions, measurement and reporting requirements is a major challenge for senior executives.
A further 85 per cent (81 per cent globally) said cost savings from sustainable practices could help the world hit net zero by 2050. Meanwhile, the same percentage (72 per cent globally) believe stronger external incentives, including favourable tax treatment would help with the transition.
Bill Winters, Group Chief Executive of Standard Chartered says: “Our survey reveals that most companies intend to transition to net-zero by 2050 but have yet to take the action needed to get there. A majority cite funding as an obstacle and carbon-intensive industries and emerging-market companies struggle the most.
“A successful net-zero transition must be just, leaving no nation, region or community behind and, despite the hurdles, action needs to be swift. We must act now, and we must act together: companies, consumers, governments, regulators and the finance industry must collaborate to develop sustainable solutions, technologies and infrastructure.”