With #COP29 in Baku concluded, the question facing companies now is how they should approach the transformation that lies ahead – i.e., make the most of opportunities, and manage risks and uncertainties?
As we discuss in a new Harvard Business Review article, “25 Tech and Infrastructure Problems to Solve Before We Can Reach Net Zero,” the journey to net zero presents many complex challenges. The energy transition requires a massive physical transformation of the energy system. Our McKinsey Global Institute research (mck.co/physicaltransition) identified 25 physical challenges that must be overcome. We categorized them into three levels – and to navigate what is to come:
Level 1️⃣: These challenges require progress in deploying relatively established technologies, for example, passenger electric vehicles that can travel for longer distances on a single charge or heat pumps that work effectively even in the cold.
▪️ Here, companies should ask themselves how they can benefit from near-term opportunities to generate new revenue streams from these technologies.
▪️ Other companies may see the near-term potential to use these technologies to reduce their own emissions – think, for instance, of organizations electrifying their own vehicle fleets.
Level 2️⃣: These challenges require scaling known technologies, but will require supply chain and infrastructure bottlenecks to be tackled. This includes expanding the EV charging network or securing critical mineral supplies.
▪️ Companies that play a direct role in tackling these bottlenecks can of course stand to benefit.
▪️ And for companies whose business opportunities in turn depend on addressing these bottlenecks, they may need to strike new partnerships with key suppliers, or find other ways to bypass supply constraints.
Level 3️⃣: These challenges are the most demanding, often involving technologies that still have performance gaps, have critical interdependencies with other hard challenges, and where execution remains in very early stages (as a result, cost competitiveness also remains a challenge). This includes decarbonizing heavy industries like steel and cement, and scaling up carbon capture technologies.
▪️ Here, companies will need to decide where and how to best compete – for example, innovating to improve technological performance, and collaborating with others to redesign entire systems.
By developing a deep understanding of the physical challenges involved, companies can boost their odds of navigating an effective way forward – one that both reduces emissions and creates value for the business.
Read my full article with Chris Bradley, Humayun Tai, and Tiago Devesa in HBR to learn more: https://lnkd.in/eMmyESKb
