First movers and fast followers: why industrial decarbonisation will require both

“Take a leadership role: the world needs first movers and fast followers.”

A new global business agenda

The success of last year’s COP26 in Glasgow has been fiercely debated, with some arguing that not enough concrete directives came out of the conference. It did at least confirm one thing, however: that net-zero considerations are now important for companies as well as countries.

In effect, the Paris Agreement and Glasgow Climate Pact are reshaping the global business agenda to accelerate decarbonisation. Shell, announced its Powering Progress strategy in February 2021, outlining its steps to becoming a net-zero emissions company by 2050, in step with society, with short and mid-term targets for 2023 and 2030 to ensure we make progress. This includes our own emissions and those from our customers.

Ultimately, Shell is reshaping its businesses in line with society’s goals and our customers’ needs.

In my part of the business, supplying fuels to airlines, ships, trucks and industrial customers, there are challenges to switch to low and zero carbon fuels at the pace required, but also opportunities for businesses to find new value.

To date there has been little customer demand – either B2B or B2C – for decarbonised products in the industrial sectors but now, we are working with customers looking for ideas to avoid and reduce emissions and compensate where emissions might still occur for some time. The risk is that rising demand for low carbon solutions, driven by mandates and voluntary commitments from customers, could outstrip available, affordable supply. 

When opportunity knocks, collaboration is the answer

Individual companies are heeding the call to decarbonise, but since emissions often occur across the value chain collaboration across supply chains and with customers is becoming a powerful way to decarbonise. This sectoral approach also needs governments, regulators and investors to build a new energy infrastructure on a global scale, connecting that new demand for low-carbon energy with its supply.

“If you don’t have the assets, infrastructure, political support and the customers’ willingness to move, you will not proceed.”

These are the words of one aviation manufacturer, taken from a series of joint reports with Deloitte on how to decarbonise global aviation, shipping and commercial road transport. These reports illustrate the many ideas that need to be put into action.

At the end of the day, only by working with customers, policymakers, and investors will society be able to develop and deploy the game-changing technologies and new stack of policies that will ultimately:

• Unlock demand for low-carbon products,
• Support infrastructure investment,
• Accelerate action across global value chains.

The good news is that this is beginning to take shape.

The urgent need for action has led to the emergence of a few industry trailblazers. You will recognise them as coalitions of progressive first movers such as the Mission Possible Partnerships, or through their industry associations like the International Maritime Organisation or International Aviation Transport Association.

Alongside these, there are also groups of like-minded investors, such as the Glasgow Finance Alliance for Net Zero, that are working out how to provide the dedicated finance that these industries will need to transition their existing carbon-intensive assets and fleets to low-carbon replacements.

And then there are companies seeking new ways to do sustainable business. I was recently on a panel at Asia Trade Week with H&M and New Balance to discuss sustainability and decarbonisation in the supply chain.

If not a first mover, be a fast follower

Our research with Deloitte shows that airlines, shipping companies and heavy-duty road transport companies increasingly want to be a part of the climate solution. Every week, I see more customers, suppliers and investors seeking to align across the value chains in their sectors, wrestling with the puzzle of how to balance the supply and demand of low- and zero-carbon solutions and how to cost-in these changes.

However, alignment is not always easy to achieve. Policymakers have now set the goals for decarbonisation, but existing policy support does not always provide the necessary certainty to secure investment and incentives when a market is immature. Equally, customers may like the idea of low-carbon products, but not all are able to afford them today. And businesses may want a new fleet of low-carbon aircraft, ships and trucks, but the low- and zero-emissions vehicles may not yet be commercially available to replace entire fleets.

This means that not every business can be a first mover. For some, it just might be a financial challenge, or it might simply not be possible structurally. But that doesn’t mean inaction is an option either. Technologies and solutions need to be developed, tested, trialed and rolled out globally. There is a role for everyone and I am encouraged to see the business community working together to tackle emissions sector by sector.

Want to learn more?

If you’d like to know more about Shell’s approach to accelerating decarbonisation across industrial sectors of the global economy, read our ‘sectoral approach’ or check out the paths for accelerated change in ‘aviation’, ‘shipping’ and ‘commercial road transport’.

Shell’s Sectors & Decarbonisation business

Shell is transforming its business to help lead change in the energy industry and accelerate decarbonisation. The company has created a Sectors & Decarbonisation business that drives technical and commercial leaders to work more closely with their customers to develop pathways that will help decarbonise sectors of the global economy. This, in turn, is part of how Shell will achieve its own target to be a net-zero emissions company by 2050, in step with society’s progress in achieving the 1.5oC goal of the Paris Agreement.

At Shell Sectors & Decarbonisation, we aim to help our customers avoid, reduce and mitigate their emissions through innovations, partnerships and policy incentives. We believe this will reduce costs, provide the incentives for new infrastructure, and stimulate customer demand.