By Jean-Marc Ollagnier, Sytze Dijkstra, Lasse Kari and Gargi Chakrabarty
Europe needs to keep producing chemicals, steel, and cement while reducing emissions from those industries. Here’s how companies can slash carbon output while at the same time improving their competitiveness.
Tackling climate change and at the same time meeting consumer expectations requires businesses to rethink how they make and market things. This is increasingly needed for the materials that scaffold modern life: steel, cement, and chemicals. These industries have outsized footprints on our daily living, from the homes we live in, to the cars we drive, to the office buildings where we work. In Europe, they account for almost 6 million jobs and 3% of its GDP. But current processes of making them also emit high amounts of carbon dioxide and greenhouse gases into the atmosphere.
Chemicals, steel, and cement industries emit about 311 million tons of carbon a year in Europe – accounting for more than half of its total industrial emissions. And the numbers likely will grow as Europe’s population climbs and cities expand, spiking demand for their products.
Overall, many European industries have tried to address climate change, putting nearly 10% of capital expenditures toward energy efficiency measures to reduce emissions. But that pace and size of investment is not nearly enough to meet the European Union’s long-term goal of making the region climate-neutral by 2050, in compliance with the Paris Climate Agreement.
It’s not just government: consumers want faster change too. We surveyed 1,400 utility consumers last June spanning the United Kingdom, France, Germany and the United States. We wanted to gauge if their feelings about climate change – mostly linked to emission of pollutants into the atmosphere from industrial activities – had shifted amid COVID-19. Our research1 found 60% of consumers have become more aware of climate change and its environmental impact since the outbreak, while half of them said this awareness would influence their decision on purchases.
Hoping to push along this energy transition, the European Union has tied climate goals to its €750 billion pandemic recovery package for industries announced in July 2020. Our research suggests that four EU countries – France, Germany, Spain, and Portugal – could allocate between €20 billion to €38 billion from the package to reduce carbon emissions by 2025.
Structural challenges, competitive pressures
Transition issues for industries are more complex than just the upfront cost of buying and installing technologies. As it is, the cost of doing business is structurally higher in Europe than elsewhere, largely due to higher energy costs. And competitive pressures continue to mount as European businesses deal with COVID-19. In November 2020, 45% of European C-levels said they expect Europe to be less competitive than China after the current crisis – as compared with 17% who had that view earlier in May.
The biggest challenge for industries making low-carbon investments is balance and timing, given that such technologies are maturing at uneven speeds. Pouring money in too early could mean a trade-off between lower returns and higher emissions reductions, while waiting too long could lead to missed opportunities in lucrative markets.
Reducing emissions from industrial processes while being cost competitive isn’t easy but can be done – with digital enablers. A recent Accenture report2 found that companies which pursue such a twin transformation – combining digital technology adoption with sustainability – are 2.5x more likely to be among the companies that emerge strongest from this current global crisis.
So, what should industries do? We studied six of them for actionable solutions – the legacy industries of steel, cement, and chemicals, and the emerging industries of pharma, battery manufacturing, and data centers. We found these industries could implement specific short- and medium-term tactics in the next three to five years to stave off any trade-offs between investments in low-carbon solutions and cost competitiveness and also spark long-term business growth. Digital technologies such as artificial intelligence, Internet of Things, blockchain, digital twin, and more can facilitate the rapid development and adoption of these solutions. These technologies can foster agile innovation processes, better insights into opportunities in the business ecosystem.
Our analysis suggests European companies can not only position themselves to achieve the ambitious EU target of 55 percent emissions reduction by 2030 but also unlock around €28 billion in business value across these six sectors by 2025. The resulting carbon emissions reductions would total 137Mt, more than the total greenhouse gas (GHG) emissions of the Czech Republic in 2018.
Practical steps for European companies
We identified four practical steps for investment that can help industries achieve the dual goals of accelerated emissions reductions and business growth while positioning them for future opportunities. Digital technologies are critical enablers for executing these steps effectively and at scale, enabling real-time monitoring, facilitating collaboration across consortia and ecosystems, and providing transparency and convenience for consumers.
1. Measure and monitor footprint
Map carbon footprint and energy landscape to identify opportunities for emissions reduction, process optimization, and value creation.
Identifying opportunities for emissions reductions starts with a detailed understanding of the carbon footprint and energy landscape of business operations. Energy and materials flows sin industrial processes are highly complex. IoT technology embedded in assets combined with advanced analytics capabilities enable detailed and forward-looking understanding of wasted energy and unnecessary emissions.
Honeywell, a technology and performance materials company based in Charlotte, NC, has a vision of the future: one that is characterized by the use of technology (connectivity and artificial intelligence, among others) to optimize energy and resource use. To this end, in 2019, Honeywell launched Honeywell Forge, an IoT platform that helps clients collect data from their operations and makes it easy to display and analyze. The intent is to use software to improve operational efficiency, reducing waste and energy costs. The company has improved its own energy efficiency by 70% since 2004.3
Smart Moves
- Embed IoT and AI technology into assets and processes to gain real-time insight into energy & emissions footprints
- Adapt frameworks for decision making (e.g. business cases) to include emissions and energy-use criteria
- Set targets to reduce impacts by processes and KPIs for continuous improvement
2. Scan the frontier
Structurally monitor low-carbon technology cost levels and technology maturity to identify key technology enablers for decarbonization and inform opportune timing for investment.
Technologies that enable emissions reductions have developed rapidly over the past decade. Some, like renewable energy generation, have developed into mature, commercial markets. E-mobility solutions and intelligent energy management are also reaching this stage, while others remain pre-commercial and sub-scale. Understanding how solutions are moving across horizons is essential for anticipating the right timing for investing.
SusChem, the European Technology Platform for Sustainable Chemistry, supports sustainable chemical and biochemical innovation.4 It develops and leads large-scale, integrated research and innovation programs on behalf of its members, and also disseminating critical intelligence. This includes, for instance, a common Strategic Research and Innovation Agenda5, which identifies key technology priorities to address EU and global challenges.
Smart Moves
- Create dedicated teams responsible for understanding technology trends and exploring relevant opportunities
- Integrate scenario thinking into business strategy to anticipate demand for sustainability solutions
- Engage with external experts and partners to share and develop cutting-edge market intelligence
3. Connect the value chain
Build cross-industry consortia that can work closely with regulators and local governments to find joint, bigger opportunities for reducing emissions and unlocking trapped value.
Opportunities for emissions reductions do not end at company boundaries. In fact, collaboration creates new opportunities for larger emissions reductions. Waste energy and material streams can find useful applications at partners on a single site or along the value chain. And pooling of resources and expertise can accelerate commercialization of new solutions for emissions reduction by identifying and testing early use-cases, supported by stimulus and subsidy funding. Consortia at industrial clusters can serve as early test beds for new concepts that bundle multiple solutions (e.g. large-scale renewable supply and hydrogen production).
Tata Steel is a partner in the Athos consortium, which provides for the construction of a basic transport infrastructure in the North Sea Canal area to enable the use or storage of CO2 under the North Sea. This project is a joint initiative of Gasunie, EBN, Tata Steel and Port of Amsterdam. It brings together all the key capabilities that are needed to establish a CCUS value chain: Tata Steel will capture CO2, Gasunie has experience with building infrastructure and transport, EBN has knowledge of geology & storage, and the Port of Amsterdam facilitates and coordinates companies in the area. The consortium approach in this industrial cluster makes it possible to capture, store and reuse large quantities of CO2 emissions before 2030.
Smart Moves
- Establish consortia at industrial clusters to create, test, and scale technology solutions for sustainability impact
- Utilize technology such as blockchain to trace resource use within ecosystem partners.
- Closely work with peers, national and local governments, and policy makers towards an orchestrated European energy transition strategy that safeguards the European competitive edge and level playing field
4. Improve user experience
Embed low-carbon criteria into product & service design for better product performance, longevity, safety, and quality at affordable costs.
Action on reducing emissions really starts to drive competitive advantage when it informs product design and customer experience. Helping customers meet their own climate ambitions through low-carbon products takes the business benefits beyond cost savings. And ever -improving technology means that low-carbon design can also bring better performance, longevity, safety and quality – at affordable prices.
Swiss multinational LafargeHolcim launched ORIS, a digital pavement design and sourcing tool for low-carbon, smart road design. With ORIS, the carbon footprint of road construction can be reduced by up to 50%, while increasing road lifespan by up to 3 times and lowering the costs by 15% to 30%. The tool assesses road design from construction down to maintenance. It uses a suite of digital platforms, hybrid cloud, digital design services, artificial intelligence, and Industrial Internet of Things to incorporate and assess materials knowledge in cement and concrete products and building solutions.
Smart Moves
- Optimize emissions and energy footprints of products by integrating these criteria into product design briefs, supported by digital twin technology
- Develop and market low-carbon premium product ranges to help customers reduce their footprint
- Use traceability technologies such as blockchain for greater transparency around resource use
Getting it right
Europe is at a pivotal moment. The European Union has stepped up efforts to become zero-carbon by 2050, tying the pandemic-related stimulus euros to clean energy transition. Now EU businesses must respond by accelerating their emissions reductions – to their competitive advantage.
About the Authors
Jean-Marc Ollagnier is the chief executive officer of Accenture in Europe, with management oversight of all industries and services in Europe. He is also a member of Accenture’s Global Management Committee.
Sytze Dijkstra is a senior principal at Accenture Research for European and Sustainability Thought Leadership in Amsterdam, Netherlands
Lasse Kari is the global energy research lead at Accenture Research in Düsseldorf, Germany
Gargi Chakrabarty is a senior editor at Accenture Research in Boston
References
- 1 https://www.accenture.com/us-en/insights/utilities/leading-energy-transition-in-tough-times
- 2 https://www.accenture.com/us-en/insights/strategy/european-double-up
- 3 Honeywell Annual Report 2019
- 4 Suschem. What is Suschem. http://www.suschem.org/about
- 5 Suschem. Strategic Research and Innovation Agenda. http://www.suschem.org/highlights/suschem-identifies-key-technology-priorities-to-address-eu-and-global-challeng
