2020 was one of the most disruptive years modern humans have ever experienced, and 2021 may be much of the same. Rampant economic turmoil, social and political instability in the U.S. and other regions, and a COVID-19 virus that is not yet contained promise to keep us in a state of uncertainty for some time to come.
We’ve identified three energy, sustainability and climate action trends for 2021 to help energy & sustainability professionals navigate this new “abnormal”.
TREND #1: Decarbonization efforts and climate commitments will continue to increase
Despite the ongoing impacts of COVID-19, social justice movements, and political disruption, climate action remains urgent, and, accordingly, many organizations and governments made decarbonization and climate change mitigation commitments in 2020. The Science-Based Targets (SBT) Initiative surpassed a historic milestone of 1,000 corporate signatories; Microsoft and IKEA are charting the way beyond carbon neutrality with ‘carbon negative’ and ‘climate positive’ goals; China—the world’s largest emitter—committed to achieving carbon neutrality by 2060; the European Union accelerated its emissions reduction target to 55% by 2030; and U.S. President Joe Biden has already signed an executive order for the U.S. to rejoin the Paris Agreement and promises to act ambitiously on clean energy and climate change.
In the U.S., mandatory disclosure laws for companies are likely, and tax credit expansions and extensions are already underway. The Biden administration is poised to take ambitious and aggressive steps towards decarbonization, bolstered by democratic control of Congress. In the European Union, one-third of the COVID-19 recovery budget is earmarked for green investments, and new requirements such as the Sustainable Finance Disclosure Regulation are putting increased pressure on organizations for sustainable actions and transparency.
Renewable adoption has substantially increased over the last decade, and will continue its upward trajectory as virtually every major country has joined the Paris Agreement and made commitments to achieve carbon neutrality. Fossil generation plants are closing at dramatic rates—particularly coal plants—and oil and gas majors including Shell and BP have begun setting carbon neutrality goals and adding renewable energy to their portfolio. Many organizations that have led the clean energy transition, like Wal-Mart, are now looking to tackle their Scope 3 emissions via their supply chain.
As organizations and governments work towards a clean energy transition, lenders and investment firms have also prioritized funding organizations that have meaningful ESG initiatives in place. The performance of ESG stock funds has skyrocketed, with further post-COVID-19 growth anticipated. Investors are also getting wise to climate-related risks and expecting companies to act accordingly,
In 2021, organizations can get in front of these trends by:
- Evaluating their carbon emission footprint and setting science-aligned reduction targets
- Advancing their journey towards carbon disclosure through CDP, TCFD, or other disclosure initiatives
- Exploring renewable energy and carbon offset purchasing, which is more affordable and widely available now than ever before
- Being aware of and anticipating regulation around resource efficiency and emissions that may have material impacts on their business
TREND #2: The awareness of the intersection between social justice and sustainability will grow and become a focus for regulatory action
The impact of the Black Lives Matter movement has reverberated across the globe. International organizations are being called to take stances against social injustice, and actively pursue equity to build back better. A major consideration for future energy projects is evaluating both the environmental and social impacts of where new projects are sited, and how energy generation, cost, and availability impacts local communities. Historically, fossil fuel generation and pollution/waste have disproportionally impacted under-resourced/under-served and BIPOC (Black, Indigenous, and people of color) communities.
The call for climate justice has an intersectional array of goals ranging from ensuring that vulnerable communities are not disproportionately affected by fossil fuel generation to retraining/reemploying those displaced by the loss of fossil fuel jobs to guaranteeing access to affordable, reliable, clean energy and digital for all. In the U.S., President Joe Biden’s clean energy plan calls for a 100% clean energy economy in the United States by 2050 and is estimated to create 10 million new jobs, while Rewiring America has found that accelerated electrification in the U.S. alone could create as many as 25 million new jobs.
Organizations and local governments should prioritize an equitable transition to a clean economy to meet the demand of their stakeholders and constituents. As they consider solutions, they can ask their solution providers:
- What the long-term environmental and social impacts are of the project they are considering
- Whether there are any more favorable or just solutions – and potentially be willing to pay a premium for those solutions
- How the BIPOC community has been engaged in the project’s development efforts – and what the opinion of the community is
TREND #3: Resource resilience, reliability, and security will be more important than ever
As most industries did, power utilities and organizations experienced a significant amount of turmoil in 2020. In areas where energy demand was hard to meet, like California and Australia, blackouts became widespread during periods of peak demand. Amplified by excessive fires, record heat, and aging infrastructure, centralized power grids have begun to show their vulnerability and inability to provide a consistent, stable power supply. Moreover, they have contributed to significant risk, damage, and loss of life. Consider California’s Pacific Gas & Electric (PG&E) utility, which admitted guilt in 2020 in the deaths of 84 people and has, to date, paid billions of dollars in damages, resulting in the company’s bankruptcy.
Resiliency is also the ability to adapt to changing market conditions and prices, and to secure energy or other resource infrastructure. Combining the above trends with the rapid adoption of digitization and the growing threat of cyber-attacks in the energy sector, cybersecurity has become a major factor to consider. A study from McKinsey demonstrates that electric power and gas companies are particularly vulnerable to cyber-attack, which can threaten the security of energy supply across the energy value chain. This threat is multiplied when the network is large.
Solutions to resilience, reliability, and security are emerging in distributed energy resources (DERs) like microgrids, fuel cells, and battery storage.
- Organizations can expect to explore, invest in, and adopt DERs at a quickening pace
- Additionally, organizations leveraging AI-assisted energy and resource management technologies will be able to more nimbly adapt and react to changing market conditions, determine where decarbonization opportunities and innovation lie, and respond real-time to supply- and demand-related risks and opportunities
2021: The new “abnormal” is here
Our global society and economies may never return to the way things were before 2020. Radical transformation has already begun, and it is likely to continue through the coming decade. Making progress towards carbon emission reductions is not only the right thing to do to manage risk and to meet the demands of stakeholders, but it may soon be required as part of doing business in the built-back-better economy.
Alongside our predictions for the new year, we are optimistic that 2021 will continue to be a year of climate breakthroughs. Watch our recent webinar featuring speakers from Faurecia, Charles River Labs and WBCSD to learn how companies have successfully taken leadership on climate action, and walk away with clear, actionable steps to accelerate your climate journey and build resilience within your organization.