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On the final day of the COP28 climate summit last December, almost 200 countries agreed to begin reducing their consumption of fossil fuels. This ‘first-of-its-kind’ deal is a giant leap in the right direction, and also a timely one, with 2023 just announced as the world’s hottest year on record.
But is it enough? Tackling energy demand has the potential to deliver over half (55%) of the solution for net zero energy by 2050, yet it is still vastly under-appreciated.
As I take stock of the panels and discussions I attended at COP28 with organizations like Bain & Company, EDF, and CCI France UAE, one thing is clear. The World Economic Forum’s annual meeting in Davos this year must home in on what can deliver the biggest impact, at the fastest rate, for CO2 reductions: demand-side action.
Here’s what COP28 got right about reducing energy demand, and where we need to take the conversation at Davos:
1. Open eyes to the impact of energy demand reduction
The link between the climate and energy crises is undeniable: 80% of global carbon emissions come from production and consumption of energy. While COP28’s flagship agreement is right to encourage transitioning away from fossil fuels, the truth is that, for the biggest and fastest impact to limit climate change, we must completely decarbonize the energy landscape.
COP’s Global Renewables and Energy Efficiency Pledge, which seeks to double the global average rate of energy efficiency improvements from 2 to 4% per year until 2030, is a great idea. But executing it is what matters, through electrifying processes such as transport and heating, and reducing energy consumption.
Take buildings, for example. Together with the construction sector, they account for 37% of global carbon emissions — according to the UN Environment Program. It’s simple to reduce building emissions by implementing a microgrid with local renewable energy sources, or installing energy management that automatically adjusts heating, cooling, lighting and more, based on need. Just look at the all-digital, all-electric IntenCity building in Grenoble, France, which uses 10 times less energy than the average European building.
As I attend the WEF gathering next week, my hope is that we focus on the energy demand side. The reason for reducing fossil fuel consumption isn’t to power our existing world, where over 60% of energy produced is wasted. It’s to power a more electric and digital world, efficiently. At Schneider Electric, we call this Electricity 4.0 — and it’s the fastest way to net zero.
2. Slash Scope 3 emissions for exponential impact on climate goals
Scope 3 emissions reduction is one of the most significant frontiers of the energy transition. Comprising more than 70% of most companies’ emissions, these come from upstream and downstream in the value chain – I’ve shared more about reducing them here. With Scope 3 a daunting interenterprise problem, I was encouraged that The Alliance of CEO Climate Leaders, including Schneider Electric, signed an ambitious action plan at COP28. This promised target setting, pledges to engage all suppliers by 2028, and transparency on all Scope 3 emissions.
Delivery of COP28’s Scope 3 pledges is not possible without digital technologies that make data visible; after all, if you can see it, you can track it. Even the smallest suppliers or customers, who may not have their own sustainability officers, can use technology to measure emissions, build a decarbonization roadmap, and access solution providers. Arming our top 1,000 suppliers with digital solutions has been central to Schneider Electric’s Zero Carbon Project, designed to halve their operational carbon emissions by 2025. Any company can do the same, with the right guidance.
Delegates at Davos need to recognize the impact that reducing Scope 3 can make, not least because regulation is on the horizon. From 2025, companies in Europe will be required to report on their Scope 3 emissions. But the positive impact of Scope 3 emissions reduction is more than the sum of its parts: as suppliers and customers improve, whole ecosystems of connected companies can decarbonize together, offering exponential improvement for a company’s costs, reputation, and supply chain resilience.
3. Recognize the competitive benefits at the heart of circularity
At COP28, circularity was more prominent on the agenda than ever, a positive sign that world leaders are recognizing its value to mitigate climate change. The Ellen MacArthur Foundation, a pre-eminent organization in this field, praised the first-ever inclusion of circular economy in COP’s specified outcomes, and called for urgency to deliver it to the market at scale, as part of the energy transition.
The event confirmed to me the importance of circular economies, starting in the design phase: like reusable cups and bottles, or clothes that last longer than a few washes. We must rethink our relationship with energy, through a new culture of recycling and refurbishment. I’ve seen the results firsthand: from Arcelor Mittal’s recycled steel that goes into our products and takes 70% less CO ₂ to produce, to sensors in systems we design that anticipate wear and tear, prompting the replacement of modules that ultimately keep machines alive for longer.
At Davos, it’s critical that organizations understand the competitive advantages at the heart of circularity. If done well, it opens new value streams via refurbished programs like our Circular Certified scheme, maintenance services to support the lifecycle of sold equipment, and energy cost savings across the board as we use less energy. After all, investing in energy efficiency is investing in a saving.
We must decarbonize the energy landscape. All of it.
To combat climate change, it’s crucial to eliminate carbon emissions. COP28’s delegates have provided the world with a strong blueprint; Davos’ decision-makers must now decide to decarbonize both energy supply and energy demand, together. The technology to address this challenge already exists. The solution lies in collectively deploying Electricity 4.0 at scale and with urgency.