Amid a flurry of political promises – how will decarbonisation be achieved on a corporate scale?
Kevin Chin, CEO and Founder of VivoPower spoke to Business Leader about the importance of decarbonisation during the current political climate.
Already a hot topic before the unprecedented events of the pandemic, environmental goals have become a core focus for us all as we emerge from lockdowns. Global economies need to be built back up; achieving this sustainably will be key in stemming the problems posed by climate change.
To this effect, governments have been announcing scoping policies with ambitious decarbonisation goals. Take, for example, Joe Biden’s first 100 days in office. The US President has re-joined the Paris Climate Agreement, alongside proposing a $2 trillion green infrastructure plan. In numeric terms, this will translate into targeting a 50-52% reduction in US Greenhouse Gas Pollution from 2005 levels by 2030. In the UK, Boris Johnson has echoed this sentiment by announcing a ’10 point’ net zero plan to prompt net-zero emissions by 2050, driven by a £12bn investment.
But what do similarly ambitious goals look like for the private sector? And – just as crucially for companies recovering from one of the most severe economic shocks in recent history, how can they achieve these goals without it affecting their bottom line?
A corporate strategy for decarbonisation
Green tech has advanced to such an extent that it is now feasible to replace fossil fuels and, at times, is more cost-effective (if allowing for the initial setup investment). Solar power currently makes up around 2% of total energy consumption in the US – but we expect that to rise as the cost per watt continues to fall. In the early 2000’s, the average US solar system cost was $10/watt – today, the price hovers around the $2-3$ mark. Similar price falls in wind and hydroelectricity present an ever-weakening argument for the renewed usage of carbon-based power.
This effort towards decarbonisation can be applied across industries. Here we take a look at how companies in the mining, manufacturing and sports infrastructure industries have made inroads with regards to lowering their total carbon output.
Tembo, a specialist off-road vehicle electrification company that converts Toyota Land Cruisers and Hilux’s to full EVs for industrial use, especially in the mining industry, is making it possible for mining firms to reduce their carbon footprint whilst also being of benefit from an operational efficiency perspective. Tembo is wholly owned by the NASDAQ listed B Corp certified company VivoPower International PLC. In January 2021, VivoPower announced a US$250 million distribution deal with GB Auto in Australia to distribute Tembo’s all-electric utility conversion kits in Australia, the biggest known conversion kit deal to date.
Indeed, with less range anxiety issues for off road usage, the vehicles provide firms with an enhanced economic proposition to the petrol or diesel alternative. Mining is an industry to have come under intense scrutiny from an ESG point of view, and whilst merely electric vehicles will not prompt complete carbon neutrality, they highlight a position from which companies can make environmental progress in an industry that contributes between 4-7% to greenhouse gas emissions globally.
Manufacturing is another industry that has also come under pressure to demonstrate its ESG credentials and potential. A key way in which this can be addressed is in converting its extensive power requirements to a more sustainable source. VivoPower subsidiary JA Martin and its partnership with Cubbie AG – one of the largest cotton producers in Australia, have done just that – whilst maintaining operational efficiency. The solar power now provided to the firm by JA Martin has led to a 40% reduction in Cubbie Station’s annual grid electricity consumption. Cost savings come to US$300,000 a year, with additional revenue generated through sales of excess solar energy and renewable certificates.
Discussed less when scrutinising ESG is sports infrastructure, yet Premier League football club and NFL host Tottenham Hotspur has partnered with VivoPower for the firm to provide it with sustainable solutions for the club’s stadium and training ground, as well as electric vehicle solutions for transport. The deal shows the club’s intent to reduce its carbon emissions and reach net zero, and serves as an example to other sports clubs on how they can rapidly decarbonise.
Such disparate examples across industries show how decarbonisation goals are logistically and economically feasible for businesses across a range of sizes and industries.
…That investors can access
As companies and governments continue to decarbonise with increasing urgency and economic ease – the opportunity presents itself to get involved in the transition from an investment perspective. The S&P Global Clean Energy Index has risen 113% (at time of writing) over a turbulent year in the wider markets to give an indication of the kind of growth expected in providing green solutions. But there is of course, more nuance within the green shift – especially on a corporate level.
We’ll start to see more specialised companies with the capacity to provide green energy and infrastructure and tailor it to provide a suite of solutions that cater to the precise needs of a company.
Whilst VivoPower is one of a few firms that occupy this area, my sense is that it will evolve further into a sector that will have to sustain rapid growth in order to keep up with demand as more firms look to decarbonise. Indeed, this will be pushed further by investor interest in ESG compliant companies in the first place. The B Corp accreditation will become more important in this regard, just as ISO9001 became the universal quality standard. Four in five companies plan to introduce ESG measures, according to a global Willis Towers Watson report, and one could infer that this is partly driven by the desire not to be left behind by a global investor shift towards ESG funds, which more than doubled over 2020 – capturing $51.1 billion of net new money from investors.
The will of politicians and investors to decarbonise – as well as the technology to make the green shift economically possible – are all present. The opportunity is therefore huge in the nascent sector of corporate decarbonisation, where companies are providing the expertise needed to make sure the private sector can execute its green goals.