Sustainability

Transformation
Essentials
Key takeaways: How we can respond to climate
change

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Sustainability Academy: module overview
How we can respond to
climate change
Consider the types of greenhouse
gases and how they are generated in
different industries
Improve your mastery of climate
transition terminology
Getting to net zero
Distinguish between scope 1, 2, and
3 emissions
Explore ways a company might
approach decarbonization
Explain the role of renewable energy
in the climate transition
Focus of this document
Opportunities and risks in
transitioning to net zero
Discuss the physical impacts of
climate change
Appreciate the strategic opportunities
businesses have in a net-zero
transition
Contribute ideas about actions
businesses can take to help their
suppliers and customers mitigate
physical risks and navigate
opportunities
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Human activity has increased carbon dioxide in
the atmosphere to levels never seen in a
millennium

Carbon dioxide
enters the
atmosphere when
we burn coal,
natural gas,
gasoline and
other fossil fuels.
It also emerges
from industrial
chemical reactions
and the
decomposition of
organic materials.

Source: climate.gov McKinsey & Company 3

4 common terms to help you "speak climate" and talk about
reducing emissions

A company’s activities are At net zero, additions and Paris1-aligned targets are Often used
“carbon-neutral” when the removals of GHGs are science-based milestones interchangeably, carbon-
CO2 they release into the balanced; in other words, on the route to net zero. negative and climate-
atmosphere are balanced the net carbon contribution Parties to the agreement positive refer to situations
by carbon removal, which to the atmosphere is zero. aim to keep cumulative where more carbon dioxide
can include offsets. Carbon As the clearest commit- emissions within the is removed from the
neutral may not imply full ment to reduce emissions carbon budget to limit atmosphere than added,
abatement, as some to zero, most definitions warming and reach the creating a net positive
companies leave out scope exclude carbon offsetting. 1.5°C-target or stay well impact on climate.
3 emissions. below a 2°C-(3.6°F) rise in
temperature.

1. The Paris Agreement, a legally binding international treaty on climate change, was first adopted by 196 parties in Paris in 2015

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Climate change is driven by different GHGs
emitted across all sectors

Global GHGs by gas (GWP20) CO2 emissions per sector Global warming potential
(GWP)
Each GHG has a different
Other gases1 Buildings Agriculture “greenhouse potential”, so
Power
4 6 1 scientists had to find a
Land Use, Land-Use common measurement unit
Change and Forestry 14 30 for comparison. All
emissions of other gases
Methane are translated into CO2
(CH4) 40
56 equivalents, based on
19 specific coefficients, known
Transport
as their GWP.
Carbon dioxide Methane for example has a
(CO2) 30
GWP of 84 times the effect
Industry of carbon dioxide over a 20
years period (=GWP20).

1. Other gases are, e.g., nitrous oxide, ozone, and chlorofluorocarbons.

Source: McKinsey Emissions Inventories Tracker, McKinsey analysis McKinsey & Company 5
To achieve the Paris agreement, we must reduce
our emissions by 50% by 2030 and achieve net
zero by 2050

We must stay within a

total budget of about
400-500 gigatons of
carbon dioxide
(GtCO2), i.e., we
cannot release more
than about 9 years’
worth of current
emissions.

Source: Global Carbon Project (2020) McKinsey & Company 6

Critical shifts are required to get to a 1.5°C pathway across
industries and stabilize our climate

CO2

Reduce demand for emission- Electrify transport, buildings, and Deploy renewable energy at scale,
intense products industrial processes and expand the role of hydrogen
and biomass in energy

Eliminate fugitive methane Reform agricultural and food Remove CO2 from the atmosphere,
emissions systems, and curb deforestation and scale carbon capture,
utilization, and storage (CCUS)

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