Assessing readiness, of course, is only the first step. Once you understand the current state and challenges to progress, you can embark on concrete actions to catalyze progress—and remain anchored in a systems perspective with a focus on shaping the core drivers of demand.
Ecosystem solutions for the toughest decarbonization challenges
Addressing the technical and business model gaps characteristic of many hard-to-abate industries requires first recognizing that decarbonization is a systems problem, and thus should be tackled through collective, ecosystem approaches. Accepting that decarbonization is a systems problem that demands multistakeholder approaches also necessitates a profound mindset shift for many. “Winning” no longer (only) means besting your competitors, but working collectively to achieve lower emissions.22 Adopting a systems view enables players to understand the bottlenecks and critical interdependencies on the path to decarbonization, and then design ecosystem solutions with specific behavioral targets for different players working across the entire value chain. Organizations can work collaboratively to remove barriers, reach critical tipping points, and accelerate adoption of new technologies and business models.23
The key to moving the needle is to get past the typical points which lead some companies to a wait-and-see approach: The mistaken belief that technology development curves and policy shifts are fundamentally uncertain. In fact, neither is uncertain. We may not know everything we would like about future outcomes with respect to either technology or policy, but that doesn’t mean we should be paralyzed by ever-deepening analyses to try to better predict them.
Instead, we should move to do what we can to act on the fundamental drivers of demand conditions in any market-based domain: the needs, wants, and behaviors of people. No amount of technological innovation or policy shift is impossible if people—consumers, customers, business executives, government leaders, and beyond—align their voices in a way that sends demand signals. This can shift trends related to product attributes, investment capital flows, IP sharing, and standards setting. Demand by likeminded companies and organizations can kickstart and accelerate decarbonization change.
The ability to consolidate demand is a critical lever to break out of the chicken-and-egg dilemma that paralyzes so many hard-to-abate solutions. Too often customer demand for low-carbon products is fragmented and of uncertain longevity, which makes producers and financiers hesitant to invest in generating greater supply. A solution could involve identifying and working with key customers who value low-emission products or services and are willing to establish financial arrangements that make such solutions possible. Aggregating demand by pooling together numerous lower-volume customers to create critical mass can also be explored. That’s the logic behind groups such as the Clean Skies for Tomorrow Coalition, which aims to create “a mechanism for aggregating demand for carbon-neutral flying”24—by extension, stimulating the market for sustainable aviation fuel (SAF).
Efforts to secure sufficient, long-term demand should extend beyond a single sector in many cases. A number of industries have an interest in sustainable biofuels, for example, including airlines (SAF), ocean shipping, and ground transportation providers. Working together can help reach critical mass, and also enable collaborative efforts to assure available supply goes to where it’s most needed in the moment. Willingness-to-pay may not be the only relevant metric for such demand aggregation efforts, either. Customers may be open to making other trade-offs for more sustainable goods—accepting marginally slower shipping times for their products if it reduces associated emissions, for example. In a B2C context, MIT researchers found that many e-commerce customers were willing to wait an additional five days on average for delivery when told about the environmental impact of their decision.25
Action modes: Getting from small steps to big wins
There are three “action modes” that can be used individually or collectively to help create a flywheel effect for efforts to decarbonize hard-to-abate industries. The goal is to build momentum and create self-sustaining positive feedback cycles all in the service of effecting major changes.
- Small wins contributing to big bets. Small wins focused on “minimum viable moves” can be helpful to create momentum, but they should be clearly aligned to a bold vision. Too often companies get stuck in a seemingly endless cycle of pilot projects, but hard-to-abate sectors can’t just focus on small steps to decarbonize because progress will not come fast enough. Small win approaches, in isolation, assume that many incremental changes add up and that the cumulative results are ultimately, sufficient. Such thinking is dangerously misaligned with the speed and scale with which some of the best science says we need to reduce emissions, and with the pace of market transformation and rising stakeholder expectations. Working backward from 2050, there are not that many years to realize system-level changes—especially given the long lives of many assets in hard-to-abate industries. Converting a steel plant or turning over a fleet of ships or trucks takes many years. Big steps can be “derisked” through creative structuring of ecosystems, such as portfolio approaches. And big steps can provide necessary encouragement for others to act—in part by appealing to fears of being left out … or behind.
- Find a motivating insight. In many cases, the standard analytic tools and decision-making mindsets deployed by business leaders can make low-emissions solutions appear unviable—if they are even considered at all.26 To spur action, look for a motivating insight that can reframe what’s possible. New data—or old data couched in new ways—can allow leaders to consider solutions from new angles. For example, a focus on sticker price and higher upfront cost can deter adoption of battery electric vehicles for road freight use. But by considering duty cycles and total cost of ownership, the economics can become increasingly compelling for vehicles with relatively short and predictable runs.
Demonstration projects and proof points can also help show the “art of the possible.” For example, Shenzhen in China converted its entire bus fleet—around 16,000 vehicles—to electric, in the process illustrating the technology’s feasibility and utility at scale in a large, complex urban environment.27
- Empower an ecosystem architect. Forging consensus among disparate actors and ensuring they abide by their mutual commitments—often in an environment of intense competition—can require the early and active participation of an entirely new type of player: the ecosystem architect. The ecosystem architect generally works to remove friction and create efficiencies across the network. That can mean identifying and coordinating data-sharing to eliminate redundancies, bringing in new players to fill key gaps in capabilities, or creating standards or specifications that participants agree to adhere to. The architect is typically empowered to coordinate among and make some binding decisions on behalf of the ecosystem participants. It aims to solve the collective action problem that would otherwise prevent participants from working in ways they would mutually benefit from.28 It does so by resolving disputes and breaking decision-making impasses. Where securing and sharing data is important, it can also hold that data in trust and serve as a secure, central repository. The precise powers delegated to the ecosystem lead can vary, but they generally fall on a spectrum somewhere short of unilateral authority but beyond mere convening; it is not top-down control.
The ecosystem architect’s role can become especially important in instances where participants’ preferences conflict or where short-term self-interest would cause them to opt out or act in ways that are counter to the ecosystem’s vision. The most effective ecosystem architects typically exhibit a rare mix of attributes and capabilities. Most important, they should foster trust. The ecosystem architect should be seen by all participants as acting in good faith and in the best interests of the collective. Impartiality is key, but they should also have an incentive to participate and to care about outcomes. Often, a noncompetitive, neutral third party is best positioned to take on the role.
The challenge with effecting change in the face of uncertainty is that—almost by definition—the outcome is unknowable. Most organizations and individuals have grown up in a world in which “knowability” (a.k.a. the derisking of decisions) is both achievable and desirable. That is certainly the case in situations where data exists, and any player can make a rational trade-off between the cost of acquisition of that data and the likely risk mitigation it can help achieve. But we need a different mindset if we are going to make progress in decarbonizing hard-to-abate sectors.
Small steps forward which are designed either to test specific hypotheses or to catalyze a reaction from others can be a critical part of the solution. For example, consider the dilemma of an executive who knows that the right thing to do for society may have negative short-term consequences for their company—or their career—if they go on record as supporting it. A common reaction could be to retreat inwards and wait until policy shifts in a way that forces them and all their peers to take the step at the same time. An atypical—and better—reaction would be to go public with an anonymous quote which catches the attention of the rest of the ecosystem, giving others who may be similarly waiting-and-seeing the confidence to act themselves.
Even without all the data on hand to justify the decision, people should have the confidence to act quickly with these “minimally viable moves” in order to provoke a future which is increasingly desired by all.29 Because the greatest risk of all is the risk of waiting too long to make progress.