Start now to build back better – Developing partnerships in green technologies
Despite the current challenges, the drive to decarbonise industry is continuing to accelerate. Whilst there are certainly existential challenges for massive parts of a nervous global economy there is hope that we can build back better. This means building back greener by being more open to partnership and collaboration.
Since the Covid-19 crisis began investors, such as BlackRock, have highlighted the relative resilience of companies who can adapt their business models to a low carbon environment. PRI, the world’s leading proponent of responsible investment, insists on “shaping a recovery that prioritises social and environmental outcomes, laying the foundations for a more stakeholder-driven and sustainable global economy.” Whilst Government support for decarbonization, particularly in Europe, remains a tantalising prospect which is eagerly awaited.
Most organisations are used by now to “engaging” with stakeholders but capturing the huge scope of decarbonisation means actually “working” in partnership with these stakeholders to deliver the transformation to low carbon industry – encompassing not only capital investment but also job creation and access to training for existing and new employees. In other words, making friends is fairly easy but finding and keeping meaningful partners requires careful preparation, proof of ongoing fidelity and acceptance that there has to be give and take to make it work.
Such partnerships will only be successfully developed by companies able to show credible and measurable commitments to decarbonisation that are compatible with the expectations of a wide variety of stakeholders, both technically and in terms of how they are presented.
For example, it is easy enough to see that an iron ore company and a steel maker need each other, but how do they align their carbon reduction strategies to mutual benefit whilst finding a workable commercial model to share the risks and the rewards whilst also meeting the evolving requirements of end users? The size of the challenge is clear.
A discussion paper this month by Transition Pathway Initiative aims to develop a methodology so investors can assess the performance of the diversified mining sector. It is clear that even in a sector capitalised at over US$350bn and contributing over 1.5 billion tonnes to annual carbon emissions there is much to be done particularly in measuring, apportioning, and reducing Scope 3 emissions. Partnership and shared goals have the potential to make this change happen. One example of this is Shell’s strategy to work with the aviation sector to reduce emissions over time through a process to increase efficiency, develop lower carbon fuels and mitigate remaining emissions.
For all sectors cultural, regulatory and technological factors will significantly influence how this process can be managed in practice. Planning is itself difficult given the scale of investment required, huge uncertainty and long timescales. Yet companies must develop a long-term plan combined with a framework for delivery. It should reflect input from across the supply chain, employees and civil society whilst also being flexible enough adapt to inevitable change and political uncertainty. Not an easy task, or coming at an easy time. Some companies simply don’t know where to start given the array of potential partners, commentators, assessors and the dread of “getting it wrong.”
Aura is very familiar with the process of identifying potential partners across the industrial supply chain having successfully helped clients to do so in China, Europe and South America. Trust, culture, clarity of intent and access to funds are always issues. But there are demonstrable rewards and some surprisingly powerful commercial benefits to common thinking.
By example, our team recently supported the partnerships journey for a client in the global steel sector by identifying stakeholders amongst investors, communities, suppliers, employees, government, NGOs, Standard setting bodies and think tanks. Amongst the 250 organisations identified as relevant we were able to define 10 who were going to be worth real partnership commitment. The process alone illustrated the complexity of the challenge in narrowing the field but it is a good place to start.
Defining the partnership strategy and framework for a decarbonisation project requires significant thought. Companies also need to allow for trial and error as experience of delivering such change does not exist and many key technologies are still unproven. For most companies – particularly those in hard to abate sectors – there really is no choice but to deal with these existential problems of tomorrow as well as those we are facing today.