Bain: Energy Execs say Net Zero Should be Pushed to 2070
The 2030 goals of the Paris Agreement, aiming for a 45% reduction in emissions, and the ultimate aim of net zero by 2050, are looming closer by the day.
However, Bain & Company's annual survey throws light on a significant deviation in the energy and natural resources (ENR) sector's trajectory towards these goals.
Engaging more than 700 executives across varied industry sectors such as oil and gas, utilities and mining, the survey uncovers a striking scepticism towards achieving net zero in the anticipated timeline.
Delayed net zero ambitions
Industry leaders across ENR sectors are becoming increasingly pessimistic about reaching net zero emissions, according to the latest survey.
The study, conducted shortly after COP29, highlights that nearly 44% of the respondents project that global net zero emissions will be unlikely before 2070.
In stark contrast, a mere 32% remain hopeful of hitting these targets by 2050, a drop from the nearly half of the surveyed cohort who, two years prior, held onto a 2050 vision.
This pessimism is echoed across the board with specific insights from the oil and gas sector expecting peak oil demand to hit only by 2038, which overshoots prior forecasts by eight years as per scenarios painted by entities such as the International Energy Agency (IEA).
Financial constraints are cited frequently, with high transition-related investment costs needing clearer routes to profitable returns being a major blockade.
Moreover, the growing reluctance from customers to bear increased prices and a Leap in shareholder scepticism — now at 68%, up from 49% last year — further complicates the collective stride towards sustainability.
Rising costs of projects
Financial burdens continue to be a core area of focus, as executives revealed an alarming trend of capital project costs surging, in some cases by double digits annually.
This fiscal strain is prompting caution with broader strategies now including stringent project evaluations, optimised capital deployment and the incorporation of breakthrough digital tools.
These include artificial intelligence, which is being tapped for efficient project management and cost controls.
The uncertainty isn't just sapping financial will but also dampening the initial fervour around transitioning enterprises to green alternatives.
A mere quarter of the executives feel optimistic about the profitability of such businesses, with a majority leaning towards innovative solutions like AI, renewable energy developments, circular economy efforts and carbon capture utilisation to shepherd in a sustainable, if staggered, transformation.
Yet, amid sprouting challenges, opportunities blossom. Utilities are strategising to handle expected surges in electricity demand, buoyed by AI's expansive role within data centres, predicting an uptick in global power demand by 2.6% by 2027, potentially inviting more than US$2tn in investments towards new generation infrastructure.
“There are two major topics at the top of executives’ agendas: managing capital cost inflation and driving transformation through AI and enterprise resource planning (ERP),” explains Grant Dougans, a partner and leader in Bain’s Energy & Natural Resources practice.
“For many, ERP transformation is no longer just an IT upgrade—it’s a strategic imperative.
“As software vendors phase out support for legacy systems, companies are realising that modernising their ERP can unlock powerful new business capabilities and technology tools, such as AI-driven demand forecasting, to drive efficiency and growth.”
A digital transformation
A pivotal spotlight in the survey was the unanimous nudge towards digital transformation as a business survival and growth strategy within the ENR sector.
More than 70% of the leaders now vest enhanced confidence in AI, mapping it as a core component of their operational and strategic decision-making.
The updates aren't limited to just operational tech but span extensive overhauls of Enterprise Resource Planning systems, which integrate various functional needs across enterprises.
These digital adaptations are viewed not merely as tech upgrades but as critical business transformations pivotal for future-proofing companies against an evolving energy landscape.
“Our findings make clear that what has been described as the energy transition is better understood as the dual challenge of delivering ever-increasing volumes of energy while simultaneously pushing to decarbonise,” says Joe Scalise, Partner and Global Head of Energy & Natural Resources at Bain & Company.
“Executives remain optimistic that meaningful decarbonisation is on the horizon, perhaps just not as quickly as they originally imagined.
“The industry is going through a period of great innovation and transformation, and executives’ agendas are fuller than ever. Those that remain hyper focused on enacting their priorities amid this barrage of challenges will lead the way in the next era of energy.”
Embracing these technologies could likely pivot the industry towards more sustainable outputs while enhancing efficacy and strategic depth.
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