The shift towards Net Zero
The Paris Agreement redefined global climate action by uniting nations to reduce their greenhouse gas (GHG) emissions, with the ultimate aim of reaching "net-zero" emissions. This means that a country must ensure that its GHG emissions are balanced by removing or offsetting an equivalent amount. For example, if a country emits 100 tons of CO2, it must find ways to either remove or offset those 100 tons, balancing its environmental impact. Under the Paris Agreement, countries have defined their own target years for achieving net-zero emissions. Counties achieve these targets by defining policies, regulations, incentives and expectations that apply on companies and businesses. These policies act as catalysts for transformative changes, redefining corporate practices, reshaping operations, and driving strategic shifts in product offerings.
Below is a list of countries with their corresponding targets:
| Country | Target Year |
|---|---|
European Union, Canada, Japan, Brazil, South Korea, Australia | 2050 |
China | 2060 |
India | 2070 |
Let’s look at the case of Germany. According to Deloitte’s CxO Sustainability Survey 2023, 76% of German companies have increased sustainability investments, while 72% of executives see economic growth and climate action as mutually achievable. Germany’s strong sustainability policies are driving business transformation and accelerating green investments. Highlighting a few below:
| Key Categories | Policies/Regulations introduced by Germany | Challenges/Benefits for existing Businesses | New Business Opportunities that have emerged as a result |
|---|---|---|---|
Carbon Taxes | Climate Action Programme 2030: Aims to reduce emissions by 55% by 2030, with CO₂ pricing on transport & heating fuels, starting at €25/ton in 2021 and increasing to €55–€65 by 2026 | Challenges: Higher upfront transition costs, compliance burdens, supply chain shift requirements. | Growth in emerging sectors: renewables, EV production, charging infrastructure |
Benefits: Cost savings from green energy and energy efficiency, and government incentives. | |||
Renewable Energy Incentives | Renewable Energy Act (EEG) Amendments: Germany targets 80% renewable electricity by 2030, expanding solar (215 GW), onshore wind (115 GW), and offshore wind (30 GW) with faster permits and financial incentives. EEG amendments cut costs, accelerate projects, and enhance the power grid for a smoother renewable transition. | Challenges: Businesses face high upfront costs for solar, wind, and storage, with small firms struggling for funding. Grid delays and weak energy storage add challenges to ensuring a stable renewable power supply. | The renewable sector flourishes, boosting energy developers and grid infrastructure. |
Benefits: Recurring Cost savings from adopting renewable energy as it is a cheaper alternative to traditional power. | |||
National Hydrogen Strategy: Germany aims to become a global leader in green hydrogen innovation, encouraging the steel, chemicals, and transport sectors to transition to hydrogen-based production. It targets 10 GW electrolysis capacity by 2030. Supported by a €9 billion investment (€7B domestic, €2B international), the plan includes R&D, infrastructure expansion, and a 1,800 km hydrogen pipeline by 2027–28. | Challenges: Green hydrogen is costlier than fossil fuels, with pipelines and refuelling infrastructure still in early development, limiting large-scale adoption. | Hydrogen producers, fuel cell manufacturers, and transport firms expand. | |
Benefits: Businesses using green hydrogen gain advantages in ESG compliance. Businesses adopting to the same will save EU Carbon Border Adjustment Mechanism (CBAM) tax. | |||
Circular Economy Mandates | National Circular Economy Strategy (NCES): Aims for a fully circular economy through reuse, repair, and recycling, targeting 70% recycling rate for municipal waste by 2030 and 55% landfill waste reduction by 2035. Backed by €1B+ funding to support businesses transitioning to circular economy practices | Challenges: Transitioning to circular economy production requires new technology, supply chain adjustments, and improved recycling infrastructure, posing challenges for businesses for high upfront costs, waste collection, and raw material recovery. | Growth in recycling, eco-packaging, upcycling businesses and waste-to-energy industries, creating new revenue streams for businesses. |
Benefits: Helps businesses cut raw material costs, reduce waste, and save energy, lowering operational expenses while promoting local recycling and reducing dependence on imports. | |||
ESG Reporting Standards | Corporate Sustainability Reporting Directive (CSRD) & Supply Chain Due Diligence Act: The CSRD requires companies to increase ESG transparency by disclosing climate, human rights, and governance data. The Supply Chain Due Diligence Act ensures human rights and environmental protection in global supply chains by holding companies accountable for issues like child labor, forced labor, and environmental harm. | Challenges: Monitoring requires due diligence, audits, and compliance measures. However, tracking violations is challenging, especially in high-risk regions, leading to costly legal processes. Non-compliance can result in fines of up to 2% of global revenue and exclusion from contracts. | Growth in ESG consulting, sustainability software, green finance, and impact investments, supply chain auditors. |
Benefits: Adopting ESG standards and ethical sourcing helps businesses attract investors, secure sustainable financing, enhance brand reputation, and build stronger customer trust and loyalty. |
As countries worldwide strive to decarbonize their economies, Germany’s approach demonstrates how businesses and corporations can adapt, innovate, and drive sustainable growth in a low-carbon future.
