Plastic waste gluts our oceans. Greenhouse gas (GHG) emissions continue to rise, overheating the planet. Global ecosystems and biodiversity are under increasing threat from industrialization and consumerism. Glaciers and permafrost are melting, and some regions around the world face storm surge and floods while others endure drought and wildfires. Not only do global and regional economies risk disruption from these environmental changes, but life on the planet itself is in jeopardy.
As a result, there has been mounting pressure on businesses and governments worldwide to adopt more environmentally sound practices and policies. Investors, banks and consumers are becoming more vocal about the need to move the global economy away from fossil fuels— the main source of the greenhouse gases causing climate change.
In response, many of the world’s largest companies are accelerating efforts to put sustainable policies in place. To encourage this behavior, investors and banks are increasingly putting money into projects that demonstrate strong environmental, social, and governance (ESG) guiding principles, and consumers are becoming more environmentally conscious in their product choices.
In few places in the industrialized world has this move towards sustainable best practices been more evident than in Europe. Here, governments have shown more willingness to pass laws that prioritize abating emissions and compel companies to adopt corporate agendas reflecting ESG principles.
Source: Oliver Wyman analysis
But there are challenges. Europe remains significantly off track to meet its 1.5oC target. Recent Oliver Wyman research with CDP Europe indicates that 84 percent of European companies have yet to set a 1.5oC-aligned science-based target (SBT), and 77 percent have yet to set an SBT of any kind.
The Russian invasion of Ukraine has also added urgency to the sustainability discussion, particularly in Europe. It has laid bare the dependence of large industrialized European economies on fossil fuel imports from Russia. The dynamic makes countries without fossil fuels more vulnerable to political pressure from countries with reserves.
The European Commission (EC) recently passed a partial ban on Russian oil that will not begin to take effect until the end of the year. In the meantime, the EC has acknowledged that the region will use as much as 5% more coal over the next five to 10 years to make up partially for the eventual loss of Russian oil and gas. Coal is by far the most carbon intensive of the fossil fuels and more usage of it suggests more emissions, although the EC insists the region will hit its carbon-reduction targets.
Meanwhile, the supply chain disruption has caused prices for all fossil fuels to surge and slowed economic growth. In its Global Economics Prospects June 2022, the World Bank now predicts global growth will be about 2.7% in 2022, down from 5.7% in 2021. The World Bank attributes the slower growth to the Russian aggression, the lockdowns in China because of COVID, and the risk of stagflation. European growth will slow to 2.5% in 2022 and 1.9% in 2023, the bank says. Ironically, slower growth could help with cutting emissions.[i]
Even with the intense economic pressures, the European Union is trying to double down on the transition to clean, self-sufficient energy by accelerating the move to renewable energy, green hydrogen, and better battery storage. But such fundamental change won’t happen overnight.
Besides using more coal, several are canceling plans to phase out nuclear power stations or at least reconsidering those plans while countries like the UK and France are expanding their nuclear power capacity. Nuclear power has no greenhouse gas emissions but raises other safety and sustainability concerns. They are also turning to liquefied natural gas (LNG) from the United States and the Middle East to replace pipeline gas. The reliance on LNG creates more greenhouse gas emissions than with pipeline gas because of the maritime transport required for LNG delivery and the methane released if the natural gas is the product of fracking.
In this period of disruption, we developed The Green Transition Index (GTI) to help countries benchmark their progress in the quest for sustainability and emission reduction. Based on the availability of data, we focused our first edition of the index on Europe and key performance indicators in 29 European countries. The index assesses the environmental performance of these countries across a wide range of categories, including overall Economy, Nature, Manufacturing, Utilities, Waste, Buildings, and Transport. Our goal is to identify the leaders and best practices that produce the most meaningful results so others might model their efforts on them.