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Climate change: How we can prevent the worst effects

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Our best ideas, quick and curated | March 18, 2022

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This week, we look at what it will take for the world to transition to net-zero greenhouse-gas emissions. Plus, the latest trends in packaging, and a bold new strategy for European software.

Our changing climate. Lethal heat waves, hurricanes migrating beyond the tropics, droughts that last for decades: the world is seeing the effects of climate change ever more clearly. Amid climate risks that are expected to grow more frequent and extreme , countries and companies worldwide are calling for net-zero emissions . It’s a huge undertaking, but here are some ways that governments, businesses, and individuals can prepare.

Trillions to transform. As much as $3.5 trillion in additional spending on physical assets will be needed each year from 2021 to 2050 , a McKinsey analysis reveals. During the transition, substantial amounts of capital will also have to be reallocated from high-emissions assets to low-emissions ones. Financial institutions are likely to play a key role in reallocating capital on a large scale.

Millions of jobs gained and lost. A fundamental transformation of the global economy would have profound implications for the world’s labor markets. About 200 million jobs may be gained and 185 million lost by 2050 in the transition, based on an analysis of sectors that produce about 85 percent of global emissions. Businesses can help make the case for change and help workers build new capabilities . Companies are also likely to need new data, talent, and infrastructure. For example, using digital platforms may enable firms to better track greenhouse-gas emissions embedded in their operations and supply chains. Leaders will also need to build climate considerations into frameworks for making key decisions.

A looming materials shortage. The transition to net-zero emissions by 2050 would open up new markets for low-emissions products and services. Decarbonizing processes and products can make companies more cost-effective, in some cases. But companies are also facing looming shortages of low-emissions resources . Green materials are needed to reduce emissions from supply chains, but demand for some low-emissions materials may far exceed supply by the next decade, McKinsey research shows. For instance, in 2030, Europe’s demand for green steel could be two times the amount that’s available. Using digital modeling tools to understand various supply and demand scenarios and implications for pricing may enable companies to better cope with green-materials shortfalls.

Governments’ role. Similar to businesses, governments can develop decarbonization plans and use policy, fiscal, and regulatory tools to create incentives. Since the net-zero transition would unevenly affect countries and sectors , governments would also need to manage the varying effects on communities and industries. Public-sector organizations can develop social-support programs that help citizens acquire new skills and jobs , and provide economic relief for lower-income workers. They can also hasten research and development that would lower the cost to acquire clean technologies.

It’s on us. Finally, individuals can keep learning about climate change and how the net-zero transition might affect consumers and workers. People may need to adopt new habits and behaviors. For example, consumers might eat less beef, drive electric cars , and improve the energy efficiency of their homes. The journey to a net-zero future may be risky, but it’s also full of opportunity. More important, we’ll have helped the planet become a more hospitable place not only for humans but for all creatures on earth.

OFF THE CHARTS

In the US, students in majority-Black schools fall further behind

School closures, quarantines, and lagging attendance: sadly, students in majority-Black schools have fallen even further behind their peers in majority-White schools. Before the COVID-19 pandemic, US elementary-school students in majority-Black schools had nine months of math curriculum still to learn when compared with other students. That gap has since widened to a year.

Check out our chart of the day here.

PODCAST

Wrapping it up: What’s new in packaging

In this edition of the McKinsey on Consumer and Retail podcast , Ron Delia, CEO and managing director of global packaging company Amcor, reveals how e-commerce is creating new demands on packaging . “Just take any grocery item; it could be pasta sauce in a rigid container or rice in a flexible package. Everything that the item’s package does in a traditional brick-and-mortar retail channel, it has to do in the e-commerce channel—and then some,” says Delia. In addition, in online retail, the “moment of truth” is when the consumer opens the box, so that experience needs to be compelling, Delia added.

MORE ON MCKINSEY.‌COM

Reversal of fortune: How European software can play to its strengths | Europe’s relative lack of top software firms threatens its economic competitiveness. It’s time for the private sector to stop trying to play catch-up and take a new approach.

How to navigate mining’s cash-flow conundrum | The mining industry’s commodity prices have been on an upswing. Our analysis of the industry’s cash flow management could help leaders maximize value.

US wealth management: A growth agenda for the coming decade | As hopes for a postpandemic recovery grow, the financial industry must prepare for the changes in technology, consumer needs, and society that will shape the future of wealth management.

THREE QUESTIONS FOR

Shelley Stewart III

McKinsey partner Shelley Stewart III was recently recognized as one of Crain’s New York Business’s Notable Black Leaders of 2022. Shelley, who leads McKinsey’s research on US Black economic mobility, founded and directs the McKinsey Institute for Black Economic Mobility. In this interview , he reflects on Black leadership in the workplace. This is an edited excerpt.

How did your upbringing influence your development as a leader?

I absolutely saw this level of determination every day from both of my parents, who both went to work every day and had to deal with all sorts of things that folks who are Black had to deal with, and in my mom’s case, being Black and also a woman . I was party to those discussions at night at the dinner table about issues that they were facing. The spirit of it was never complaining. It was more about understanding the reality of the situation that we’re in.

[It was also about] recognizing that as you progress, you have an obligation to bring more people through the door. That’s something that’s always stayed with me. You’ve got to open doors, create opportunities for folks who look like you, who traditionally have not been given these opportunities. The whole of your success will not be based on the level that you rose to but actually on how many people that you directly helped to bring along that journey so that they can progress and provide more for their family.

What are some solutions for a more equitable future?

If you invest in people, in human capital that is here in this country, that has been traditionally underinvested in, then that is a high ROI way to use your money because that is a local economic-development lever. We are better off as a society if we are educating our people to be more book smart and providing adequate healthcare so that they are healthy. That allows them to later be more productive in the workforce, as entrepreneurs and investors, and that is an economic engine. This whole idea of economic empowerment of Black Americans is at the core of sustainable, inclusive growth.

Some people may say, well, why focus on Black Americans? That’s just because if you can solve it for Black Americans, than you’ve got seeds of the solution for all Americans living close to the poverty line, because Black Americans are disproportionately the poorest and from an income perspective and from a wealth perspective, they suffer from very limited economic mobility, if you look historically.

Black Americans have faced limited mobility for generations. Have we as a society made any progress?

If you look at educational attainment , that’s one area where, objectively, you can say we’ve seen progress. It started when you were in high school and going into college. We’ve seen some gains at some of the higher levels. And you’ve seen [it with] some CEOs and [in] some boardrooms. But that prosperity for Black Americans is not broadly shared. In the US, the opportunity to increase the number of Black-owned businesses and support Black entrepreneurs is substantial.

— Edited by Belinda Yu

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by "McKinsey Shortlist" <publishing@email.mckinsey.com> - 01:50 - 18 Mar 2022

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