As negotiations continue into the final hours of COP26, McKinsey senior partner Harry Bowcott led a conversation reflecting on the last 12 days in Glasgow—and the implications of a deal globally. Harry was joined by Dickon Pinner, a McKinsey senior partner and co-leader of McKinsey Sustainability, and Claire O’Neill, managing director of Climate and Energy at the World Business Council for Sustainable Development, who shared perspectives and key takeaways from the conference.
A replay of the conversation is here. Excerpts from the entire discussion, edited for clarity, are below. Read highlights from all of McKinsey’s COP26 sessions here.
Highlights from today
The private sector’s increasingly important role: Dickon described the conference as the first to be as much “anchored around the private sector” as it was governments, highlighting how this moment is one for “courageous leadership.” The transition to net zero will require the largest reallocation of capital in history, as stakeholders aim to rebuild an economy in 30 years that originally took 200 years to build. The answers will differ across sector and geography, and while challenges remain, “the problem has now been articulated and is being understood.”
The challenges begin after the ink dries: Claire said the final agreement will be a process in which “every word, every piece of punctuation” matters. Still, there are important questions to ask even after the agreement is published. “The real challenge is how do you get countries to show their homework—to bring forward their increased ambitions?” Claire asked. “This is not just a question of decarbonization. This is a question of national development, finance, and in particular, adaptation finance. Lastly, this very vexed question about what you do with fossil fuels—clearly there is a huge split among the parties about the scale and speed at which fossil fuels will be phased out.”
A new standard for organizations and leaders: “Net zero is the new organizing principle for business,” Dickon said—and leaders will be measured against their deviation from it, not their aspiration toward it. While demand for the green transition is apparent, supply remains a challenge. Locking in long-term suppliers with green materials and working with investors to get capital to existing green infrastructure and initiatives will become a competitive advantage for CEOs.
From “operating under certainty” to “operating under certain volatility.” For regulators and businesses alike, the policy and strategy “environment pre-pandemic was benign and stable,” Dickon said. “It is neither now.” How can leaders adapt? Dickon offered three suggestions.
- Have a North Star: “Have a point of view to cut through the noise.”
- Tell your story: It’ll be increasingly important for leaders to articulate their change to both the board and investors.
- The opportunity is real, but so is the risk: Trading, scenario planning, and green materials sourcing will all become increasingly important.
On the horizon for COP36: Noting COP has rarely been held in the Southern Hemisphere or Asia, Claire predicted a strong pull East and South over the next few years. “We could be talking about carbon negativity and not just about gliding to this landing zone point of net zero, but how do we actually take carbon out and start to recover? The other thing I think we'll see is a convergence of the three contracts—for climate, nature, and desertification—and the realization that we can actually go beyond this net-zero landing zone and actually start to repair the climate.”
From our venue at COP26
At a glance
Net-zero commitments are rising, but the net-zero equation is not yet solved. McKinsey’s framework offers nine key net zero requirements that can be seen as the fundamental chords that would all need to be resolved in concert, if not in unison, for a net-zero transition to materialize by 2050.
Learn more about nature conservation and its role on the path to net zero with these McKinsey articles:
Solving the net-zero equation: Nine requirements for a more orderly transition
Innovating to net zero: An executive's guide to climate technology
Protecting people from a changing climate: The case for resilience