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Does size matter in the transition to net zero?
23/3/2022
6 min read
Feature
The final online session during International Energy Week 2022* compared what big and small companies bring to net zero, with young professionals from Generation 2050 representing each side, and more senior panellists providing some balance.
In the first of an ongoing series of pieces written by the Energy Institute’s young professionals as part of the Generation 2050 initiative, two of the young professionals present at the discussion agreed to offer their opinions on the different roles that big and small companies will play. Despite their contrasting backgrounds, Adriana Martins, Junior Data Scientist at Arenko Group, and Piotr Konopka, Senior Manager for Energy & Decarbonisation Programmes at a global shipping and logistics company, generally agreed that both big and small companies are essential to achieving net zero.
Small companies and rapid innovation
During the online discussion, all the panellists reached a consensus on the vital contribution that small companies make by providing much-needed innovation. Konopka pointed out that: ‘Most emissions come from some 20 companies. But these companies don’t have all the solutions to decarbonise. So, they need to find solutions internally, but also from SMEs and startups for innovation.’ Likewise, Martins said: ‘Small entities are better at quick innovations and rapid shifts, as there is less bureaucracy to deal with.’ There was recognition that startups have fewer hoops to jump through when moving concepts from ideation to execution.
Kevin McCann, Policy Manager at Solar Energy UK, described how he could simply bring an idea to his boss, discuss its merits, and then begin planning its implementation within a very short time frame. He contrasted this with larger corporations which can take months just to greenlight an idea. This speed is a significant advantage considering the time constraints around achieving net zero by 2050.
Big companies and impact
However, Louise Kingham, Senior Vice President of Europe and Head of Country UK for BP, also promoted the role of supermajors in cultivating innovation, praising BP’s incubation programmes for startups and other entrepreneurial initiatives. Martins acknowledged that: ‘We need the big players to apply innovation to reach more customers and make the transformation possible.’ Small companies may have the advantage of flexibility with a greater potential for creating new processes and technologies, but it is the big companies who can make the most impact by adopting and applying these solutions.
Similarly, Kingham mentioned that the impact a company like BP can have was the motivating factor behind her move from the Energy Institute to BP last year. But Konopka was more inclusive in his consideration of company size and decarbonisation, stating: ‘We need both the stable, predictable big companies and the risk-taking startups which allow people to run with ideas.’ Konopka also suggested that having big companies incubate the smaller ones can take advantage of the benefits that each offers.
Employee advantages of big and small companies
Moderator Sumit Bose, Editor and Co-Founder of Energy Live News and future Net Zero, moved the discussion on to compare career opportunities. Konopka suggested that big companies could attract more young talent by hiring more heavily in their renewable sectors, as this is where young peoples’ interests lie. McCann emphasised the diversity of experience and greater variation working at a small company. He said that: ‘At small companies you get exposed to everything’, including running and managing projects, noting that this experience is just as applicable for larger firms.
Environmental, social and corporate governance
Kingham said: ‘Small companies have the advantage of allowing you to make more of a mark. But a big company with the right culture can offer the same opportunities.’ Nigel Pocklington, Chief Executive Officer of UK-based renewable energy retailer Good Energy, cautioned that not everyone thrives in a chaotic startup environment and instead recommended that young people join an organisation where they think they will learn the most.
For the young professionals themselves, the integrity and goal of a company was fundamental. Konopka said he would not join a company that merely had a net neutrality pledge but would join one with a net zero target. Martins was concerned about the true motives of companies, saying: ‘It’s hard for the for the public to understand if pledges are greenwashing or genuine.’ But she conceded that: ‘We mustn’t point the finger and blame corporations. If no young people join the big companies, who will move them forward in the right direction?’
Young professionals’ contributions
Following International Energy Week 2022, Piotr Konopka and Adriana Martins expanded on the ideas and opinions espoused during the online debate. See below for their views on whether size matters for the energy transition.
Big companies will play the greater role in achieving net zero
Piotr Konopka, Senior Manager for Energy & Decarbonisation Programmes at a global shipping and logistics company.
Climate change is becoming an increasingly contentious topic for the general public. This is largely due to multiple recent extreme weather events that anybody can see are caused by global warming. Achieving net zero carbon emissions by mid-century is by far one of the greatest challenges that we are facing today, although the solution likely does not lie in the hands of everyday customers or small companies, but with large players.
According to a report published by the Carbon Disclosure Project, 71% of global carbon emissions since 1990 were emitted by 100 companies and 33% by just 20 companies. We need action to push the needle on decarbonisation. But this is a complex problem that requires systemic change to slash the current 50 billion tonnes of CO2 emitted per year to net zero.
Although it is likely that many of the small companies will lead the charge in creating the required innovative solutions, it is going to be the big companies that will play the leading role in incubating and adopting them. This applies to both decarbonising their own operations and helping to reduce carbon emissions from their supply chains.
For example, in the maritime sector, many companies operate using chartered vessels with leases ranging from short to medium terms, but generally no more than five years. Such companies can start signalling to the market that, in the next leasing cycle, sustainability principles will be included as part of their tender evaluation criteria. This could be followed up by longer term contracts at a premium, giving the suppliers certainty that their investments in low carbon assets for leasing will pay back.
Besides being the greatest challenge of the 21st century, I believe that decarbonisation will also be an immense investment opportunity. Personally, I want to see the next billion-dollar companies innovating in the areas of zero carbon fuels, electrification, maximising efficiency and renewable energy technology (among others), rather than producing more superficial apps on which people share photos of their cats.
According to Forbes, the renewable energy market alone will reach a size of over $2tn by 2025. Major investments in this market are being made by large energy players, including major oil and gas companies, who are increasingly trying to reinvent themselves and enter the broader energy space.
Big companies also have an unparalleled opportunity to impact entire industries. Showcasing large-scale successful solutions and collaborating across various associations creates the systemic changes that are crucial to achieving the net zero ambition.
An exciting development in the shipping industry is the Maersk McKinney Moller Center for Zero Carbon Shipping – where 19 strategic partners came together to collaborate on research and development and decarbonisation roadmaps. All of them are large companies such as Maersk, DP World, BP, Cargill, Mitsubishi and others. An advantage these organisations offer is that all their findings are made public for the wider industry to use.
Besides the sheer size of the carbon footprint of large companies, they are also subject to factors that significantly affect their operations. These include regulation, pressure from commercial customers and the inability to access reputable, low-interest financing if they cannot prove their commitment to and actions in mitigating climate change. This means that they are forced to reinvent large parts of their business and service offerings, leading to significant reductions in carbon emissions.
Piotr Konopka is a Senior Manager, responsible for energy and decarbonisation programmes at a global ports and logistics company. He is also a Board Member and Vice-Chair of the Young Professionals Network at the Energy Institute’s Middle East Branch. He is a graduate of the Sustainable Energy Futures course at Imperial College London.
Arguing in favour of small companies
Adriana Martins, Junior Data Scientist at Arenko Group.
The Generation 2050 session at International Energy Week started with a simple question from Moderator Sumit Bose: ‘What does net zero mean to you?’. The way we all approached this question was different; however, the sense of purpose in everyone’s answers was identical. As Kingham mentioned later, net zero is an amazing way to be purpose-driven. This motivation has led a lot of professionals to this sector, and it continues to do so today. However, as a young professional, where can one make the biggest impact? Does size really matter? Is big better than small?
Overall, the panel agreed that size does matter. How can we achieve net zero and make an impact in the industry if we ignore big players like BP? These multinational companies need to be considered and involved in the solution so that impactful and long-lasting change can occur. Firstly, there is too much at stake – millions of jobs and trillions invested in infrastructure – that cannot be overlooked. Also, these big businesses have the exposure and the scale to operate large-scale projects and reach more parts of the globe.
On the other hand, small enterprises are also important. Small companies are agile and therefore quicker to move and to innovate. Smaller workforces are more fun for employees and can be better for learning. The younger members of the panel, the Generation 2050, agreed that small companies enable you to grow more quickly; to gain responsibility; and to be exposed to more, earlier in your career. Small companies act like accelerators for young professionals and we need Generation 2050 to lead the energy transition.
Size matters because each company has a role to play. We need innovation and younger minds in addition to scale and exposure to make a change. However, the panel agreed that the transition needs to be profitable for both as well. Small companies cannot grow and become big corporations if the business is not lucrative, while big companies cannot move away from fossil fuels if the alternative options will not make up for the change financially.
In short, it needs to be a combined effort. Small and big have quite a lot to learn from each other as young and senior, expert and junior. The task is hard, and to move and develop in the right direction we need everyone onboard.
Adriana Martins is a Junior Data Scientist at Arenko Group, a software company that aims to decarbonise the electricity grid through an AI-powered operating system that can maximise the efficiency of energy storage and generation. She is also a Member of the Young Professionals Network at the Energy Institute’s London and Home Counties Branch. She is a first-class graduate of the Sustainable Energy Futures course at Imperial College London.
Watch the full debate here.
*International Energy Week took place in London as a hybrid (online and face-to-face) conference on 22–24 February 2022.
