Scope 3 Emissions: Bain & Co Explores Net-Zero Dilemma

Bain & Company's latest study reveals growing pessimism among energy sector executives regarding net-zero targets, with significant implications for Scope 3 emissions.

Its survey, conducted during and after COP28, provides insights into the industry's decarbonisation prospects and the challenges faced in addressing indirect emissions across the value chain.

Mounting scepticism on net-zero timeline

Bain & Co's study reveals a sharp increase in executives doubting the achievability of net-zero carbon emissions by 2050. A staggering 62% now believe the goal won't be reached until 2060 or later, up from 54% in 2023.

The shift in sentiment reflects the complex nature of reducing Scope 3 emissions, which often constitute the largest portion of a company's carbon footprint.

Financial viability and consumer demand: Key Scope 3 hurdles

Executives cite several obstacles to achieving net-zero targets, many of which directly impact Scope 3 emissions:

• 70% identify customer unwillingness to pay higher prices as a major challenge, a 14% increase from 2023.
• High interest rates and inconsistent policy frameworks complicate investments in Scope 3 reduction initiatives.
• A 500-basis-point rise in the cost of capital could increase the annual revenue required for decarbonisation projects by up to 50%.

Michael Short, Partner at Bain & Company in Energy and Natural Resources, observes: "The pace of the energy transition looks to be slowing as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world."

Regional variations in Scope 3 reduction efforts

The report highlights geographical differences in clean energy investments, which have implications for Scope 3 emissions:

• North America is considered the most attractive region for energy transition investments, with 79% of executives ranking it above Europe (65%).
• Middle East, Asia-Pacific and Latin American executives are more optimistic about transition-oriented growth businesses contributing to profits by 2030.

Technology's role in addressing Scope 3 emissions

While generative AI is expected to impact businesses significantly by 2030, its role in reducing emissions, particularly Scope 3, is viewed sceptically:

• 65% of executives anticipate Gen AI will significantly affect their businesses by 2030.
• AI's potential in directly addressing decarbonisation challenges, especially in Scope 3, is limited.
• Companies focus on AI applications with shorter paths to ROI, such as maintenance and supply chain improvements.

Scope 3 challenges in 2025

As 2025 begins, the energy sector faces continued challenges in addressing Scope 3 emissions. While progress has been made, such as at COP29, the overall sentiment remains cautious.

Bain & Company concludes: "The longer that executives on the front lines of the energy transition grapple with the challenges of implementing decarbonisation plans, the more sober they're becoming about the transition's practical realities."

The sobering outlook highlights the need for innovative solutions and collaborative efforts to tackle the complex issue of Scope 3 emissions in the journey towards net zero.

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