Net Zero Business Models

5THE FOUR PATHWAYS TO NET ZERO: AN INTRODUCTION

“The world has never done anything quite this big.”¹

—Bill Gates

Transforming a company’s business model to achieve commercial success in a net zero world is a complex process. A company must address many issues, including the risks related to climate change and managing the transition to a net zero economy. Larry Fink, CEO of BlackRock, points out in his 2022 letter to CEOs that “delivering on the competing interests of a company’s many divergent stakeholders is not easy.”²

The six chapters in Part II outline four strategic options, which we call “Pathways,” to achieve a net zero business model. These strategic options should help executive management and boards determine their net zero strategies, emissions‐reduction targets, and net zero transition plans required to achieve a net zero business model. Although all four strategic options share the common goal of achieving net zero emissions, the role the company’s business model plays in achieving the overarching objectives of net zero emissions and commercial success is the differentiating feature between them.

Since the transition to net zero will require significant capital investments, the minimum threshold for commercial success for each Pathway is that the company’s financial returns on invested capital exceed its cost of capital, and thus generate a positive economic profit.

The Pathway to net zero is different for established companies that have existing products, services, ...