Energy costs are embedded in facilities, transportation, manufacturing and product use. Energy efficiency and a shift to renewables drive lower costs. A World Economic Forum study done in collaboration with PwC found up to $2 trillion in annual savings (at current energy prices) is possible using existing technology and if measures to reduce demand were taken by the end of this decade. NYU Stern CSB’s analysis of the financial benefits for sustainable building design for Gundersen Health System, for example, found that energy retrofitting would yield $1 per square foot in energy savings and avoided carbon fees, and net zero building design would yield net $2 per square foot annually. Optimizing last mile delivery can also lead to energy savings and carbon fee reductions: Working with Cardinal Health on one supply chain route, NYU Stern CSB found optimisation would yield $254,000 in average annual savings. A circular approach can reduce greenhouse gas emissions and costs considerably: an automotive company reusing 2.5% of used car parts in Europe, recycling 10%, and paying to dispose of the rest, was netting $100 million annually in reduced costs and increased revenues, according to a CSB study.

Fossil fuel energy prices are volatile — and likely to become even more so. Companies that reduce their dependency on fossil fuels through energy efficiency and/or on-site renewable power reduce their exposure to price swings. For example, NYU Stern CSB found that a shift away from air transport to more ocean and road modes of transport, saved the apparel company Eileen Fisher an estimated $1.6 million annually in transportation costs by the fourth year of transitioning, and also insulated them against pricing volatility during COVID when air freight costs increased by 25-50%, especially between Asia and the US.

Global regulations, including in the European Union and California, require companies to report on their carbon emissions. While some countries have yet to enact similar regulations, and others, like the US, are delaying implementation at the federal level, the magnitude of climate-related risk is significant and growing, likely meaning more regulation in the future. In addition, companies risk losing customers. Brands and retailers are asking their suppliers to decarbonise to meet their own commitments and are increasingly including carbon specifications in their RFPs. For example, Apple is facilitating the transition of its direct manufacturing suppliers to 100% renewable electricity as part of its goal of being carbon neutral by 2030. Consumers are purchasing sustainable products in large numbers, and they and regulators are looking to make sure claims are authentic. Various jurisdictions such as the EU, US, UK, Australia and India, have active or proposed legislation that addresses false or misleading claims about environmental benefits. In the EU, penalties can amount to a minimum of 4% of annual revenue in the region per breach.

Government-imposed carbon fees can be as much as $159 per metric ton, according to the World Bank. Nearly 28% of global emissions are subject to some type of carbon pricing, and that percentage is growing annually. Governments generated $102 billion in revenue from carbon pricing fees in 2024. The EU has a carbon border adjustment tax, which will tax the embedded carbon of goods exported to the EU from elsewhere. Energy companies clearly have significant exposure, but agricultural and manufactured products, including packaging, generally have high levels of embedded carbon, often unmapped by the company selling the products. The emissions associated with AI computing needs are also significant and growing. PwC found that companies are emitting an average of 132 tons of CO2e per $100,000 in revenue, which would amount to 6.6% of revenue for a carbon fee of $50 per metric ton.

Companies investing in climate action are increasingly able to access lower-cost financing through green, social, transition or sustainability-linked bonds and loans. These instruments fall into two categories.

• Use of Proceeds (UoP) instruments: These green, social and transition bonds require that funds be directed toward specific environmental or social projects, with most supporting decarbonisation investments. Transition bonds are a relatively new mechanism designed to finance climate transition plans. These UoP instruments often benefit from a pricing advantage while also offering issuers access to a broader pool of investors and reputational benefits.
• Sustainability-linked bonds and loans: These instruments are not tied to specific uses of proceeds but are linked to achieving company-wide sustainability performance targets, such as reductions in greenhouse gas emissions. If targets are met, issuers typically receive a discount of around 25 basis points on interest rates. Some financial institutions are also beginning to charge a premium to companies — such as utilities — with high exposure to climate transition risk.

NYU Stern CSB worked with Capital Power, a Canadian-based utility, to assess the financial benefits of phasing out coal earlier than required by federal regulations. The analysis found that the company could realize cumulative net benefits of $189 million over nine years, driven in part by a reduced cost of capital.

Innovation that produces new products, processes or services can open up access to new markets and revenue streams. Reselling platforms such as eBay Pre-Loved and ThredUp upcycle and resell apparel. They have been successful at not only creating value for themselves, but also for brands by enabling access to new customers and revenue from reselling garments multiple times. B2B companies are developing decarbonisation solutions for their customers and suppliers. IKEA, which strives to use 100% renewable energy across its value chain, announced earlier this year that the share of renewable electricity in production of its products increased from 71% to 74% in its 2024 fiscal year. It has a program that helps its suppliers purchase renewable electricity via bundled frame agreements or power purchase agreements. It also uses logistics modeling and other technologies to help suppliers understand and reduce transport-related emissions by improving routing, load efficiency and mode shifts (air, rail, sea).²³

Consumer-facing products and packaging that reduce carbon footprints are also popular. To reduce its emissions, coffee brand Nespresso, has assessed the carbon footprint of its entire value chain, from the farmer to the cup. It works directly with farmers to reduce the impact of coffee cultivation and the Nespresso system uses a precise amount of ground coffee, water and energy to make one cup, which minimises food, water and energy waste. Aluminum from capsules and coffee grounds are recycled, helping compensate for the additional packaging used for portioned coffee.⁴⁵

The Canadian utility mentioned earlier was also projected to benefit from $41 million in increased competitiveness with customers over nine years due to customers making decarbonisation commitments and looking to reduce their scope 2 emissions through their utilities.

Measuring emissions according to the Greenhouse Gas Protocol has become a table-stakes expectation for many organizations. It’s important to know where your emissions are today as well as where they will be in the future if no further action is taken to reduce them. This view will help the organization understand the full magnitude of emissions reductions needed to achieve the targets they set.

There are many actions companies can take to reduce their emissions, and PwC has compiled an inventory of over 2,600 different levers in its Carbon Intelligence Hub.

A good starting point is to identify actions to reduce energy and fuel use through process and equipment optimization and building energy efficiency actions.

In addition to reducing energy use, organisations should look to convert remaining energy needs to cleaner energy sources by converting fossil-based energy sources to electric and tapping into renewable energy sources such as onsite solar or geothermal or by entering into a power purchase agreement for renewable energy.

For Scope 3 emissions upstream and downstream, organisations should explore how product or service design can reduce emissions through less carbon-intensive materials or less energy required to source, manufacture and transport them. Work with suppliers and customers to reimagine the design and to get these solutions adopted.

The finance and sustainability teams can work together to finalize the ROI for a range of conservative to more aggressive scenarios.

The team should estimate how much carbon each lever will remove, along with the capital and operating expenditures required, available tax credits and incentives and other financing options, and the potential upside and risk avoidance of each lever. They should also project the tangible and intangible benefits of the investment (e.g. energy cost savings, maintenance savings and improved productivity related to LED lighting).

The levers can be grouped into different scenarios to understand the breadth of actions needed to achieve different targets. The finance team should put in place the metrics to track the financial benefits (intangible and tangible) of the investment once made in order to improve future decision-making.

Equipped with a clear understanding of the full costs and benefits of different ambition levels, the team can seek leadership buy-in on the desired targets. This buy-in should include support from finance for the CapEx and OpEx needed, from tax to capture incentives, and from operations, R&D, and supply chain to commit to the actions needed to reduce Scope 1, 2 and 3 emissions to achieve the targets.

Once the ambition level is agreed upon, the team may need to develop a more detailed plan that outlines the governance, processes, KPIs and detailed near term actions needed.

Investors, regulators, customers and employees increasingly expect transparency and accountability. CEOs and CFOs who actively report on climate goals can signal strategic foresight, reduce reputational risk and strengthen stakeholder trust. Demonstrating tangible progress can also unlock competitive advantage in a market where climate performance is fast becoming a differentiator.