Mobilising demand for low carbon materials to achieve rapid industrial decarbonisation
On 24th May, Innovate UK, First Movers Coalition (FMC) and Cambridge Institute for Sustainability Leadership (CISL) co-convened a roundtable discussion to understand how demand for low carbon materials can rapidly decarbonise industry. The discussion centred on two key questions: why does demand matter and how can it be harnessed to decarbonise industry at scale and pace?
Why does demand matter?
Materials produced by the foundation industries are essential for modern civilisation and the global economy. In the UK, these industries employ 250,000 people, turnover £67.5 billion, bring economic prosperity to many UK regions while delivering materials that underpin other critical industries. However, these industries also account for approximately 15% of the UK’s annual CO2 emissions. Their decarbonisation is essential to avoid carbon leakage and import dependency as the UK economy transforms to achieve its climate neutrality target by 2050. Therefore, demand for low carbon materials produced by the foundation industries is key to delivering the targets and technology adoption rates assumed in various decarbonisation strategy documents.
The viability of every decarbonisation pathway depends on sufficient customer demand for low carbon materials across the value chains. At present, market demand (or market pull) for low carbon materials and products is not high enough to incentivise substantial investment in new low carbon innovation, or to scale up the demand for existing low carbon technologies. As outlined by Dr Sanna Markkanen (Research Programme Lead and Senior Analyst, CISL), one key finding in her research was the supply-demand catch-22. This refers to a situation whereby an upstream company does not have a large enough market demand to upscale the production of low carbon materials or the technologies to produce them, and downstream companies cannot risk investing in alternative technologies before they have a stable supply of upstream low carbon materials or products.
Research shows us that policy action has an important role in increasing demand for low carbon products, and supporting the contextual conditions needed to encourage the development and scale-up of innovative technologies in this area. In addition to government action, the wider public sector can play an important role in supporting private sector decarbonisation efforts by bringing companies together, facilitating dialogue and information sharing, and encouraging higher ambition. Innovate UK is uniquely placed to facilitate this collaboration, alongside other support, and such was the intention of bringing together the roundtable discussion at Innovation Zero.
How can we mobilise demand for industrial decarbonisation at scale and pace?
Over 90% of global GDP falls under net zero commitments, therefore there is a huge potential for translating that purchasing power into demand for low-carbon technologies. As described by Nathan Cooper (Strategic Climate Partnerships, Lead, World Economic Forum and First Movers Coalition), the First Movers Coalition leverages the purchasing power of 70+ companies to accelerate the adoption of net-zero technologies for the decarbonisation of heavy industry (steel, aluminium, cement and chemicals) and mobility sectors (aviation, trucking and shipping), as well as the critical enabling sector of carbon removal. The FMC coalition of companies creates early markets for innovative clean technologies across these sectors, facilitating demand-led innovation. For example, it was announced at Innovation Zero that founding members of FMC, Holcim, have committed to procure 1,000 electric trucks from Volvo up to 2030, representing the largest commercial order for Volvo electric trucks. Commitments such as these provide the clear demand signals for investment in innovation of low carbon technologies.
Innovate UK has recognised the opportunity and announced a pilot programme into demand-led innovation (focussed on low carbon cement and concrete), that is due to be launched later in 2023. This programme builds on existing projects in the field, such as Flue2Chem, which was outlined by David Bott (Chief Innovation Officer, SCI) in the discussion. The £5.4m Flue2Chem Project is spearheaded by Unilever and SCI, with 13 other organisations involved. The aim is to effectively create a new supply chain, taking waste gas from foundation industries and generate an alternative source of carbon for consumer products. Innovate UK grant funded projects can provide the catalyst for new developments and the platform to facilitate collaboration along supply chains to de-risk new technologies. In so doing, this develops the much-needed innovation skills in the workforce. However, it was clear from the discussion that there are still challenges with the amount of funding available, particularly compared to the US and EU and the investment required to scale up the range of low carbon technologies required to achieve the net zero commitments.
During the discussion, several end-users gave examples of where they are working with their supply chains to drive towards their sustainability goals. For example, Oliver Novakovic (Technical and Innovation Director at Barratt Developments plc), stated that they have mandated Environmental Product Declarations (EPDs) from their suppliers. In some other countries this is required, but not in the UK. As stated by Efi Tzoura (Innovation Manager, Ferrovial Construction), inconsistencies in geographies make it challenging, but they are working to overcome these. Digital product passports have been implemented in several EU countries but are yet to be adopted in the UK. These data driven systems can quantify and track carbon emissions, and other impacts, of a supply chain to target and demand improvements. It is important to be consistent in their application and encompass all aspects of sustainability to avoid unintended consequences or greenwashing. Although, as several participants stated, the perfect should not become the enemy of the good and delay implementation of these new approaches.
While companies are willing to support innovation in their supply chain, several stated that they cannot be responsible for the risk associated with scale-up of new technologies. The risk appetite dramatically decreases when it moves from R&D to procurement. The rhetorical question posed by businesses is: “if the customers are not asking for it, then why should they pay for it?”. This is why the supply chains need to work together to pass the demand signals along and drive innovation from the raw materials. According to Marcela Navarro (Chief Executive & Co-Founder Project X Global), funders and insurers are needed to facilitate the switch from innovation push to adoption of new technologies. Sustainability goals should be aligned to other priorities to create policies, both at a national and company level, that increase demand for low carbon materials. Policies to address national security or supply of critical materials, can be used to address sustainability.
Arguably incremental improvements to existing supply chains will not meet the sustainability goals of most organisations, let alone national targets. The adoption of more fundamental innovation is necessary to achieve the step changes required for rapid industrial decarbonisation. Through the targets, there is demand for low carbon products and materials which must be leveraged. Greater collaboration is needed along the supply chains, and with public bodies and financial organisations, to unlock the required investment to de-risk the development and adoption of new technologies. Some sustainability focussed organisations are leading the way but it is clear no one organisation can do this alone.
To find out more about the work Innovate UK is doing to support demand-led innovation for the foundation industries, contact Christopher Pilgrim.