Decarbonisation Case Studies: Adidas, ArcelorMittal, Mitsubishi

2/9/20233 min read

When firms decarbonise on a shallow level, there is little or no transformation of the output, technological processes, and structures which lie at the heart of their business (Newell 2020).

Deep decarbonisation, on the other hand, requires companies to stop selling energy-intensive goods, apply different forms of technologies, and transform internal mechanisms and operations (Newell 2020). It is a profoundly disruptive paradigm change involving, ideally, “a more fundamental shift in the way value is created, profits generated and shared and companies governed” (Newell 2020:9).

After considering the decarbonisation strategies of Adidas, ArcelorMittal, and Mitsubishi, in my view, while all three strategies are shallow, of the three, Mistubishi’s strategy confronts the climate crisis most directly.

Adidas is in the business of the design and manufacture of footwear, apparel, and sport-related accessories. They intend to become climate neutral by 2025, cutting absolute greenhouse gas emissions by about one third by 2030. This is to be achieved by monitoring their environmental footprint, collaborating and building capacity with their suppliers, using more sustainable raw materials, lowering resource consumption and waste production across their sites, and disclosing climate- and carbon-related information.

Applying Newell’s framework, Adidas’ strategy lies on the shallow end of the spectrum because its core suite of products remains the same. While there appears to be a drive toward cleaner and more climate-friendly processes and greater accountability, in my opinion, it is business as usual with less emissions. However, “[we] need transformative thinking, and lower aggregate consumption, rather than simply more efficient or alternative technologies” (Newell 2020:8). More depth in Adidas’ strategy could potentially be achieved if, for instance, they were to incentivize the widespread recycling or donation of their own products, thereby scaling down production – and all associated emissions – in absolute terms.

ArcelorMittal, a steelmaker, produces steel from iron ore and other raw materials. They pledge to cut carbon emissions by 25% on a group level by 2030 and reach net zero by 2050. This is to be achieved by using natural gas-based firing technology versus a blast furnace (from the BF-BOF (Blast Furnace-Basic Oxygen Furnace) route to the DRI-EAF (Direct Reduced Iron-Electric Arc Furnace) route), using more scrap, buying carbon credits and offsets, and entering into renewable energy power purchase agreements.

Similar to Adidas, ArcelorMittal’s principal business model remains untouched in this shallow strategy. They continue to manufacture steel, but with less reliance on fossil fuels and will engage in the negative emissions sector more extensively. There is a brief mention of carbon capture and storage, without a firm commitment to integrate that technology in their manufacturing processes. Steelmaking accounted for almost 9% of the world's anthropogenic carbon dioxide emissions in 2020 (World Steel Association). There is hence a pressing need in the industry not only for the large-scale development and adoption of carbon-light manufacturing processes (to the extent possible), but also to capture and sequester emissions at their source in the interim.

Mitsubishi Corporation is a multinational trading company which is active in the sectors of energy and power, industrial materials and infrastructure, minerals, automotives, food, and urban development. Generally, Mitsubishi intends to halve their greenhouse gas emissions by 50% by 2030 and achieve net zero by 2050 by investing in “Energy Transformation” and by using digital technologies. In its energy and power group, for example, there are initiatives toward switching from coal to oil; bringing hydrogen to market; growing the ammonia fuel, biofuels, and clean energy businesses; and the recycling of carbon and plastic materials.

Indeed, Mitsubishi’s plans involve greater leaps and deeper dives, and can be achieved at an accelerated pace precisely because of the circumstances set out in Newell (2020): “where a new and well established technology simply substitutes for an old one”; “where substitute technologies have been previously used in other markets”; and “where the technologies offer high and clear benefits for adopters” (Newell 2020:6). It appears that the business model of their power and energy group is experiencing a seismic shift away from their traditional fossil-based origins and toward renewable and clean sources of energy.

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