The Cost of Inaction 2024

The green advantage can still exist for those who act FIGURE 20 24% of talent seek sustainabilityEasier hiring, retention +4%-70% CAGR of sales growth for “green” products +36% Median upside in price premiums across 35 CPG sub-categoriesHigher revenues-18 bp WACC for top environmental performersCheaper financing +2-6 pp EBITDA margin after EU carbon border tax2 for companies abating 55% of emissionsLower regulatory risks ~10% of emission reduction with cost optimization1Save cash and carbon 1. Abatement level for cost optimization without considering any carbon price. 2. Based on a €75/tCO2e carbon price assumption for 2030 . Note: CAGR = compound annual growth rate, CPG = consumer packaged goods, WACC = weighted average cost of capital, pp = percentage point, bp = basis point (0.01%). Sources: 2023 BCG/The Network/The Stepstone Group proprietary web survey, IEA World Energy Outlooks (2016-2023), European Environment Agency, Statista, Plant Based Foods Association, IEA Global EV Data Explorer, Our World In Data, NYU Stern Centre for Sustainable Business, EU announcements, LSEG Data & Analytics, Capital IQ, BCG benchmarks, BCG analysis. 4.2 In heavy industry, climate leaders play a long-term game While consumer products can bring sustainable offerings to market in a few years, leaders in hard-to-abate industries such as steel and aviation operate on longer timeframes, often collaborating with value-chain partners and governments to scale-up game-changing solutions. For example, the Swedish steel company SSAB recently reached a milestone in its years-long effort to bring green steel to the market. In April 2024, the company announced the next phase for its HYBRIT partnership with miner LKAB and energy company Vattenfall: construction of a fossil-free mini-mill in Lulea, Sweden, with a start-up planned in 2028. Formed in 2016, the partnership is already producing steel for customers such as Volvo Group, positioning SSAB as a European green steel leader as it prepares for future regulatory and market demands. In aviation, Airbus expanded its sustainability efforts in 2024 by becoming the anchor investor in a $200 million fund for sustainable aviation fuel solutions. The company aims to decarbonize the sector with clean hydrogen, targeting the first hydrogen- powered commercial aircraft by 2035, while building a green hydrogen network in the Asia-Pacific region.57,58 These investments are key to staying competitive and securing the industry’s future in a low-carbon world. The Cost of Inaction: A CEO Guide to Navigating Climate Risk 34