How Are Latin American Companies Progressing Toward Decarbonization?

Digitization and automation are the fastest and most efficient routes toward reducing a company’s carbon emissions, according to experts consulted by Bloomberg Línea

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Bloomberg Línea — One of the main goals set at COP21 in 2015 was to limit the global average temperature increase to below 2°C, with respect to pre-industrial levels, and to increase efforts to limit that global temperature increase to 1.5 °C in the second half of the current century, although some reports indicate that this may not be met.

And one of the most frequently mentioned and implemented ways to achieve these goals, despite record global temperatures in 2023, is decarbonization.

“Decarbonization is a fundamental concept in the field of energy and the environment. It refers to the reduction and gradual elimination of carbon emissions and other greenhouse gases generated by the various activities carried out by companies, with the aim of mitigating climate change and achieving a more sustainable and resilient economy,” Javier Ortiz, president for Ecuador, Venezuela and Colombia at Schneider Electric, told Bloomberg Línea.

A key step in this process is to reduce dependence on fossil fuels and promote the use of cleaner and renewable energy sources in operations, such as the use of solar, wind, hydroelectric and geothermal energy, which implies for governments and companies a transition towards efficient and sustainable energy systems, as well as the promotion of technologies and practices that minimize such emissions, he added.

A report by the UN Intergovernmental Panel on Climate Change noted that limiting global warming to 1.5°C requires global greenhouse gas emissions to peak by 2025 and be reduced by 43% by 2030.

“It seems clear that the commitments made by states are going to have a very significant impact on the business world. It is simply not possible for any state to achieve these objectives if its business fabric does not move forward along the same lines,” wrote Alberto Castilla Vida, Alberto Andreu Pinillos, Isabel García Tejerina and Elena Fernández of EY Spain in a paper.

According to Ortiz, reducing the carbon footprint remains a challenge and is “the first step”.

At the same time, companies must consider a number of factors:

  • Where to invest, what adaptations to make and what changes are most important
  • For a company it is essential to understand how to structure the process of gradual reduction of greenhouse gas emissions, involving the adoption and expansion of renewable energy sources to enhance solar, wind, hydroelectric and geothermal energy, as the cleanest and most sustainable alternatives to fossil fuels
  • It is vital to invest in infrastructure and technologies supported by Artificial Intelligence, the Cloud and Machine Learning, for control and monitoring in buildings, and thus reduce energy consumption or diversify it to be more sustainable
  • With digitization, strategies that encompass greater connectivity and computing capabilities are adopted, being an essential factor to achieve decarbonization goals. This translates into improvements in energy efficiency, circularity, resilience and security

Colombia, among LatAm’s leaders in progress toward decarbonization

This year’s report by consulting firm EY, for which more than 400 company directors from different industries were interviewed, showed that Colombia is among the countries that have made the most progress in the sustainable agenda in the region, with approximately 58%.

For Ortiz, the decarbonization of the economy “is a mega trend encouraged by both public policies and the private sector”.

In Latin America, Argentina leads the way in terms of organizations making progress in sustainability, followed by Colombia (32%), Brazil (28%) and, in fourth place, Mexico (21%), according to the study ‘Sustainability on the agenda of Latin American leadership’, published by SAP.

But the president for Ecuador, Venezuela and Colombia of Schneider Electric warned that digitization is the first step for companies to achieve their decarbonization goals.

The EY report concludes that the most mature sectors in decarbonization, in Latin America and in the world, are manufacturing, retail, as well as energy and hydrocarbons, “which indicates that an important transformation is taking place in sectors where change was previously seen as impossible,” said Ortiz.

The Paris Agreement includes 197 countries, which have at least one law or policy on climate change, according to Ortiz, who noted that there are more than 1,5000 climate laws and policies worldwide, a considerable advance, as this figure reached only about 60 in 1997.

“Of the 35 countries in Latin America and the Caribbean that have ratified the Paris Agreement, only 7 countries (Argentina, Brazil, Chile, Colombia, Mexico, Paraguay and Peru) have presented a Framework Law on Climate Change (LMCC), which serves as a comprehensive and unified basis for climate change policies, and addresses multiple aspects and areas for climate change mitigation and adaptation, as an example for the other countries,” he explained to Bloomberg Línea.

But companies have more to do

Decarbonization seeks to reduce carbon emissions and combat climate change, which implies the adoption of adaptation and resilience measures in the protection of natural ecosystems, the strengthening of critical infrastructures and the implementation of policies that promote sustainability and equity.

One of the key steps, after digitization, is to adopt renewable energy sources and cleaner technologies in various sectors, as they are a vehicle that contributes not only to mitigate extreme weather events, but also promotes job creation in different sectors, “generating economic opportunities and a more sustainable future for the next generations”, in the words of Ortiz.

Likewise, electrification, increasing the efficiency of existing infrastructures through digitization and automation, will be one of the most important levers in the next decade, since for many organizations it is the fastest and most capital-efficient way to reduce emissions.

Finally, he emphasized the “urgency to address climate change and reduce carbon emissions”, which implies not only investment in infrastructure and technologies, but also in digital consulting services, which help companies in their decarbonization process.