| This week, the challenges and solutions that the global energy transition presents for business. Plus, how to strengthen employee purpose in an era of workplace turmoil, and Indra Nooyi, former CEO of PepsiCo, reflects on her tenure there and lessons learned. | | | | | Making the switch. New ways of heating our homes, fueling our cars, powering our planes: the switch to cleaner energy over the next few decades will take a monumental effort. As climate challenges proliferate, world leaders attending the UN Climate Change Conference are pledging to accelerate the world’s transition away from greenhouse-gas-emitting fossil fuels to renewables such as wind and solar. We have seen these pledges before, but there is new urgency about finding solutions, among governments and businesses alike. Our framework for cutting emissions to net zero describes nine critical areas for organizations to consider. | | Getting credit. Many businesses that are unable to reduce their emissions as quickly as they want can turn to carbon credits to reduce their carbon footprint. As a growing number of organizations commit to achieve carbon neutrality over the coming decades, we estimate that the carbon-credit market could be worth over $50 billion by 2030. To meet demand, the voluntary carbon market, which is currently fragmented and complex, will need to scale up. Registering projects and verifying and issuing credits digitally would help safeguard the market’s integrity and improve the credibility of corporate claims about carbon offsets. | | Barreling along. Oil and gas companies in North America and Europe experienced huge losses in 2020. Despite the challenges, many have set net-zero emissions targets and are decarbonizing their operations and value chains. To stay relevant, these companies should focus on building a more resilient core business. This means concentrating future investments on “advantaged” resources, which offer lower break-even prices and lower emissions intensity. Retiring the least productive, most carbon-intensive wells can also improve profitability and reduce emissions. | | Electric machinery. The energy transition will also pose significant challenges to the global machinery industry, since much of existing machinery is powered by engines that run on diesel fuel or gas. We find that transitioning to electric drives could put up to $60 billion in annual revenue at stake for construction machinery OEMs alone. In the longer term, however, greening the machinery industry may well have economic benefits along with environmental ones. Our analysis indicates that for heavy-duty machinery operated continuously, some battery-electric vehicles have already undercut the total cost of ownership of gas-powered vehicles by nearly 30 percent. | | A green grid. For electric-grid operators, the challenge will be staying flexible in the face of decarbonization. Although fossil fuels will continue to play a role in the energy system through 2050, it’s up to individual operators to manage the mix of power supplied by renewable energy versus fossil fuels. The call to lower emissions has increased usage of lithium-ion batteries and electric vehicles, which also affect demand- and peak-load profiles. As more people plug into the system, the grid of the future needs to be even more resilient. | | Fully transitioning to clean energy requires new technologies, a massive amount of capital, and the concerted effort of industry and government leaders. But the scale of the transition the world needs to make is heightened by the speed at which we need to make it. For organizational leaders taking on the challenge, the goal will be to create a future that’s sustainable, inclusive, and growing. | | |  | | OFF THE CHARTS | | How to fine-tune your machine-learning models | | Machine-learning deployments typically unfold in three stages: first comes development, in which developers build and modify systems; next is testing, when users try out features of the system; and last, production, when the system is fully operational and available to end users. Even when a company has high-quality data to train the machine-learning model, it might not be able to use the data during the earlier stages of design. To successfully work with machine-learning models, it's critical to match the right data set to the appropriate stage of production. | | | | | | | | | | Is work–life balance a myth? | | That’s why I use the term work–life juggling. It’s when you’ve constantly got multiple balls in the air and you hope nothing drops. It’s not easy for a stay-at-home mom who’s juggling so many home priorities. It’s not easy for a working woman without a family who’s also juggling other priorities—it could be an aging parent or a relative she’s looking after or a work environment that’s hostile. Everybody’s juggling all the time. | | When you include work, home, and children—if you put all three together—that’s a lot to deal with because everybody wants you full-time. Whether you like it or not, to hold your job at the senior level, you’ve got to work extra hard. At that level, it’s either up or out. To compete with others, and contribute, and be noticed is a tremendous investment of time and energy. That’s why the hope is that by the time you reach that level, your kids are already going to college, so you can have all the time to focus on the job. | | How is the corporate ladder for women different from the ladder for men? | | Women today are held to a different standard. They’re too loud or too soft. They’re too emotional or not emotional enough. They’re too strident, or they’re too weak or passive. Every possible badge is given to women. It’s disconcerting because you can feel it. You get these badges. You can see the looks among men when women dress a certain way. It’s the environment we live in, whether we like it or not. That ranges from every business event you go to, every social event you go to, and sometimes even in boardrooms. | | We have to stop that. We have to stop defining women versus the ideal worker of the past, who was a man. If you constantly do that, women are going to get a raw deal. We have to say the ideal CEO, the ideal worker, the ideal executive of today is whoever’s doing the job the best. We’re not going to constantly define them versus somebody else who’s our image from the past. | | Is there anything you wish you had done differently as CEO? | | I had a 12-year tenure as CEO. In the first six years, I was navigating through the [2008] financial crisis and creating a more international PepsiCo because we were more US-focused then. I was also addressing the North American bottling relationship, which was not particularly great at that time. The second set of six years was delivering performance from the expanding core—both geographically and from a product perspective. | | When you look at these two eras, I wish I didn’t have the financial crisis, and I wish I didn’t have the bottling crisis to deal with. Because so much more could’ve been done with the company. But I also realize that’s foolhardy. Every person goes through some sort of a crisis in their tenure as a CEO. My successor’s dealing with the COVID-19 pandemic now. | | The mark of a good CEO is knowing how to navigate through a crisis and constantly thinking about how to create a stronger company coming out of a crisis. As long as you have an eye toward the long term—as opposed to “How do I navigate for the quarter or for my duration as CEO and somehow come out looking good? I don’t care what happens to the company after me”—you’re OK. That’s what I was singularly focused on. | | — Edited by Belinda Yu | | | | | BACKTALK | | Have feedback or other ideas? We’d love to hear from you. | | | | | Did you enjoy this newsletter? Forward it to colleagues and friends so they can subscribe too.
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