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COP21 Climate Deal: What’s Next for Business

business meetingThe world’s 195 countries signed a historic climate agreement this weekend in Paris at COP21. And although the agreement doesn’t bind businesses to making and reporting on emissions cuts, it will require ambitious efforts by private corporations, according to COP21 attendees.

“At COP 21 businesses showed they supported an ambitious agreement and were ready to step up and make bold commitments to tackle climate change,” Kevin Moss global director business center, World Resources Institute, told Environmental Leader. “These commitments ranged from rallying behind carbon pricing and setting science-based emission reduction targets to responsible corporate engagement in policy and major investments in renewable energy. The momentum this created contributed to the ambitious agreement that was reached in Paris. In 2016 businesses need to reinforce their resolve to lead on climate change by continuing to turn their commitments into action.”

In other words: now the real work begins for companies.

The private sector played a leading role in the climate talks. This included commitments from more than 5,000 global companies that together represent over $38 trillion in revenue.

Also in Paris the Science Based Targets initiative announced that 114 companies — including Ikea, Coca-Cola Enterprises, Walmart, Kellogg and Dell — committed to set emissions reduction targets in line with what scientists say is necessary to keep global warming below the threshold of 2 degrees Celsius.

The Science Based Targets initiative, a joint effort of CDP, WRI, WWF and UN Global Compact, works with companies to set science-based emissions targets and only approves corporate targets that meet its strict criteria.

However only 10 companies’ targets have been approved: Coca-Cola Enterprises, Dell, Enel, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony and Thalys. In addition to the remaining 104 that have pledged to set and seek approval for their science-based targets, hundreds of other of companies publish annual sustainability reports that cite emissions reduction targets and 8,000 companies have signed the UN Global Compact, which asks its members to address and report on a range of ESG issues.

Reporting on this discrepancy, The Guardian says: “Companies, while eager to save money by becoming more energy efficient, remain reluctant to spend money on low-carbon energy so long as fossil fuels remain cheaper. Put simply, the environmental imperatives and the short term business case are not aligned.”

Plus, the Paris Agreement set the bar for climate change action even higher, by aiming to keep global warming “well below” 2 degrees Celsius and striving towards 1.5 degrees Celsius above pre-industrial levels. This will require major investments in renewable energy and clean technology.

The climate deal sends “a very strong signal to business and investors that there is only one future direction of travel to reduce emissions in line with a 1.5 degree pathway,” said Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, whose members manage assets valued at over 13 trillion euros, in a statement to the Washington Post. “Investors across Europe will now have the confidence to do much more to address the risks arising from high carbon assets and to seek opportunities linked to the low carbon transition already transforming the world’s energy system and infrastructure.”

Unilever chief Paul Polman says keeping global warming below 2 degrees Celsius presents an opportunity for business. “Achieving a zero emissions economy is the greatest business opportunity of the century,” he says, adding that the “consequences of this agreement go far beyond the actions of governments. They will be felt in banks, stock exchanges, board rooms and research centers as the world absorbs the fact that we are embarking on an unprecedented project to decarbonize the global economy. This realization will unlock trillions of dollars and the immense creativity and innovation of the private sector who will rise to the challenge in a way that will avert the worst effects of climate change.”

The next step for businesses is to decrease their own emissions, says Tom Murray, vice president, Corporate Partnerships Program at Environmental Defense Fund.

“The climate deal is a strong step that signals to business that the nations of the world are serious about reducing the impacts of climate change,” Murray told Environmental Leader. “Business has played a key role in pushing for a strong climate agreement, and the outcome shows the power of their support. But with the ambitious deal comes the hard work of making this agreement a reality. The next steps for companies are to continue to decrease their emissions, to continue to innovate and, crucially, to work toward a low-carbon world. In the United States in particular, business support for the Clean Power Plan will be key to helping the US fulfill its commitments under the Paris Accord.”

Photo Credit: business meeting via Shutterstock

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