COP26 Outcomes – our take on the implications for businesses
COP26 Outcomes - our take on the implicatons for business
Thought to be one of the most significant climate events of the last few years, COP26 brought together world leaders, activists, and delegates from all over the world to discuss solutions and plans to manage the ever-worsening climate crisis.
As is to be expected from such a hotly anticipated event, opinions on the final agreements are divided.
Before the conference started, a major step forward was made as delegates acknowledged that the agenda should work towards keeping global warming below 1.5°C due to greenhouse emissions, rather than 2°C – hailed by many climate scientists as a breakthrough in itself.
However, before the conference was even over, Greta Thunberg wrote on Twitter “this is no longer a climate conference. This is a Global North greenwash festival. A two week celebration of business as usual and blah blah blah.” National plans post COP26 would lead to 2.4°C of heating, according to an analysis this week by Climate Action Tracker. This is an improvement on Climate Action Tracker’s calculations following the Paris 2015 Climate Accord that estimated warming could reach 3.6°C.
The final set of agreements went through a number of iterations and – to the frustration of many – eventually removed the requirement to ‘phase out’ coal, instead opting for ‘phasing down’ at the behest of China and India. However, including any mention of reducing the use of coal remains a landmark step when it comes to global climate agreements. According to the IEA, 60% of electricity generated in China and India is from coal, while consumption in developed economies accounts for c.20% of the electricity mix in those countries
Whether officials at governmental level achieved enough or not is debatable but what was made clear through the surrounding public-, private-, and cross-sector pledges made during the conference is that net zero has become accepted as the goal. As the global consultancy McKinsey wrote at the closure of the summit – “it is clear that the climate commitments launched in Glasgow will reshape the agenda for global business…executives told us and our colleagues that they expect an acceleration of climate action across the real economy: at the system level, throughout industries, and within organisations.”
With that in mind, we sum up COP’s key agreements and what they mean for business:
A planned scheme to cut 30% of current methane emissions by 2030, confirmed by over 100 countries
Countries are being requested to reveal their national plans to reduce greenhouse gas emissions, at a much faster rate than previously demanded. Frustratingly, China, Russia and India have not yet joined the agreement.
What this means for business:
1: businesses will increasingly be legally obliged to outline credible, scientifically based plans to achieve net zero. UK chancellor of the exchequer Rishi Sunak reiterated at COP26 that the Treasury would require UK-listed companies to release net-zero plans by 2023. The trickle down for this is two -fold. Eventually all companies – regardless of size - may be required to release similar plans. Secondly, small suppliers will inevitably become swept up in carbon reductions plans of listed companies’. As large companies grapple with their scope 3 emissions (simplistically put, all indirect emissions that occur in a company’s value chain), small organisations wishing to work with them will have to have their own carbon neutrality plans in place as an entry to doing business.
2: greater pressure on larger companies to concentrate on their scope 3 emissions provides a golden opportunity for smaller companies to present themselves as solutions. Small to medium-sized businesses account for almost 50% of UK business emissions; as demand increases for products and services with low emission intensity, those of us already involved in greener product solutions and with one eye firmly fixed on our environmental impact are exactly the part of the supply chain larger companies will be looking to work with.
3: there will be a real consolidation of standards and reporting mechanisms as companies are required to provide tangible evidence on how they are delivering against carbon commitments.
A deal signed by over 100 countries to end deforestation by 2030 with £14bn in public and private funds already pledged to achieve the goal
What this means for business: most obviously, very sector specific restrictions on the construction/furniture and pulp and paper sectors, while the meat industry (a significant contributor to forest loss) will need to adjust given its outsize contribution to forest loss. Reduced access to virgin timber will increase demand for recycled and secondary sources of wood – this should result in a real pick up in interest for circular design products and sustainably sourced wood from managed forests.
450 financial organisations, with shared financial control of $130 trillion, have agreed on their responsibility to help accelerate the transition to a net-zero global economy
The financial sector will be one of the deciding players in the transition to net zero. The first week of COP included a dedicated Finance Day chaired by the former Governor of the Bank of England, Mark Carney, and the business coalition known as GFANZ (Glasgow Financial Alliance for Net Zero) whose members together are responsible for over $130tn of assets. The group has committed to invest in innovative technology and infrastructure solutions for both climate change and climate adaptation.
What this means for business: Greater capital channeled towards low-carbon infrastructure (with a particular emphasis on the developed world) and more willingness to invest in cutting edge, untested technology. Technology will be central to reaching global emissions targets but while there is plenty of press attention on innovations that don’t yet exist, the development and scaling up of existing technologies will be critical, particularly in renewable energy generation and storage. More broadly, this further confirms the evident direction of travel in the finance sector, whereby businesses that can evidence strong environmental credentials and have a positive impact are better placed to attract capital at a lower cost.
The US and China have announced a joint pledge to boost climate cooperation over the next decade, collaborating on a range of issues, such as methane emissions, transitioning to clean energy, and decarbonisation
The two super powers and giant emitters came together to issue a joint climate announcement recalling their ‘firm commitment to work together’ to keep emissions below 1.5°C. There was no real detail on how they would work together to achieve this but no summary of COP26 outcomes would be complete without mention of this potentially game changing agreement.
What this means for business: The implications for business are unclear at this stage. Very speculatively, we hope it will mean an easing of Sino-US tensions, possibly easier access to the Chinese market for low carbon technologies and a general scaling up of climate related collaboration as markets and supply chains pull together towards a globally accepted standard. This further reinforces the need for all businesses, irrespective of size, to consider their own environmental footprints in order to stay competitive in the global marketplace.
For more, our COP26 primer explains the main aims of the conference and why expectations were so high. We have plenty of other resources to put this into the broader international context, explain sustainability a little better or do your part from home.