Five key takeaways from COP26 for businesses
What actually happened at COP26? On one hand, we have heard positive reports of progress made, while on the other, we know the world is still some way off being in accordance with the 1.5°c Paris Agreement target. What should business take from the Glasgow accords, while looking ahead to Cairo for COP27? We have broken down our key findings here.
- Businesses played a larger role at COP26 than in previous COPs
Business was visible as never before, and rightly, given its role in producing global GHG emissions, and its essential role in reversing the trend. Indeed, U.S climate envoy John Kerry may have put it best as:“…for the first time, and in a massive way, the private sector is at the table and, frankly, leading in the way that some governments are not”. This leadership can be exemplified by the private sector announcements made such as the Glasgow Financial Alliance for Net-Zero, GFANZ, which saw over $130 trn of private capital being channelled towards a net-zero economy[1].
Clearly announcements and pledges are not enough to meet any goal, however it is encouraging to see businesses taking more of the driver’s seat towards climate action than ever before. Part of the evolving private sector response has been driven by markets as investors, consumers and governments signal that business ought to play their role – or face scrutiny, divestment, changes in demand, or regulatory costs as a result.
- Net-zero is the new normal for businesses (finally) – now is the time to put plans into action
The runup to COP26 saw numerous corporate initiatives crop up which provide guidance, resources, and collaboration opportunities for companies to achieve net-zero. For instance, the Science-Based Targets initiative, SBTi, who set guidance for businesses to reach net-zero according to the best available science has already seen 2000 businesses sign-up as signatories. In addition, the UN Race to Zero campaign, a coalition of cities, regions, businesses, investors, and higher education institutions already has over 3000 businesses and over 170 of the world’s biggest investors as supporters.
It is safe to say that we are entering a new normal when it comes to net-zero. However, relatively few businesses have a concrete strategy to reach net-zero on an appropriate timeframe. Consequently, those businesses that do are able to gain a competitive advantage and to benefit from the most creative and cost-efficient ways to achieve net-zero.
- Cross-party and sector collaboration is needed now more than ever
COP26 saw an amalgamation of private, public and citizen presence on numerous debate tables within the Green and Blue Zones. The science is clear: whether you are a business, government or citizen, all are vulnerable to climate change – it will not discriminate. As a result, it is now more important than ever for cross-party and cross-industry collaboration to build up economies of scale and knowledge-sharing towards tackling climate change.
The need for scaling up collaboration between the public and private sector was signalled at COP26. For example, the UK Government acknowledged the importance of scaling up effective private sector finance to meet the $100 bn per year climate finance goal, already behind schedule. In addition, global companies outlined the importance of radical collaboration and investors collaborated to define ways to curb deforestation within the commodity supply chain.
- Investing in adaptation and resilience will safeguard your business and the people it serves
We are living in a world hotter than it has been in 125,000 years, meaning that everything we do is in a climate different than any general period of human history. Scientific modelling during COP26 suggested that with the current pledges we are on track for between 1.8C and 3.6C of warming by 2100. Given that global GHG emissions are continuing to increase, even a sharp sudden decline in emissions will mean we are locked-in to significant uncertainty and volatility to such effects as extreme weather events or heavy flooding. Business must therefore act to mitigate the worst effects of climate risk by investing in adaptation and resilience measures throughout their value-chain.
Physical risks from climate change can affect companies through supply-chain disruptions or by negatively affecting their workers or consumers livelihoods. By building greater resilience, companies can reinforce confidence in their ability to protect people at the heart of their business.
- Eco-anxiety among workers is real and will only increase
The nuclear arms proliferation during the Cold War created significant anxiety among people due to presence of an existential threat. The end of the Cold War brought relief from this persistent yet uncertain nuclear threat and an easing of anxiety felt by many for decades.
With climate change, a new age of ‘eco anxiety’ is affecting people, especially young people. COP26 saw an array of young activists from Extinction Rebellion to Greta Thunberg’s Fridays for Future walk the streets of Glasgow and beyond to call for greater climate action. The difference between nuclear anxiety experienced in the Cold War and modern-day eco-anxiety is that the Cold War ended as soon as those in power chose to do so; however with climate change, the anxiety may yet increase in the years to come.
As a result, businesses should bear in mind their most valuable resource, i.e. their workers. A renewed approach to worker health and wellbeing can include efforts to channel eco-anxiety into positive, creative and innovative climate solutions – big and small – engendering a sense of meaning and power in the face of this serious global challenge.
While there will no doubt be additional, more specific takeaways for business going forward – especially as efforts shift to COP27 in Cairo and the newly-agreed pledges come formally under scrutiny – these five themes suggest a shift in mindset and the start of a new phase of collaboration.
We’d love to hear more about how your business is approaching its responsibility as part of this movement. Get in touch with Ilkka.Saarinen@sancroft.com or Judy.Kuszewski@sancroft.com to talk.
[1] Membership of GFANZ increased 25-fold since April 2021 to include 450 firms from 45 countries.