In March 1995, the first Conference of the Parties (COP) to protect our planet was held. 2021 marked the 26th year of COP, where Italy and UK joined hands to host the COP 26 summit from November 1st – 12th in Glasgow.
Outcomes of COP26
In line with the 5-year review plan, delayed a year by the pandemic, the COP 26 was a chance for countries to review and update members’ plans regarding reducing carbon emissions. It’s pertinent to note that the commitments made in Paris 2015 did not come close to limiting global warming to 1.5 degrees Celsius, and the window to achieve this goal is ending. This prompted the goals set forth in COP 26.
Some of the key outcomes of COP 26 include:
- Reduce carbon dioxide emissions to half by 2030
- Reach net-zero emissions by 2050
- Halt and reverse deforestation by 2030
- Align private sector goals set out in the Paris Agreement 2015
- End sales of internal combustion engines by 2035
While companies are not formally a part of the COP, this year’s summit saw a swarm of executives and their consultants. COP 26 placed a greater onus and trust in business as compared to states to fix the climate crisis. Here, we will highlight the role that businesses can play in achieving each of the goals, and how these should ideally intertwine with the Environmental, Social, and Corporate Governance (ESG) goals of companies and governments.
Here are a few ways COP 26 outcomes will affect and impact businesses:
- New carbon market rules will drive investment decisions
- Reiteration of 1.5 degrees Celsius target pressures companies for better Net-Zero plans
- Greater scrutiny of fossil fuels could impact industry decisions
COP 26 has made Net Zero a priority for businesses. Experts have understood that the commitments made in the Glasgow meeting will reshape the agenda for businesses all over the world. This essentially means that net-zero commitments will overshadow other mechanisms and steps towards decarbonization. Though it may present challenges in terms of adapting to new strategies and a lower dependency on tried and tested resources, it also presents several opportunities.
Challenges to get to Net-Zero
Cost – Despite the precedented savings, going green will require enterprises to first spend money. Most businesses are still grappling with the blow their company received after the COVID-19 pandemic, and it may not make sense for them to allocate their limited profits to the COP 26 goals. Fortunately, the initial investment will be meager for most organizations. Executives who switch to more renewable suppliers can not only reduce emissions, but also attain cost-effectiveness.
Recording Carbon Impact – About 30 per cent of companies said it is difficult to measure their carbon footprint. Businesses that fail to do this will naturally lose that competitive edge, making it harder for companies to set realistic goals to go green. This is the time for IT executives to try out new technology, like carbon calculators, that can help businesses measure close to accurate carbon footprints to set and achieve their goals for Net Zero.
Supply Chain Emissions – Most companies find it hard to control the carbon emissions made outside of their business operations – most likely supply chain emissions. Creating a greener supply chain is not easy, and procurement executives may struggle with this. IT executives can adopt steps to closely work with their supply chains and procurement partners. While this may take time and effort, IT executives should start considering and experimenting with solutions that produce fewer emissions.
The role of IT
COP 26 gave a very clear message to companies that they need to reassess their business strategy as well as their carbon footprint to gain monetary rewards and cut back on losses. While Net Zero may seem like a huge, unattainable feat right now, IT executives and their peers should begin to tackle this task right away. This can only be done by incorporating climate in your business strategy, such as:
- Building emission-free value and supply chains
- Updating the company’s mission statement to reflect your commitment to the 1.5 degree Celsius goal
- Analyzing your business portfolio to phase out any solutions or products that increase emissions
- Innovating with the help of IT to create more climate friendly products and services
Companies can make more targeted efforts to track and record their carbon footprint by analyzing three areas: emissions created directly by the organization, through the supply and value chain, and through electrical consumption.
Businesses can use the increasing prices of carbon emissions to their advantage, creating and innovating more environment-friendly products that generate carbon credit. Digital technology has the scope to cut back on emissions. In fact, experts predict that, with the proper technology in place, the ICT industry can reduce greenhouse gas (GHG) emissions that exacerbate climate change by a remarkable 1.34Gt as compared to usual business strategies by 2030. This could be achieved through automation of processes, especially in manufacturing and agriculture.
Companies should create or review their sustainability policy. With an increased focus on fossil fuel consumption, consumers and workers alike are becoming more aware of their company’s carbon footprint. In fact, 24 per cent of employees said they would refuse to work for a company with a poor sustainability record. Businesses can leverage artificial intelligence (AI), which has the potential to accelerate the achievement of Sustainable Development Goals (SDG), along with smaller steps like recycling paper, using environmental-friendly cleaning products and so on.
How ESG strategies benefit companies
Building an ESG strategy is no longer just beneficial. Rather, it’s imperative for companies and governments to transition towards a low-carbon and sustainable economy. Businesses can create sustainable value for stakeholders to attract investors. When they initiate environmentally friendly campaigns, it will boost reputation and potentially expand the company’s scope into new markets with the new goals set forth (for example, a green transport agenda). Companies can also mitigate regulatory compliance risk by incorporating the agenda of COP 26 in the company’s ESG program.
Conclusion
What’s more important for companies to understand is that ESG is no longer a niche but a bar they need to compete with. Since COP 26, the involvement of businesses in the quest for a safer planet has brought companies under scrutiny. As a result, it is vital that they create an ESG program and integrate the latest policies and regulations in their ESG programs to further the end goal of a net-zero economy.