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Our Insights 30 Nov 2015

Does COP 21 Need Business More than Business Needs COP 21?

By Geoff Lye
A participant in London's climate change march holds up a placard near Hyde Park Corner with an appeal to the powerful at this week's COP21 Paris Climate Conference to finally take action on carbon emissions and climate change. Image © CC Alisdare Hickson via Flickr

A participant in London’s climate change march holds up a placard near Hyde Park Corner with an appeal to the powerful at this week’s COP21 Paris Climate Conference to finally take action on carbon emissions and climate change. Image © CC Alisdare Hickson via Flickr

As COP 21 gets underway, Geoff Lye considers the role of business to help deliver the decarbonisation needed to avoid breaching the 2°C threshold – the ultimate goal of the Paris climate talks.

In a statement by the International Chamber of Commerce to a ‘pre-COP’ in Paris earlier this month, a (diplomatic) plea was made that ‘The current minimal reference to business in the preamble text of the draft Paris agreement should be expanded to recognize what business expertise, experience and innovation can bring to elaboration of the Paris outcomes as well as to their implementation’.

Indeed, a review of the full draft text going into COP 21 uncovers minimal references to the private sector. To be precise, there are just eight separate references; these, at best, position private sector contributions as welcome rather than critical. As a long-time observer of the role and interactions of business at previous COPs, I find the current position unsurprising but disappointing.

There are, of course, good reasons for the UN and civil society to be cautious in embracing the business community on the journey to a carbon free economy. Two recent reports1 highlight the scale and impact of corporate lobbying in creating public confusion around climate science and in battling to dilute regulatory action. And we have seen cynical strategic reversals by oil majors like BP and Shell who more than a decade ago committed to shift from fossil fuels into sustainable energy systems, but – with a simple change of CEOs – backtracked on their climate commitments.

Even a recent declaration by business leaders through WEF encouraged ‘governments to set science-based global and national targets for the reduction of GHG emissions and the development of alternative energy sources’. Interestingly, the UNFCCC process, for all its failings, has firmly rooted its overall targets in the biggest scientific assessment process ever. Yet very few businesses – including the majority of the signatories to the WEF declaration – currently follow their own declaration by setting science-based climate mitigation goals for their companies to align with avoiding 2°C of global warming2. This is part of a theme of recent years – particularly by carbon intensive businesses – to push responsibility onto regulators.

While I share all these concerns, I continue to argue for unilateral action by the private sector in the belief that, if the best of the private sector’s climate strategies and goals were followed by the rest, we would not need regulation to avoid breaching the 2°C threshold. I was commissioned to develop this theory in a chapter entitled ‘Business as low carbon transformation driver’ for a book on climate change. To quote from the book: ‘While policy and regulation will progressively ‘push’ business in [the decarbonisation] direction, only a combination of unilateral (voluntary individual company actions), collaborative (sector and cross-sector joint actions) and system-wide voluntary actions (coalitions of corporate, NGO and/or governmental actors) will deliver the speed and scale of emissions reductions needed to stay below the 450ppm CO2e threshold’. Put simply, without proactive business leadership on climate mitigation, COP 21 outcomes cannot avoid the 2°C threshold.

This belief in unilateral action is shared by many progressive business leaders. Take Unilever’s Paul Polman who has pledged that his company will become ‘carbon positive’ by 2030, through the use of renewables, and through investments in generating more renewable energy than it needs. This is in line with a progressive shift in the framing of corporate sustainability from doing less harm, through doing more good and now to delivering net positive environmental outcomes (with climate as the primary focus). In a recent article, Jeffrey Hollender identified IKEA, Kingfisher and BT as ‘Net Positive Pioneers’. BT, for example, has committed to go beyond zero carbon and to ‘help customers reduce their carbon emissions by at least three times the total carbon impact of the company’s business by 2020’.

The financial community and investors have also been very active in flushing out the risks and opportunities of decarbonisation. Trillions of dollars have been mobilised to address climate change. Over $2.6 trillion of funds are estimated to have committed to divest from fossil fuels; while, since 2013, more investment has been directed towards renewable than towards fossil-based energy. The private sector landscape – in terms of decarbonisation – has shifted dramatically since the failed Copenhagen conference six years ago. Indeed, it is possible thatCOP 15’s failure itself spurred an emerging movement of unilateral corporate actions and commitments to decarbonise our economies and break the link between fossil fuels and development.

So what are the levers that leading corporations are pulling, which have the potential to close the gap between COP 21 commitments and the 2°C imperative? The most significant are:

Driving for carbon neutrality and then net positive climate outcomes.Companies across a wide range of sectors have achieved carbon neutrality – principally through shifting to renewable energy and improving energy efficiency. Over 400 companies use internal carbon markets to penalise carbon emitters and reward carbon savers (e.g. Microsoft and General Motors) and reflect this externally through a ‘carbon adjusted’ P&L (as pioneered by Puma). The ‘Net Positive Pioneers’ and other leaders are thinking beyond carbon neutrality with a view to saving / avoiding more lifecycle GHG emissions than are produced3.

Decarbonising the full value chain. Historically, companies have focused narrowly on their own direct and indirect emissions through, for example, their use of electricity. In the real world, however, many products’ lifecycle emissions occur in the use phase (e.g. cars and detergents) or in the supply chain (e.g. retailers and leather goods). Extending carbon accountability for the full lifecycle is profoundly changing business strategies – and even business models. This is driving completely new technologies (e.g. Tesla cars and batteries), market shaping (e.g. Tide’s ‘wash on cold’ campaigns) and internal incentives such as carbon pricing.

Pursuing radical innovation. The full value chain assessments of GHGemissions are spurring fundamental shifts in technologies, products and processes. This includes reimagining products and services through a no / low carbon lens: and exploring a shift from creating value through product sales to providing the product function / benefit as a service (e.g. Zipcar and ‘telepresence’ conferencing). Novel collaborations are also emerging across industries, throughout the value chain and through ‘crowdsourcing’ (e.g. Nike’s open source Apparel Design tool and Unilever’s Sustainable Living Labs).

Perhaps UN negotiators should more readily acknowledge a fundamental difference between the UN and the private sector’s processes, governance and decision making. Valiant attempts by the UNFCCC over decades have inevitably been hamstrung by the need for unanimity resulting in lowest common denominator outcomes. Corporations, on the other hand, have a key advantage over policymakers and governments in driving rapid change in their business models and practices – namely their ability to act quickly and on the authority of a few senior decision makers. What we need now are more net positive climate pioneers. Or, as I wrote in a blog from the Rio+20 conference, ‘The world needs more Paul Polmans’.

At the heart of COP 21 negotiations will be the INDCs (Intended Nationally Developed Contributions). They are currently calculated, if delivered, to reduce average global warming to about 2.7°C above pre-industrial levels. This would clearly be a major advance against a ‘business as usual’ scenario. But it would still lead us into what scientists predict to be ‘dangerous territory’. Perhaps the UN should run a parallel process to INDCs seeking Intended CorporatelyDeveloped Contributions (ICDCs)? As described above, the leading climate mitigation commitments of corporations are already showing how their cumulative efforts could just close the decarbonisation gap.

Bring on the ICDCs!

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