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Our Insights 18 Dec 2015

We’ve Come a Long Way from Rio. But the Real Journey Starts Now.

By Geoff Lye

As the dust settles after the negotiation of an ambitious global agreement in Paris, Geoff Lye offers his assessment of its significance.

23 years ago, I left Rio full of optimism – confident that a range of Earth Summit agreements, including the UN Framework Convention on Climate Change, would set us on a sustainable path well before I would have any grandchildren. When I got back to the UK, I made a video to persuade clients of the company I was then building to take environmental issues more seriously. In practice, not only were many of my forecasts simply wrong, but my spirit of optimism was misguided. In 1992 I had four young children. Returning for the Rio+20 conference, I had four young grandchildren – and I was struck by how little progress we had made; worse, on most measures, we had tracked significantly in the wrong direction.

So, on a train to London as COP 21 finally closed with a truly ambitious agreement, I was – in contrast to the first blog of this series – once again seeing the climate glass as half full. In fact, I see it as much more than half full. This agreement – voted on behalf of over six billion global citizens – fires the starting gun on a quest to deliver a carbon neutral economy within the lifetimes of our grandchildren. It would be easy to highlight the many potential loopholes and future roadblocks in the agreement, but the agreement does, I believe, change the nature of the debate and shifts the framing of decarbonising our economies irreversibly.

I have become increasingly cynical over the years about the role of the UN. It is worth dwelling, therefore, on the dramatic shift in the spirit of COP 21 compared with the failed talks in Copenhagen six years ago. For whatever reasons, and as noted in my last blog, the mood music was quite different from any of the UN meetings I have attended since the Earth Summit in 1992. We all need the UN to succeed and, for once, we now have an outcome from Paris which meets the original spirit of the UN’s foundation – an outcome which is more ambitious and better in its framing than anything a seasoned observer would have thought remotely possible a few weeks ago. Full credit must be given to the impressive French diplomacy before and during COP 21. It enabled all voices to be heard and respected; and dissected a complex agreement into bite-sized chunks which discrete parallel negotiations could digest, process and ‘de-bracket’ for a consensus agreement.

The implications of the Paris Agreement for high carbon businesses are clear and irreversible: find a way to decarbonise or risk value destruction at best or stranded assets at worst. A carbon neutral economy has been set as the benchmark for twenty first century global climate security. It would be naïve to expect an overnight shift to low/no carbon businesses and markets, but an accelerated set of disruptions and business model changes is now inevitable.

In an earlier blog, I highlighted imminent tipping points for rapid decarbonisation. These include renewable energy costs crossing the point of competitiveness with fossil fuels for electricity; battery and other forms of energy storage technologies / costs reaching economic viability; and innovations which capture and convert carbon dioxide into valuable resources. The combination of these tipping points makes deep decarbonisation not only more economically viable, but will also disrupt whole sectors and individual company business models. In the process, it will also provide massive ‘investable opportunities’ for companies and investors alike. These imminent tipping points would have arrived without any agreement in Paris. COP 21 will undoubtedly tip markets more quickly and scale the impacts faster.

The aspiration to a 1.5°C ceiling sets a huge challenge (and equivalent opportunity), however, for all businesses. As a member of the Technical Advisory Group of the Science Based Targets initiative1 I supported the proposal to set a 2°C threshold as the science-based reference point against which companies should develop forward plans for reducing their carbon footprints. The Paris Agreement suggests that mitigation goals should now be re-calibrated to 1.5°C. Any company joining the movement to set science-based targets (114 signed up by COP 21), should review the implications of setting both 2°C and 1.5°C scenarios; and align their own targets as close to 1.5°C as possible. It is generally judged that the emissions already in the atmosphere will continue to have a warming effect which will take us to 1.5°C even if manmade GHGemissions stopped today. The implication of achieving the COP 21 ambition, therefore, is that we will have to extract carbon from the atmosphere over coming decades. This will involve scaling radical technologies, massive reforestation and even geoengineering to accelerate biological carbon storage, ‘net positive’ climate products and processes and carbon capture & conversion.

Climate mitigation on a massive scale, as foreseen in the Paris Agreement, has great significance for all businesses. But what does COP 21 mean for adaptation? The agreement lays out a range of measures and commitments – particularly in support of the most vulnerable countries. For business planning, however, my advice is little changed. We must hope for a 1.5°–2°C outcome, but, realistically, acknowledge the possibility (many still predict the ‘probability’) that the Paris Agreement does not deliver and, therefore, assume a higher 3°- 4°C outcome. SustainAbility’s climate diagnostic for the food and beverage industry highlights radically accelerated risks in a 4°C scenario compared with 2°C – in line with the IPCC’s own conclusions. Indeed, we have advised clients to manage their mitigation efforts towards a 2°C ceiling (future advice will be tougher), but plan their resilience – in other words, their adaptation – strategies to 4°C.

Paul Polman features too often in my blogs because few other business leaders are willing to carry a similar vision and courage into their own companies. Again at COP 21 he was very forthright about abandoning business as usual and, quite properly, highlighted some of the progressive initiatives and commitments the private sector has made in the lead up to and during the Paris conference (see a clip from one of his Paris speeches here). I sense that COP 21’s surprising level of ambition will be a real wakeup call in many boardrooms not just in relation to climate change but to the wider range of climate-related sustainability issues such as energy, water, food, deforestation and infrastructure resilience.

Given my work in support of protecting tropical rainforests in Borneo – particularly in helping emerging economy governments generate a greater economic return from leaving trees standing than from logging them2 – I have been watching carefully how the Paris agreement integrated REDD+3. Just 98 words are dedicated to this in the final agreement4, but those words were what armies of stakeholders have been calling for over the last decade. We could add two words more: ‘Do it!’ There is a huge amount of work to turn this call to action into reality, but the critical roles of corporate commitments to zero deforestation in their supply chains and of attaching real economic value to forest and ecosystem protection have now been formally identified as essential components of global climate protection.

As a final observation, COP 21 highlighted the intergenerational implications of climate change. One of the best questions asked at the morning session of the UNGC’s Caring for Climate event last week was from a 25 year old who asked the panel why her generation was not adequately consulted or considered in boardrooms. The responses were, naturally, very supportive, but predictable. Business leaders would do well to listen closely to the concerns, values and ideas of the next generation. On climate, as with all sustainability issues, Generation Y – businesses’ future customers, managers and investors – has a very different world view from most of today’s senior management. A blog I wrotea few years ago is even more relevant post COP 21.

Hopefully, COP 21 will be judged by future generations as the ‘end of the beginning’ of a journey to break the historic connection between economic development and fossil fuels. It will certainly represent the beginning of the end of the fossil fuel era. Sadly, my interactions with major fossil fuel and other high carbon companies on the issue of stranded assets have been met with complacency. The Paris agreement will hopefully shake that complacency by resetting the course of industrialisation – progressively penalising high carbon and rewarding low carbon enterprises. This global agreement spells out a carbon neutral future within decades. Investors, insurers and business leaders can no longer afford to ignore the massive risks and opportunities of this impending clean energy revolution.

Around the world 21st birthdays celebrate the coming of age. The 21st Conference of the Parties has certainly seen the UNFCCC come of age, delivering an overdue gift to the world and future generations. As the President of COP 21 banged the closing gavel last Saturday, delegates leaped to their feet in a massive celebration. This was the moment the Conference of the Parties turned – very appropriately – into a party of the conference.

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