The role of business: the need to push for an ambitious climate agreement in Paris

Next year, in Paris, governments are scheduled to reach a new climate change agreement that puts the world on track toward a carbon neutral world by the second half of this century while ensuring societies and economies remain resilient in the face of the climate impacts that are already locked into the coming years and decades.

 

A safe and prosperous population is prerequisite for profitable business, and this is the only sustainable future there can be in the face of the climate change challenge.

 

It is a perfectly achievable goal, but only if every business moves as quickly as possible to cut its own greenhouse gas emissions as far and as fast as possible and to climate-proof its own production, supply and distribution chains.

 

In the most fundamental way, business needs a Paris agreement but a Paris agreement needs business and it is not too late for business to do more now to make clear exactly what it needs from a new, international climate regime.

 

For example, business is still faced with a myriad of inconsistent reporting requirements. In many cases it has been faced with policy flip-flopping at national level. Investors are unclear how the current contours of the 2015 international agreement will help them invest more securely in climate-friendly assets in the hard world of financial risk and return.

 

The needs are pretty clear. As enlightened business leaders repeatedly point out, governments help most effectively by strengthening and coordinating policies both at home and under the new international agreement to do three things:

 

  1. Make clear that carbon has a price and that price is increasing, will continue to climb and will not likely decrease. That means speeding up ambitions to reduce national emissions.
  2. Enforce a full accounting of the cost of holding high-carbon assets and revenue sources on the books. Investment funds must see the true cost of high-carbon business and in turn be held to fiduciary account, if they ignore this risk.
  3. Be consistent across countries as well as domestically in providing incentives for business to switch direction rapidly to low carbon – for example via consistent laws, subsidies, tax breaks, regulations, markets and other business and investment mechanisms.

It is most encouraging that the past few years have seen a tremendous increase in business action to reduce emissions and address climate risks. From energy efficiency measures to reporting true carbon footprints to climate-proofing supply chains and ensuring resources are sustainably sourced.

 

More companies and investors see that prosperity is impossible if large parts of the world turn into no-go business areas. Increasing extreme weather events are causing extreme losses, making some geographic areas almost uninsurable.

 

Last year, looking at the top ten most expensive natural disasters alone, flooding in central Europe cost $22 billion in losses, typhoons and droughts across Asia more than $42 billion, flooding in Mexico, Brazil and Canada over $17 billion.

 

Taking action now has three major business benefits. First, it positively impacts the bottom line now and into the future.

 

Second, it pre-adapts companies to a world where policies are tougher on high-carbon emitters. Governments are not acting fast enough but they will get there.

 

Third, it responds to increasing consumer demands that business does not pollute and waste resources for singular gain at the cost of the common good. Consumers as citizens are increasingly concerned at the environmental decay that threatens their families and livelihoods.

 

It is no coincidence that company valuation studies have shown that the most forward-looking companies in climate-related action have outperformed by an average of as much as 25% in higher stock values.

 

Not all businesses can act at the same time in the same way but all business must inevitably act. This includes the fossil fuel industry. Up to 80% of coal, oil and gas reserves of publicly listed companies are “unburnable” if the world is to stay below an internationally agreed global temperature rise of 2 degrees Celsius.

 

But the massive new business opportunities presented by a transformation to clean energy and resilient economies is at a scale that offers every sector the space to reinvent, re-engineer and not only survive but grow along a sustainable pathway, with a just transition for hard working employees.

 

So here is my urgent request to you as company managers and investors:  Look at your own backyard first. Have your emissions peaked? Are you using the most efficient technologies? Are you managing long-term climate risks? What is your investment strategy toward carbon neutrality?

 

Second, the Paris agreement needs to be relevant to business to get rapid and lasting results. Tell your governments what needs to be in there to make this possible.

 

And finally, be a champion for clean energy and sustainable business. In September, the UN Secretary-General is asking business groups as well as governments to come with bold new initiatives that move us faster down this road. Be there, be bold. I hope to see you.

 

Written by Christiana Figueres, UNFCCC

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