3. Imapct of COP-21 on businesses
3
Impact of COP-21 on businesses
From the 30th of November until the 12th of December 2015, representatives of
195 nations convened in Paris for the United Nations Climate Change Conference,
also known as COP21, to agree a new global climate change deal. On the opening
day, the summit welcomed 150 presidents and prime ministers from around the
world, as well as mayors, governors and industry leaders from some of the globe’s
biggest companies.
On the final day of the conference in Paris, an historic accord was reached that
commits nearly every country, wealthy and poor alike, to lowering greenhouse gas
emissions in order to avert serious climate change risk.
At the start of the Paris Climate Change Conference, Bill Gates announced the
“Breakthrough energy coalition” consisting of more than 25 investors from 10
countries, including billionaire philanthropists such as Bill Gates, Mark Zuckerberg,
and Richard Branson. The partnership will mainly provide early-stage funding to
clean energy companies across a range of sectors, such as electricity generation
and storage, transportation, and agriculture.
What are the important outcomes of the Paris agreement?
• Unlike the Kyoto Protocol, which aimed to limit carbon emissions, and had a
reduced number of signatories, the Paris agreement is a global accord and
aims to limit global temperature increase to below 2 degrees Celsius by the
year 2100, and encourages efforts to keep it around 1.5 degrees Celsius.
• For the first time, this agreement sets binding commitments (based on
Intended Nationally Determined Contributions (INDCs)) for all countries, both
developed and developing.
• While developed countries are expected to lead the efforts on climate change
mitigation, developing countries are expected to increase their efforts. The
agreement describes a set of commitments and procedures on how to:
• “prepare, communicate and maintain” an INDC;
• provide required information for transparency;
• communicate and submit new INDC’s every 5 years; and
• ‘’represent a progression’’ beyond the previous INDC and show a party’s
‘’highest possible ambition’’
• COP 21 extends the existing goal of the mobilisation of $100 billion per year
green climate fund by 2020 through 2025, with a new higher target to be set for
beyond 2025.
4. 1
The Paris agreement opened for signature on the 22nd
of April 2016. In order for
the agreement to be enforceable, a minimum of 55 countries, or those responsible
for at least 55% of global greenhouse gas emissions, needed to sign the
agreement. A historic 174 countries and the European Union signed the agreement
on the 22nd
.
December 12, 2015
COP21
Paris Agreement
adopted by 195
parties to the
UNFCCC
April 22, 2016
Paris Agreement is
opened for signing
April 21, 2017
Deadline for signing
Dec Apr
Parties can jon by signing the
Agreement and deposting
instruments of “ratification,
acceptance or approval”
Apr
Parties can join by
“accession”
Timeline for signature and ratification of the Paris Agreement
When will the Paris Agreement take effect?
At least
representing
at least
must join
55 55%
parties to the
UNFCCC
of total global
GHGS
Source: World Resources Institute
Source: World Resources Institute
“This is a historic day. This is by far the
largest number of countries ever to sign an
international agreement on a single day”
UN Secretar General Ban Ki-Moon
175
parties signed the
agreement on
22nd
April
5. Imapct of COP-21 on businesses
2
How will this effect businesses
The good news is that INDCs show that major economies of the world are planning
to reduce business-as-usual emissions, emissions that would occur without
any efforts to reduce them, between now and 2030. Moreover, all developed
economies are planning to reduce emissions by at least 25 percent by 2030,
compared to 2005 levels. This can only be achieved by the right combination of
policy and regulatory measures, investment in green technology, and an increase
in R&D spending on renewable energy technologies.
According to the study undertaken by E3G, independent experts on climate
diplomacy and energy policy, renewables will form approximately 80 percent
of new power generation investment by 2030, which in turn should equate to
cheaper renewable energy. Other research suggests that within 15 years, solar will
be one of the cheapest sources of energy worldwide.
Globally, we are shifting towards a low-carbon economy, and with the agreement
in Paris, this transition will speed up. As a result, carbon pricing mechanisms will
extend globally, and carbon prices will increase after 2020. It is essential to note
that energy is the key focus in the conversation about tackling climate change.
Thus, countries will develop and implement a range of energy policies that aim
to increase investment in energy efficiency, renewable energy, smart grids and
storage. Companies will see the need to move away from coal & oil, while natural
gas demand will grow and a need for Carbon Capture and Storage (CCS) will appear.
In light of the above points, the following major implications of the agreement for
businesses can be expected:
• GHG accounting and reporting will be mandatory for major industries in all
major economies.
• Multinational companies will need to comply with different regulations for GHG
reporting, targets and mitigation.
• A significant focus will shift to the transport / logistics industry increasing
efficiency projects through technology, innovation and R&D.
• Land use and forestry will be one of the key focus areas that will put many
companies under pressure.
• The cost of carbon will become increasingly material.
o Companies manufacturing raw materials and/or producing/delivering energy
to consumers will be under pressure to reduce the carbon intensity of their
products or fear risk of losing market share.
o Supply chain sustainability will become crucial. Transparency will become
significant and companies will start to track their suppliers in a more
rigorous way.
o Service provider companies will start to feel more pressure from their
customers to reduce the carbon intensity of their operations.
All of above will lead to greater investment and innovation in clean technologies
and increased efficiency, because companies will not want to lose market share or
increase the cost of their operations.
6. 3
Conclusion
Now the real work starts for countries and companies. The private sector will
play a major role in this plan. As companies become increasingly aware of the
importance of this issue, they will need to analyse their risks, and develop long-
term commitments to the initiative. At climate talks, more than 5000 global
companies, representing over $38 trillion in revenue, declared commitments to
climate change.
The Science Based Targets initiative (a joint effort of CDP, WRI, WWF and UN
Global Compact) announced in the conference that 114 companies including Ikea,
Coca-Cola Enterprises, Sony, Procter and Gamble, Walmart, Kellogg and Dell
committed to set emissions reduction targets in line with what scientists say is
necessary to keep global warming below the threshold of 2 degrees Celsius. The
Science Based Targets initiative works with companies to set science-based
emissions targets and only approves corporate targets that meet its strict criteria.
Unfortunately, only 10 companies’ targets were initially approved, including Coca-
Cola Enterprises, Dell, Enel, General Mills, Kellogg, NRG Energy, Procter & Gamble,
Sony and Thalys. The remaining 104 have pledged to set and get approval for
their science-based targets, with hundreds of other companies citing emissions
reduction targets in their annual sustainability reports and 8,000 companies
signing up to the UN Global Compact. Other major coalitions of companies
pledged their support at COP21, including We Mean Business Coalition (363
companies), American Business Act on Climate Pledge (154 companies), RE100
Initiative (53 companies) and Oil and Gas Climate Initiative (10 companies).
Interviews with key stakeholders at major corporations revealed the following:
Unilever chief Paul Polman feels that keeping global warming below 2 degrees
Celsius presents an opportunity for business. He said, “Achieving a zero emissions
economy is the greatest business opportunity of the century,” adding, “the
consequences of this agreement go far beyond the actions of governments. They
will be felt in banks, stock exchanges, board rooms and research centres as the
world absorbs the fact that we are embarking on an unprecedented project to
decarbonize the global economy. This realization will unlock trillions of dollars and
the immense creativity and innovation of the private sector who will rise to the
challenge in a way that will avert the worst effects of climate change.”
Google’s Vice President of Energy states, “the cost of doing nothing in terms
of risk and climate effects is so dramatic that there’s almost no other viable
alternative than a low carbon business model.”
In reference to the Breakthrough Energy Coalition, Microsoft founder Bill Gates
said, “The increased governmental research and private investment are to address
climate change and to reduce the cost of energy, to reduce poverty. We need to
move to sources of energy that are even cheaper than the hydrocarbon energy we
use today. We need it to be not only clean, but also reliable.”
