COP27: What Does It Mean For Business?
COP27 (the 27th session of the Conference of the Parties of the UNFCCC) culminated on 20th November 2022 in a breakthrough agreement on ‘loss and damage’ funding, but fell short of committing to a phase down of all fossil fuels. While COP27 was largely regarded as providing too-little-too-late to tackle the climate emergency, there were some significant steps forward for the business community. The business implications of COP were mostly lost among reports about controversies ranging from fossil fuel lobbyists to political repression. This article will unpick some of the announcements that are important for businesses to be aware of.
Many of the reporting requirements that are increasingly being announced only explicitly apply to large corporations, however the nature of carbon emissions means that all businesses are likely to be affected. Scope 3 is the emissions that are produced indirectly by a business, occurring along their supply chain; it typically makes up the vast majority of a company’s emissions. To accurately report and reduce their emissions, large companies must put pressure on their supply chains to act in accordance with emissions regulations. Indeed, the amount of companies calling on their suppliers to report their emissions data to the CDP increased between 2019 and 2020 by 24%.
The UK’s Transition Plan Taskforce (TPT) was published during the first week of COP27, having been launched in April 2022 “to develop the gold standard for private sector climate transition plans in the UK”. Aiming to create “transparency and accountability around net zero targets” with wide reaching implications for all stakeholders, namely investors, the TPT deserves businesses’ attention. Based around the guiding principles of Ambition, Action, and Accountability, the TPT outlines the four key elements to a strong transition plan:
- Setting a net-zero commitment, as part of high-level ambitions to mitigate, manage, and respond to climate change.
- Short, medium, and long term actions, and how they will be financed.
- Governance and accountability mechanisms.
- Measures to address both risks and opportunities.
In alignment with the Task Force on Climate-related Financial Disclosures (TCFD), UK listed companies are required to report to the FCA by the end of 2023. Once in full effect, the TPT will highlight companies’ net-zero commitments (or lack thereof), having significant implications for investors, customers, and employees.
In alignment with the UK’s TPT, the International Organization for Standardization (ISO) launched their Net Zero Guidelines at COP27. These guidelines set out a common understanding of ‘net zero’ and “guiding principles and recommendations to enable a common, global approach to achieving net zero”. ISO’s guidelines have extensive implications for businesses, including the following recommendations: “incorporating net zero targets into core governance documented information”, “disclosing shareholder voting records on climate-related issues”, and “appointing competent members of the organisation’s leadership to take responsibility for actions”.
One final development from COP27 for businesses to take note of, came from the International Sustainability Standards Board (ISSB). The ISSB announced a new Partnership Framework, aimed at “achieving a truly global baseline” for disclosure and accountability standards. Further organisational alignment is taking place, as the CDP announced that it will incorporate the ISSB’s requirements into its own global environmental disclosure platform. Collaboration is growing, meaning that standards are likely to be embedded faster and more effectively.
Underpinning these regulatory advancements is the need to ensure that companies can make robust and transparent emission reduction targets. Organisations can make claims about their ‘green’ credentials, but without a carbon reduction plan backed up by climate-science and using commonly understood terminology, companies are vulnerable to greenwashing accusations.
Companies might view incoming regulation as a ‘cost’ and merely a compliance exercise, however, this misses huge opportunities for value creation. Being prepared for the emissions reporting requirements that are around the corner will give your business a competitive advantage. Suppliers who are unable to report on their emissions will fall behind, while those embracing the shift to sustainability will prosper, gaining new contracts and leading the way among their competitors.
With each COP that goes by, more and more people are becoming passionate about taking climate action. The vast majority of consumers care about being more environmentally-friendly, and 69% of people aged between 18 and 44 are willing to spend more on eco-friendly products. The strength of public concern about the climate emergency cannot be underestimated, and businesses will miss out on huge opportunities if they do not meet customer expectations. Surveys indicate that around 77% of people think that businesses’ climate plans are either “ambitious but not to the scale of the challenge or they are not ambitious full stop”. It is clear that there is a huge and growing appetite for businesses to prove their environmental credentials.
The regulatory landscape can be intimidating, and not many people (especially from small businesses) have time to trawl through extensive policy documents! Fortunately, SMEs can use a carbon management platform that does the hard work for you. With a platform like Climate Essentials, your data is automatically sorted into the reporting scopes defined by the globally-recognised Greenhouse Gas Protocol. The resulting data insights are aligned with the SME Climate Hub and the Science Based Targets initiative. The reports generated from Climate Essentials enables small businesses to report the necessary information to larger companies which they supply to. Not only will this help you to secure contracts, but also enable you to provide your green credentials to customers and avoid greenwashing.