Climate diplomacy continues at a glacial pace. The last few days in Glasgow have been a whirlwind of semi-promising announcements and challenging diplomacy as Prime Minister Boris Johnson has attempted to secure ramped up ambition to keep global warming to 1.5 degrees. However, with China’s Xi Jinping and Russia’s Vladimir Putin not turning up, and recent net zero commitments not being as ambitious as hoped, it has been an uphill battle.
He has come away with a few wins, most notably a promise from more than 100 countries to reverse deforestation by 2030 and support to limit methane emissions by 30% compared with 2020 levels. However, there has been a failure to significantly move the needle on the use of coal whilst the vision of a global carbon tax – environmentally crucial but politically and practically challenging – is looking highly unlikely.
Unsurprisingly, geopolitical tension coupled with an unwillingness to make economic sacrifices have resulted in Monday and Tuesday’s World Leader’s Summit being broadly lacklustre. Climate diplomacy is well known for moving at a glacial pace, and it will unfortunately take more COPs yet to develop a global consensus on how best to tackle emissions in a manner that is viewed equitably by all nations involved.
The private sector proves the scale of its commitment. Whilst few businesses attended the Paris Climate Conference in 2015, it is clear the increased expectations of society have now brought them to the table. Companies from across all sectors have arrived in their droves in Scotland this year to help lead the conversation and prove their commitment to encouraging a decarbonised world. The mood on the ground in Glasgow is that if governments fail to rise to the climate challenge, it is up to the private sector to pick up the slack. This was proven during Finance Day today, with the announcement that 450 companies in 45 countries, with $130tn of assets, have committed to “transitioning the economy to net zero”. The announcement proves how fast the private sector is willing to rally around climate challenge, with commitments growing from just $5tn in April 2021 to today’s impressive figure that represents more than a third of investible private sector assets.
Other announcements from today have attempted to service the ever-growing demand from investors and consumers for greater transparency so they can better hold corporates to account on their climate ambitions. Chancellor Rishi Sunak announced that by 2023 large UK firms and financial institutions will be forced to show how they intend to hit their climate targets, with the plans being reviewed by an independent expert panel. Whilst the commitments will not be mandatory, companies that are seen as not doing enough will suffer significantly from potential investors, shareholders and customers.
There is now no real excuse for any company to not have a net zero target in place.
Investors will be provided further transparency through continuing initiatives including the formation of the International Sustainability Standards Boards, which will be tasked with setting sustainability disclosure standards to meet investors’ demand for better ESG reporting. Improved and standardised reporting will be an ever-growing trend that the private sector will have to adapt to.
Now is the time for action. COP26 serves as a two-week reminder that all institutions in the public and private sectors must focus on lowering their emissions if they are to operate in a decarbonised world. How they choose to undertake this journey will be the benchmark by which they are judged by their stakeholders.
There is now no real excuse for any company to not have a net zero target in place. Even the world’s biggest oil exporter, Saudi Aramco recently announced a net zero target, indicating its commitment to a sustainable future. However, net zero commitments alone are inadequate for reassuring investors, consumers and the media that real actionable progress will be made.
Companies must set interim goals informed by science-based targets to prove that their leadership of today will be held accountable for the progress, or lack thereof, made tomorrow. COP26’s remaining days won’t provide all the answers. No certain road map to net zero will be developed by the national delegates still in attendance hammering out commitments and proposals for different sectors including energy and transport. However, the private sector, and companies either in attendance, or keeping a close eye on developments, should be confident that even if governments make little progress, they can still make the necessary changes in how they operate to grow their business whilst reducing their emissions as we tick along to 2050.
For further advice and support or if you have any questions, please contact Charles Withey, Senior Consultant and Deputy Head of Maitland/amo Sustain, on [email protected]
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