Big business and COP26: are the ‘net zero’ plans credible?

[ad_1]

With the greatest respect, Prince Charles told world leaders at the COP26 summit last week, the private sector offered the only prospect of achieving the fundamental economic overhaul needed to avert a climate disaster.

The heir to the British throne was in Glasgow to bestow some royal favour on businesses he saw leading that change — companies as diverse as AstraZeneca, Bank of America, IBM and L’Oréal. His patronage came in the form of the Terra Carta Seal, an award created by former Apple designer Sir Jony Ive that features oak leaves, honey bees and a monarch butterfly.

The party at which Prince Charles mingled with chief executives captured a congratulatory mood at COP26 among some of the world’s largest businesses, many of which have used the summit to advertise fresh sustainability initiatives.

But the regal validation was paired with a harsher critique from others at the summit – that many companies’ emissions-cutting plans do not oblige them to change their behaviour any time soon or hold senior executives accountable for realising them. Some companies, the critics charge, are also engaged in hypocritical lobbying that is undermining the climate action they claim to want to see.

For growing numbers of environmental activists, regulators and multilateral organisations, the voluntary steps companies have taken so far have had nowhere near the impact needed to steer humanity’s course away from climate catastrophe.

Prince Charles meets business leaders at COP26 in Glasgow, where he awarded his Terra Carta Seal to companies including AstraZeneca, Bank of America and IBM
Prince Charles meets business leaders at COP26 in Glasgow, where he awarded his Terra Carta Seal to companies including AstraZeneca, Bank of America and IBM © Ian Forsyth/Getty

Indeed, some in Glasgow argued, the focus on voluntary corporate action risks weakening the drive for badly needed government policy interventions. Such concerns are driving pressure for the next chapter of the corporate response to climate change to be marked by fewer parties and press releases and by more verifiable standards, mandatory reporting and meaningful carbon prices.

“Their main goal at COP is to emerge as undisrupted as possible,” Pat Brown, founder of the alternative protein start-up Impossible Foods, says of both the business and political elites gathered in Glasgow. Instead, he warned, “what is needed is radical change — and fast”.

Embracing net zero

Companies are not formally part of the Conference of the Parties meetings, which are reunions of countries that signed the 1994 UN Framework Convention on Climate Change. But this year’s summit was swarming with executives and their consultants, crowding out campaigners and even national delegates from Glasgow’s overfull hotels.

The corporate crowd jetted in with a self-assured message for politicians: that business has been leading the way on climate action and it is high time that governments catch up. The International Chamber of Commerce told governments to “wake up” to the risk that their patchwork of carbon pricing regimes could slow progress on cutting emissions.

The US Business Roundtable and its counterparts in Europe, Australia, Canada and Mexico told world leaders that companies could not “shoulder the burden alone” of investing in new clean energy technologies and needed better co-ordination between countries. Companies were now the ones asking for more ambitious climate action and saying “for God’s sake, do something about it”, Francesco Starace, CEO of Enel, told Fortune.

The message from some politicians at COP26 was not much different. “It’s bankers that are now deciding. You have major corporate America factoring in the price of carbon. It matters,” US president Joe Biden said.

In the years after Biden’s predecessor, Donald Trump, pulled the US out of the Paris climate accord, US companies embraced the idea that they were filling a void left by Washington by voluntarily setting “net zero” targets to cut their greenhouse gas emissions in line with the goals of that agreement, or offset any they could not eliminate.

Business leaders mingle at COP26 after receiving Prince Charles’s seal, which recognises companies’ efforts to become more environmentally friendly
Business leaders mingle at COP26 after receiving Prince Charles’s seal, which recognises companies’ efforts to become more environmentally friendly © Ian Forsyth/Getty

The Business Roundtable, for example, argued in September that the country had made significant progress towards reducing emissions “in part because of corporate leadership in the absence of a smart, national climate policy”.

Corporate America is far from unique in this, however. A recent survey of global CEOs by Accenture and the UN Global Compact found that just 18 per cent believe that governments have given them the clarity they need to set goals in line with a 1.5C warming trajectory.

While some global business leaders are embracing the opportunity to help drive the new economic agenda, others like Joachim Wenning, chief executive of reinsurance giant Munich Re, feel a growing sense of unease.

“Very often I’ve heard things like ‘in the absence of governments doing their job . . . we the private sector, we the economic leaders, have to take care of combating climate change’. It’s almost: ‘Then we have to replace the governments,’” Wenning said. “I think it’s an illusion. It’s not only that we don’t have the mandate. We don’t have the means, honestly.”

Empty pledges

The flood of pledges before and during COP26 suggests that the pace of corporate climate action is accelerating. One in three of the largest public companies in G20 countries now has a net zero target, up from one in five last year, according to an international research initiative called the Net Zero Tracker.

In the UK, nearly half of the members of the FTSE 100 have set net zero goals, while mentions of net zero in corporate reports have increased by 370 per cent in two years, according to Datamaran, an ESG analytics company.

Behind the marketing materials, though, some of those pledges are less promising than they seem. Just one in five of the G20-based companies which have set emissions-cutting goals have aligned them with keeping temperatures to within 1.5C of pre-industrial levels by 2050, according to the non-profit Science Based Targets initiative (SBTi), and the rate falls to just 6 per cent outside G7 countries.

Climate activists protest at COP26. A push for more meaningful standards for reporting climate action may be a harbinger of the more rigorous scrutiny companies can expect
Climate activists protest at COP26. A push for more meaningful standards for reporting climate action may be a harbinger of the more rigorous scrutiny companies can expect © Alastair Grant/AP

Similarly, of the 412 US companies in the US Russell 1000 index which have pledged to emit less, just 65 have set goals in line with that 1.5C target, according to Just Capital, which tracks businesses’ impact on society.

According to a new MSCI report, companies’ current emissions plans are still putting the globe on track for warming of 3C. That is alarming many of the people who believe most ardently in the central role companies can play in responding to climate change.

“We are very concerned about the credibility of all the targets out there,” says Lila Karbassi, chief of programmes at the UN Global Compact, the UN’s voluntary corporate sustainability network, which is a partner in SBTi.

One problem is that many companies are pledging to hit those targets in almost three decades’ time without committing to action for which they can be held accountable in the short term, says Austin Whitman, CEO of Climate Neutral, a non-profit organisation that helps brands cut their emissions.

“I think we are taking far too much comfort from the fact that companies are making these commitments for 2050,” he says, arguing that companies should quantify what they plan to do in the nearer term. “There’s a reality that if you’re making a 2050 pledge you really don’t have to change anything today.”

Democrat senator Joe Manchin, who has opposed the Clean Energy Performance Program in the US president’s spending package which would pay utilities to transition away from fossil fuels
Democrat senator Joe Manchin, who has opposed the Clean Energy Performance Program in the US president’s…

[ad_2]

Source link