Commentators have offered mixed reactions now that the dust has settled on COP27. Where the Loss and Damage (L&D) agreement is referenced as the most significant outcome of the global climate summit in Egypt, several analysts expressed concern as to the future of the 1.5C limit. But amid encouragement and missed opportunities, how will COP27 impact businesses?
As previously stated, EcoOnline expected COP27 in Sharm El-Sheikh to be a crucial opportunity for nations to drive the pledges drawn up at COP26 into action. Although we welcome the agreement to provide loss and damage funding for vulnerable countries hit hard by climate change and disasters, we also share concerns over the lack of firmer action and national commitments to keep the global temperature rise below 1.5 degrees.
However, three things remain clear for businesses in terms of carbon. First, authentic and effective climate actions must be core to their strategies to remain competitive and relevant. Second, to deliver on that strategic intent, they must engage their people and supply chains. Third, the answers to climate change risks will not come from elsewhere and will not be found if businesses don't seize the opportunity they present.
In the following, we will describe what we think are the top three takeaways from COP27 and what it means for businesses:
Takeaway 1: businesses can and must continue to build climate change action into their commercial strategies
National commitments by the world's governments rely upon companies developing transformational products and services to deliver the transition to a lower (and ultimately net zero) carbon future.
Investors, customers, employees, and other key stakeholders demand that companies across all sectors embrace credible, authentic, and ambitious carbon reduction plans.
This brings business valuations, reputational and operational risk, and competitive advantage into sharp focus.
COP27 has amplified the fact that climate action must take its place amongst other priorities like cost control if companies are to compete. Moreover, effective carbon reduction strategies go hand in hand with energy reduction and therefore cost savings, linking them firmly to financial survival.
Read more about how the Corporate Sustainability Reporting Directive (CSRD) makes environmental, social, and governance (ESG) reporting mandatory for 50,000 EU companies.
Takeaway 2: employees and supply chain partners play a fundamental role in fulfilling business climate change strategies
Forward-thinking companies can make the climate change agenda a powerful people engagement tool, offering new ways to understand their employees' expectations. Arguably the richest seam of a company's innovation potential, staff can shape climate change action programs, challenge outdated processes, and be incentivized to cut carbon (and invariably cost) through energy efficiency schemes.
Businesses can only claim credible and robust carbon reduction plans if they engage their suppliers on that journey. Without that more comprehensive input, organizations will effectively ignore half or more of their carbon footprint, as supply chain Scope 3 carbon can be up to eleven times greater than the carbon from direct operations.
Crafting authentic collaboration, mapping out practical options, and agreeing on joint actions are essential to setting and achieving science-based targets. Businesses should bring buyers and suppliers to work together on trusted, common evidence, benchmarks, and data as a starting point.
Takeaway 3: fresh thinking, new technologies, and improved data granularity are helping businesses to identify what they can change or explore
Our final COP27 takeaway is for businesses to face into climate change and look for opportunities to grow, improve profitability and cut costs. Those benefits may come from adjacencies and options for diversification or new partnerships. They will undoubtedly require awareness campaigns, consistent messaging, and commitment to go beyond 'box-ticking' to recognize the rapidly escalating costs and risks of doing nothing.
Forward-thinking businesses are re-educating boards to understand risk profiles better and grasping the challenge of quantifying subjective risks through objective metrics.
By focusing on a few priorities in terms of impacts and accessibility, companies are trying initiatives, tracking the results, and learning lessons to drive broader adoption or to fine-tune their approach. By iteration, those lessons are helping the best commercial options (through trial and collective learning) evolve toward joint adoption in procurement, material use, energy, or elsewhere in their carbon footprint.
The direction for business remains towards net zero
The annual UN Climate Summits, or COPs, will always remain policy events at their core, but there is an increasing role for businesses to play in delivering their intent. There is now a clear 'three-way' link between government policy agreements, the business cases that bring them to life across private and public sector organizations, and the actions we can take as individuals.
Notwithstanding any debate about whether COP27 was a success or whether we can expect any more from governments at COP28 in Dubai next year, the direction for business should remain towards net zero.
Businesses need a will for action, a belief that they can make a difference, and realistic business strategies to stay on track amongst many challenging priorities. Health and safety management software can go a long way to helping you prepare for your Net-Zero journey. EcoOnline's robust and rich EHS software platform can help you to create safe, sustainable, compliant, and efficient workplaces. If you are interested in finding out more, request a demo today.