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5 things your company should consider after the COP21

On December 11th 2015, most governments around the world agreed to reach net zero greenhouse gas emissions by the second half of this century. As governments have usually limited control over major impacts, the bulky work has to be done by the private sector. This agreement has serious implications to businesses all over the globe.

Based on this new reality, what should you consider for your business?

1. Define when to achieve the COP21 targets

The question on how to achieve climate change mitigation and emission reduction targets shifted from what do we want to do to reduce our carbon footprint to when do we want to do it?

Industries can use this opportunity to proudly show their voluntarily efforts. Now that the timeline has been set, governments can start implementing measures to force companies and industry to proceed with the required alterations. In any case, it is advantageous to be well-prepared and proactive.

2. How to translate the COP21 targets into my own company needs

Let’s assume your company wants to move forward. What is the right ambition? A sound approach is to use science-based targets at least as the minimum ambition level. This way your targets will be in line with the technological developments and you will be able to create ambitious but realistic targets.

“Emissions reductions targets are considered science-based if they are in line with the level of decarbonization required to keep global temperature increase below 2°C compared to pre-industrial temperatures, as described in the Assessment Report of the IPCC.”

Emission reductions will be achieved with technologies and products that still need to be (partially) developed or implemented. For some industries it will be relatively easy to reduce their carbon output while for others it might turn out to be more challenging. Within the science-based targets concept a lot of industry emission pathways have been developed. For example, in the chemical industry large CO2 reductions are hard to reach as oil is their main resource. The estimated CO2 reduction per ton by 2050 for this industry is around 50% considering that entirely fossil-free alternatives are not expected to be developed soon. However, if you are an energy producer you are expected to benefit a 95% decrease of CO2 per kWh by 2050.

3. Explore the implications for your product portfolio

The climate treaty requires not only emission reductions but a big change in the whole production system. Typical examples which will play a significant role are renewable energy and efficiency, raw materials and storage, new production methods for food and crops, electric cars and virtualization of services.

This will open the doors for innumerable new business opportunities for the decades to come. Today’s margin of scarcity is tomorrow’s competitive opportunity for a disruptor. Your company could be part of this new economy and can have a competitive edge.

As Paul Polman, CEO of Unilever, after the COP21 stated:

“The result is an unequivocal signal to the business and financial communities, one that will drive real change in the global economy. Investment in innovation will accelerate in critical low carbon areas, and we can expect the pace of change to accelerate as the world rallies around this historic moment, implementing the commitments they have made in Paris.

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 decarbonise the global economy. This realisation 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.”

4. Take measures to achieve the targets

Setting a target is the first step; the next, implementation. For smaller companies their measures can be based on the activities that contribute the most to global warming, often related to energy use, transport, products and raw materials purchase.

Larger industrial companies can use different approaches such as internal carbon pricing. This can really drive a change by putting the right cost on carbon, especially when it comes to investments and new businesses. Inspiration can be found in the carbon pricing leadership coalition where companies, governments and civil society cooperate. In their view a number of things can be done to set up a carbon pricing approach, being their main recommendation to:

Set an internal carbon price high enough to materially affect investment decisions to drive down greenhouse gas emissions.”

Time to take action! Once the measures are implemented and integrated into the companies’ activities, make sure you stay on track.

5. Keep looking beyond the horizon

Fighting climate change is a tremendous endeavour. This should not keep you from thinking about other issues that remain to be dealt with. If we continue to live beyond our planet’s limitations there will be continuous challenges looming even after we fix climate change.  If your company wants to stay well-prepared and proactive, think more deeply about other possible risks and how to manage them correctly. Look beyond the obvious.

 

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5 Things Your Company Should Consider After The COP21

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Max Sonnen

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Pau Huguet Ferran

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