COP27 has drawn to a close. But what does its legacy mean for business?
Much has changed in the year since COP26 in Glasgow. The war in Ukraine has struck Europe with an energy supply crisis, forcing nations to revert to fossil fuels. With the visions of floods in Pakistan and Australia, fires across Europe, and the mercury hitting 40°C in parts of the UK front of mind, global leaders and decision-makers met in Egypt to make further progress in tackling climate change. Here are our key takeaways from COP27 and what they could mean for your business.
Purpose as a business tool
Many organisations will have already implemented their Environmental, Social and Governance (ESG) policy. For some sectors, such as finance, it has already become a core part of their compliance programmes. Regardless of sector, how an organisation carries itself during the climate crisis could make or break a reputation. ‘Greenwashing’ is getting called out; there is no alternative but for organisations to become sustainable and transparent regarding ESG.
It comes down to actions and words. We know many consumers – especially savvy ones with high disposable income – want to buy from businesses with a conscience. Grayling’s recent Dis/Connected report finds that the people who are most likely to follow public affairs – a group we call ‘the Plugged-In’ – are the most passionate about the environment, want to see more government intervention on climate issues, and the most likely to support brands who demonstrate that the environment is central to their work.
How businesses can help achieve COP27 goals
So, where are we at the end of COP27? Despite the United Nations (UN) saying that global greenhouse gas (GHG) emissions need to fall by 45% by 2030 if we are to keep rising temperatures to below the target of a 1.5°C, the Global Carbon Project (GCP) estimates that emissions will rise by one percent in 2022. So, we’re still headed in the wrong direction on emissions.
COP27 has focused on the key themes of nature, food, water, industrial decarbonisation and climate adaptation to drive action, with goals to be agreed upon around four focus areas – mitigation, adaptation, financing and collaboration.
Given emissions are still rising, the first thing we need to do as individuals, companies and nations is to cut down the GHGs that we’re pumping into the atmosphere. At COP27, nations have been discussing the Mitigation Work Programme (MWP). The MWP was proposed in 2021 after it was suggested that countries’ commitments were not sufficient to hit the 1.5°C target. It puts the onus on the 20 leading emitters of GHGs to reduce their omissions.
However, many developing countries – such as India and China – have only become largescale emitters in recent decades and pushed back on richer, more developed nations. The European Union (EU) is keen to adopt an MWP as part of its broader commitment to achieve climate neutrality by 2050.
- Wherever your operations are based, there will be renewed expectation on your business to deliver decarbonisation – fast. But accusations of greenwashing are constantly surfacing. It’s critical to make sure that as a business you are not over-promising and under-delivering.
- What are you doing to ensure your business is taking sufficient action on reducing emissions? Are you working with a credible third-party to get counsel on your goals? Are you doing enough to track your progress against your ambitions?
- Lastly, how are you communicating your efforts to your stakeholders? Cutting your emissions has impacts beyond just your own business. Others in your supply chain will be looking to you to help them with sustainability efforts throughout the value chain, known as Scope 3 – which is increasingly becoming the focus for both regulators and reputation. There’s also a big job to be done in distilling the complexity of your strategy and initiatives so that they can be communicated in a way that’s easy to digest for your audiences. Any activity must underline a sense of urgency in the current climate and show the positive impact that your organisations is having.
The impact of the climate crisis is not evenly distributed. Even though the developed countries of the ‘Global North’ have, historically and currently, been among the most significant contributors to climate change, it’s often developing countries that feel the impact most.
Adaptation refers to protecting lives and livelihoods as the climate changes. For some countries, like the Pacific country of Tuvalu, climate change provides an existential threat. Every country must prepare to adapt for rising sea levels, more extreme weather events, crop failure, and the risks of flood and fire. In what’s being seen as the biggest “win” from COP27, a ‘loss and damage’ assistance fund was agreed early on Sunday morning, after long negotiations and multiple countries changing their position. Still, the lack of strong commitment in other areas of the final agreement has communities around the world worried.
- Think beyond your operations to the locations and communities you are operating in. Does your company have operations or suppliers in the countries most affected by the climate emergency? If so, what is your business doing to mitigate risk and support the people there – either through direct ESG initiatives or working with others?
- There’s been a lot of discussion in recent years about too little emphasis being placed on the ‘S’ (or ‘social’ element) of ESG. As a business, you need to ensure you are acting on and communicating about ESG in the round.
How clean energy is financed has been a hot topic for years and will continue to be so after COP27. Developing nations who are historically low emitters of GHGs, but who are often more impacted by climate change are demanding more financial help from the West.
Transitioning from fossil fuels to clean, renewable energy will require investment from the richer nations. At COP27, we saw some movement; for example, the US government launched a voluntary carbon trading market scheme to drive private investment in renewable energy projects in the developing world.
- Do you work in the financial sector? With multilateral development banks under fire, what more needs to be put in place to make climate finance successful? And with ESG compliance regulations evolving fast, how might you be able to help drive progress before legislation demands it?
- Have you done enough to consider how you’re defining ESG and applying this across strategies and portfolios? Have you clearly communicated your position?
One positive from COP27 was the conference seems to have signalled more collaboration on tackling climate change. Most notably, the world’s two biggest economies – and polluters – the US and China seem to have become closer this week, which is important. At COP27, we also saw the launch of the Forest and Climate Leaders’ Partnership (FCLP) to help restore forests in the coming years, which will be vital in achieving ambitious temperature rise goals.
- Projects such as the FCLP will rely on private donor finance as well as funding from governments. Could you commit to supporting projects like these that aim to help preserve habitats and reverse human-made damage to the environment?
- What more can you also be doing to encourage better collaboration within your industry to identify and implement sustainability solutions? True leadership isn’t about acting alone.
Conclusion: Let’s put our money where our mouth is
It’s easy to dismiss COP meetings as talking shops; real change comes from them. At COP26, for example, the International Sustainability Standards Board (ISSB) was formed to create a global baseline standard on ESG disclosures for capital markets. COP27 represents more progress despite challenging economic conditions as the world recovers from Covid and the war in Ukraine continues to hamper Europe’s moves away from fossil fuels.
Everyone must play their role in the fight against the climate emergency, and companies can lead with their ESG policies. It’s a fight we either win or lose as a collective. At Grayling, we’re proud to have worked on some fantastic sustainability campaigns and would welcome the chance to discuss how to help you communicate your ESG strategy.
If you would like further information on how we can assist you with your ESG strategy, please contact us at firstname.lastname@example.org.