COP26: The Impact on Businesses
With the close of the COP26 conference and the finalisation of wide-ranging pledges, it is clear that the conference outcomes will have a significant impact on the business environment. Climate pledges, like those agreed at COP26, provide a framework on which to base future opportunities, regulations, and the mobilisation of public and private financing.
Whilst the outcome of COP26 can be considered imperfect, the pledges made signal a committed global drive towards net zero. Many of the net zero commitments made in Glasgow have come from coalitions of stakeholders, including the Glasgow Financial Alliance for Net Zero (GFANZ) which represents total AUM of US$130trillion. In addition, over half of the UK’s largest businesses have committed to net zero by 2050, representing a combined annual turnover of £700 billion. So, what does COP26 mean for businesses?
Key impacts on the business environment:
Mandatory disclosure of net zero transition plans by 2023: Businesses will have to set out detailed, publicly available plans for how they intend to decarbonise, with science-based standards to be implemented by a high-level Transition Plan Taskforce to combat greenwashing.
Measuring progress: Businesses will need to lay out how they intend to measure progress and achieve transparency regarding their climate footprint. This will include strategies to shift away from fossil fuels, particularly coal, and accelerate towards the use of renewable energy for power and heat. Clean energy technologies, including renewable energy generation and energy efficient technology, will be essential for reaching net zero targets.
Switching to green transport options: Petrol and diesel must be phased out, making room for new ‘green’ vehicles, powered by electricity and hydrogen. The Zero Emissions Vehicles Transition Council (ZEVTC) 2022, formed by ministers and representatives from the world’s most progressive automotive markets, is set to provide an action plan for the acceleration of the global transition to zero emissions vehicles.
Business will have greater funding available for green initiatives: In the UK, £576 million will be spent on a package of initiatives to mobilise funding into emerging markets and developing economies.
Businesses will have to keep up with trade regulations: The EU has proposed a Climate Border Adjustment Mechanism (CBAM) to tackle the importance of high emissions goods and in order to set out a clear path for the EU to become a climate-neutral continent by 2050. Inquiries have been made to introduce a unilateral CBAM in the UK.
Stakeholder and shareholder collaboration will be required: In order to make economy-wide transitions possible, businesses, governments, suppliers, local communities, customers, and employees must collaborate and form cohesive strategic partnerships as “No single technology alone can achieve net zero”.
The outcome of COP26 will bring about new challenges, but also new opportunities for businesses. Those who decarbonise sooner and are transparent in their approach can benefit through gaining a competitive advantage, reducing running costs, and increased investment opportunities, to name a few. Harnessing green technologies and materials will further mitigate climate risks and create jobs. In short, there is a long way to go before net zero can be achieved, but COP26 has focused attention on the importance of taking a global, collaborative approach to resolving this environmental crisis and businesses have a strong influence in the transition to a net zero carbon global economy.
How we can help
If you are looking to set a science-based net zero strategy for your business, Orbis Advisory can support you. With over 30 years of experience in sustainable consulting, we have taken businesses through the whole process of calculating their carbon emissions, reducing their emissions, and setting science-based targets. Please see the “services” section on our website to explore the full range of services, or send an email through to info@orbisadvisory.com for any inquiries.