Reflections on Business Climate Summit, Paris May 2015
There are less than 200 days to COP21 in Paris. There’s a pragmatic optimism that some form of deal will be found but right now we are heading for a significant shortfall in the GHG emission reductions that are likely to be needed for us to keep within the 2C warming threshold.
Until we see all the national reduction plans (INDCs) for COP21 we cannot be sure what the shortfall will be but current estimates suggest it’ll be of the order of 30-50%. The need to close the gap between national plans and the science behind 2C means ever more attention is being given to the additional role that business can play in driving the shift to a low carbon economy.
President Hollande hosted an important meeting last week in Paris to address the role of business in closing the emission reduction gap. The Business Climate Summit (BCS) brought 1,000 business leaders together to explore the role of business at COP21. Here are a few take-outs from 36 hours of lively, informed and at times passionate discussion.
Price of carbon – we saw it at Davos and we saw it again at the BCS, CEO after CEO aligned around the need for a price of carbon. Of course there is a huge amount of devil in the detail but the debate was ‘how’ not ‘why’. When polled the audience said they thought a carbon price of $40-100 by 2020 would be needed to drive significant change rising to $100-200 by 2030. Angel Gurria, Secretary General of the OECD, summarised succinctly, ‘we need a big fat price on carbon’. Similarly the need for better business carbon reporting to underpin carbon pricing and investment decisions was given prominence.
A joint voice is a strong voice – the BCS showed the power of a positive business narrative from across the global economy. CEOs of car, food, logistics, finance, technology, clothing, telecom, chemical and resources companies all outlined the need for change. The We Mean Business Coalition has created across economy commitments on carbon pricing, reporting, renewables etc. The International Chamber of Commerce is helping convene 6.5 million companies to support the need for a transition to a low carbon economy.
Sector plans – to complement a general cross economy narrative we need more detailed plans that will see specific sectors outline how they’ll shift practically from high to low carbon. The Consumer Goods Forum (CGF) has taken a lead on this, focusing on the most material parts of its carbon footprint and setting time bound targets to tackle it. We need more sectors to come to Paris in December with at least an outline of their transition plan.
Solutions exist today – There is a temptation for business to accept the need for change but then throw its hands up in despair at the cost and difficulty of change. There are certainly some huge hurdles to overcome but it was interesting to see how much focus there was at the BCS about the extent of solutions that exist today. Berry Wiersum spoke about how Sappi the paper and pulp company set its engineers the long term innovation goal of cutting GHG emissions from their processes by 80%, they did it in 12 months.
Long term policy – If there was one ask by business of Government it was for long term, consistent and stable policy making. Only this will allow the long term investment decisions to be made that will propel business to a truly low carbon economy. The examples of California’s 40 year track record on air pollution and the EU’s 10 year transformation of its car industry were both cited repeatedly.
Energy companies – It was good to see the energy sector well represented at the BCS. The global economy is largely fuelled by fossil fuels today and will be for many years to come. The fossil industry has to be part of the low carbon transition. Some CEOs, like Statoil’s, spoke clearly of their need to change their energy portfolio. Others highlighted the cost of transition and the need to deliver energy security for the world’s poorest. All legitimate concerns. But you sensed amongst the general politeness of proceedings future fault-lines forming. The potential for a proactive low carbon wing of the economy to more aggressively challenge those adverse to change.
Create one ‘better economy’ narrative – Although the focus of the BCS was carbon, the issues of poverty, the Sustainable Development Goals (SDGs – due to be launched by the UN in the autumn) and the circular (zero waste) economy kept cropping up. It’s clear they are all linked but there is a potential for confusion as we engage the many millions of businesses more distant from leadership on sustainability. We need to combine these issues into one narrative about a better economy, one that works for customers, shareholders, society and the planet alike. An economy that works for all.
Disruption outweighs risk management – Much of the climate narrative for business today is about risk. Risk to operations, supply chains, costs, continuity. But the BCS showed that what really keeps CEOs awake is the threat of existential disruption powered by new low carbon business models. The example of Tesla disrupting the car industry was what had CEOs sitting forward in their seats. As Paul Polman of Unilever eloquently said, ‘every CEO has the choice in the shift to a low carbon economy to make the dust or eat the dust of change’.
The BCS was a great event. It showed the growing corporate acceptance of the need for a dramatic shift to a low carbon economy. It also showed how government leaders could be emboldened by a new positive business voice supporting them in what all recognised would be tough politics. The event broadened the narrative beyond the usual CEO superstars of the sustainability movement. It was good to see CEOs from India, South Africa, Mexico provide an input too.
There remains though a frustration that the BCS wasn’t convened 12 months ago. The positive mood music of the BCS needs to be translated quickly into more tangible plans in the next few months. We all know that COP21 is not an end though and expect to see the business voice and low carbon transition plans grow through 2016.
- Davos 2015: 10 reflections on the state of sustainable business
- Economy and nature cannot be separated
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