When it comes to implementing climate action, we are often asked, whose responsibility is it?
My response to that question is: everyone’s. Everyone should and can contribute in a fair and equitable manner, in line with the agreed principles and responsibilities that guide our collective action as reflected in the convention and the Paris agreement.
As the world comes together at COP27 in Egypt in November, we have a rare opportunity for everyone gathered to recognize our common interests and return multilateral action back on track. At this precarious time, more will be expected of industry as companies are tasked with aligning their business models with the pursuit of resilient and low-carbon economies.
COP26 ended with a hard-fought deal—aptly named the Glasgow Climate Pact—that brought nearly 200 nations together to work together towards delivering just pathways to implement the Paris agreement. The period 2020-2030 is a critical decade, both in terms of action and support. We need to do much more to curb climate-warming carbon emissions, double finance and deliver on resilience and adaptation.
That agreement came shortly after an August report by the Intergovernmental Panel on Climate Change showing that by 2040, the planet will have reached an average global temperature increase of 1.5 °C above pre-industrial levels. The report made clear that global political leaders will not be able to coordinate a big enough worldwide response to climate and economic pressures independently. Every lever of society will need to make critical choices in the face of more flooding, wildfires, storm surges, and drought brought on by climate change.
Today, we see corporates across all industries announcing substantial transformation in line with the Paris Agreement, shifting towards the decarbonization of their operations and business practices, along with investors’ environmental practices and government policy—but announcements are not enough.
If the 2020s are to truly become a decade of critical action, then businesses have a significant part to play through their action, technology transfer, finance, and leading by example. After all, almost every business is at risk when it comes to the impacts of climate change—whether it be offices, plants, upstream suppliers, or downstream customers in areas affected by climate change. Every business could soon be vulnerable to climate-driven instability, resource shortages, or economic downturns.
Business leaders have two roles in this extraordinary moment—one that is dangerously poised at a point of no return. The first is to move as quickly as possible to reduce greenhouse gas emissions from their own operations and from their supply chains. Carbon offsets are no longer considered sufficient in countering emissions.
While many firms see this as a burden on return but it need not be. A recent report by McKinsey & Co suggests that the very exercise of setting and meeting aggressive carbon-reduction targets can be an important step for organizations, helping differentiate climate-conscious firms from less committed enterprises in the eyes of consumers. It also seems obvious to say that those companies with compelling climate strategies will attract the most capital in the global marketplace. Influencing the activities of other businesses—such as those within the supply chain—also spreads awareness of effective practices and extends the beneficial impact for both the company and the planet.
All of this is being made easier by increasingly affordable cleantech. Today, almost two-thirds of renewable power added in G20 countries in 2021 cost less than the cheapest coal-fired options. Egypt is on track to produce 42% of its energy from renewable resources by 2035.
The second and more indirect role is the support of effective climate regulation. Decarbonizing the world’s economy requires rebuilding not only the entire electric power industry but also transportation, infrastructure, construction, and agriculture. Action by individual firms can take us a long way, but we won’t solve the problem of climate change without building real partnerships between the public and private sector, developed and developing countries, to ensure that everyone has the skills—and the incentives—to reduce their emissions. Businesses can lead the way by insisting that politicians act now to ensure our future.
Having said that, we need to also be clear that the majority of companies in the private sector in developing countries need the right support packages to allow them to make the envisaged transition. This would include the right finance from finance providers, the relevant and affordable technology needed, the appropriate partnerships with research and development, incentives, and a just pathway.
Industry also has a role to play in working alongside government to facilitate the financing of climate adaptation investment in the developing world. For example, African countries are committed in principle to adopting renewable energy and refraining from exploiting their fossil-fuel resources, but 600 million people in Africa—43% of the continent’s population—currently lack electricity, and around 900 million don’t have access to clean cooking fuels. Industry and business can help to fill this void and ensure that the continent’s broader development needs are met in sustainable ways.
If enough will is put into aligning profit with decarbonization, business leaders should be able to drive large-scale impact while generating an abundance of profitable business opportunities. The awareness of the need for this alignment is rising among both business leaders and investors, but we need to turbocharge our action it if we want to have a shot at avoiding the worst.
At COP27 in Egypt, I am hopeful that the world’s business leaders and decision-makers will rise to that challenge and truly come together for implementation.