COP 27 outcomes and what does it mean for business?
U.N. climate negotiations in Egypt (COP27) came up with an agreement to set up a Loss and Damage Fund. The Fund is the first step to addressing injustice to billions of people in developing countries who are the least responsible but suffer the most due to climate impacts: floods, droughts, hurricanes, and rising sea levels.
“The decision on loss and damage finance offers hope to the vulnerable people that they will get adequate help to recover from climate disasters and rebuild their lives,” said Harjeet Singh, head of the global political strategy for Climate Action Network.
The tricky part of the decision on the Lost and Damage Fund is who, how and when will fill it with cash. The agreement on these questions is postponed till COP28 next year in the United Arab Emirates.
While countries’ delegations tried to agree on addressing the consequences of the climate crisis – they failed to focus on the root cause of the crisis: fossil fuels. At the COP in Egypt, fossil fuel lobbyists were presented in high numbers and didn’t save money on side events and champagne.
In the final COP27 text, activists noticed the inclusion of “low-emission” energy as part of the solution. Some experts worry this broad definition may be a loophole for the growth of natural gas and nuclear power.
Countries such as UAE and Saudi Arabia, whose economies rely heavily on fossil fuels, have said they plan to supply the world with gas and oil. With an energy crisis in Europe due to the Russian invasion of Ukraine, some African countries plan to increase their export of fossil fuels to Europe.
With all these controversial talks in the halls and corridors, civil society and scientists keep saying that staying within the 1.5C limit would require even more dramatic and expensive emissions cuts. For now, average global temperatures have risen more than 1.2C since preindustrial times. The latest IPCC report also shows that today’s commitments will increase emissions by 10.6% by 2030 compared to 2010. Meanwhile, the IPCC AR6 report (2022) indicated that CO2 emissions needed to be reduced by 45% by 2030 compared to 2010.
U.N. Secretary-General Antonio Guterres warning our current trajectory places us “on a highway to climate hell with our foot still on the accelerator.”
Photo credit: Ministers deliver statements during the closing plenary at the COP27 climate summit in Red Sea resort of Sharm el-Sheikh, Egypt, November 20, 2022. REUTERS/Mohamed Abd El Ghany
What about business?
U.N. climate negotiations get together a wide variety of people: politicians, official delegations, civil society, scientists and, of course, businesses. Last year, COP26 in Glasgow boosted countries’ pledges of emission reductions. It was a good push for many big and small companies to take their more ambitious climate targets towards net zero.
With almost no outcomes on mitigation at COP27, business companies become the essential moving force to address the climate crisis.
A strong focus on net-zero pledges, ESG disclosures, and best practices available for emission reduction will help to compensate poor results of COPs.
“We urgently need every business, investor, city, state and region to walk the talk on their net zero promises. We cannot afford slow movers, fake movers or any form of greenwashing.” António Guterres, UN Secretary General
For some, 1.5°C is very much alive. The companies at COP spoke loudly about the need for governments to make progress on regulations and standards to facilitate the global transition of the private sector. There was also news that the number of companies setting science-based targets (SBTi) has doubled since COP26, with over 1,800 companies having validated targets and 4,000 having committed to setting them.
Loss and Damage fund and business.
Although there is no clarity on the Loss and Damage Fund, many experts commented that businesses could capitalise on the subsequent sustainability opportunities in previously underfunded countries. This agreement could open novel markets for companies in infrastructure, manufacturing, capital goods, and more for expansion and business development.
No greenwashing towards NetZero
At COP27, a U.N High Level Expert group release a report about greenwashing and its widespread impacts on successful climate action. The report aims to build on the Race to Zero and Science Based Targets initiative by providing corporates and investors with time-based frameworks to deliver net zero based on short, medium and long-term targets. The U.N. experts provide a list of recommendations to ensure developed net zero pledges do not fall for greenwashing pitfalls.
In the report, experts stress that companies should no longer claim to be net zero if they are still involved in building or investing in new fossil fuel supply or support deforestation and other environmentally destructive activities. Firms should focus on cutting emissions before purchasing carbon credits, which should only be used as a last resort to offset hard-to-abate emissions.
International Organization for Standardization (ISO) presented a NetZeroGuidelines, and Christoph Winterhalter, ISO Vice-President, explained: “We have the foundation, resources and industry experts to take global action. There are already numerous policy tools and standards available that help to address climate change. It is increasingly clear that we don’t need to reinvent the wheel, just realign it.”
Inflation in carbon prices.
We all know inflation is on the rise. The International Monetary Fund (IMF) says that the carbon price must go up to at least $75/ton by 2030 for global climate goals to succeed. This discussion also shows a clear path towards emission reduction as soon as possible because it’ll become more expensive.
Carbon offsets are back. What business should be aware of?
Experts noted a significant increase in offset conversations throughout COP27. Offset and renewable energy projects can help offset a company’s internal emissions or be sold to other organisations falling short. At the same time, business companies should be aware of junk offsets. Purchasing credits to support solar or wind projects sounds good for the climate. However, Bloomberg experts consider these offsets largely bogus. Barbara Haya, the director of the Berkeley Carbon Trading Project, views empty offsets as “paying for business as usual” behind a facade of decarbonisation.
Biodiversity is on the rise.
Although COP27 wrapped up past weekend, in December, Montreal is hosting COP15, the U.N. Biodiversity Conference.
Nature can’t be viewed as a secondary, less-important challenge to climate; action in one area impacts the other. Companies and governments need to respond and report to relevant frameworks. For example, in 2021, the Taskforce on Climate-related Financial Disclosures (TCFD) announced a new initiative called the Taskforce on Nature-related Financial Disclosures (TNFD). The framework was tested this year and is scheduled to officially launch in 2023. TNFD mimics the structure of TCFD, intending to help companies and local governments report on the risks associated with biodiversity loss and ecosystem degradation.
At Clearstream Solutions, we strongly believe small and big business companies play a dramatic role in preventing irreversible consequences of climate crisis. That’s why we assist organisations in measuring and implementing best-in-class environmental and sustainable practices in their businesses, products and supply chains to prevent a global climate crisis.
Sustainability Program Associate
- COP27 – Initiatives