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Climate Change and Concerns About Carbon Remain Burning Issues in Davos

It's been a hive of activity here at Davos this week as business leaders and politicians discuss some of the biggest global issues on the table in 2010.

Understandably there was concern that with so many important issues vying for attention -- and with some of the disappointments of Copenhagen -- climate change would have slipped down the agenda.

But it's clear from conversations with business and political leaders, my own clients, as well as many of the main plenaries and side events that carbon is still a burning issue here.

The last couple of days here have seen a real focus on climate change and I wanted to share four key takeaways:

{related_content}Firstly, it's important to reflect on Davos in the context of Copenhagen and Mexico.

Felipe Calderon, Mexico's president, summed up the general view here when he said of Copenhagen that it "was not enough" and that "nobody was satisfied with it." But Calderon, who will officiate over the next round of climate change talks in Mexico at the end of this year, was also clear that while a disappointment, Copenhagen was not the end of the road for a global deal on climate change.

I agree with Calderon's assessment that Copenhagen failed to deliver on many of its promises, but that hope remains in 2010. My view is that from the ashes of Copenhagen has come the shell of an agreement, in the form of the Copenhagen Accord. This short document now needs to be filled in with both the details of a future climate change deal and with the political legitimacy necessary to be accepted by heads of state.

Secondly, delivering a global deal is not going to be easy, but progress is being made and in many cases companies have decided to ramp up their investments. Here at Davos, it's clear that to make progress governments and businesses will need to be convinced of the economic viability of any proposed regulatory plans.

To quote Calderon again, the mood here is that "the economic costs associated with trying to tackle climate change are central to the challenges facing governments." To ensure a deal, future plans will need to ensure that no country is unfairly penalized for compliance and that there are sufficient economic incentives.

Thirdly, while you could pessimistically view the absence of clear and definitive price signals as a blocker to investment I think there is an alternative, more pragmatic view. From our conversations with CEOs here at Davos, we know that that even in the wake of Copenhagen they are ramping up in the face of expanding national and regional emissions regimes which compel them to address climate change today, rather than wait for absolute clarity on a possible global deal and carbon price.

What is clear is that business leaders are demanding more certainty from policymakers. Crucially, they are pressuring politicians to deliver the clear price signals that are needed to stimulate investment. As we heard Renault-Nissans CEO Carlos Ghosn say this week: "In the private sector, we need clear targets."

From my conversations here in Switzerland, business wants to play a major role in a low carbon transition both in some cases driven by personal values or wanting to make a difference, and also as Steve Howard, chair of the WEF Global Council on Climate Change, said during the summit, because "smart business knows that taking climate action makes good business sense; it is prudent risk management and creates significant opportunities."

Intelligent cities and smart technologies are one clear area that has been discussed again and again -- renewable energy and energy efficiency have been others.

This recognition, which is shared across the business community, has driven repeated calls this week from industry leaders at Davos, including direct calls made to the EU to act decisively and set the "rules of the game":

"The EU should speed up the transition to a low-carbon society, as we firmly believe there is a wide range of benefits for consumers, the environment and the economy. This is why we urge EU policy leaders to maintain ambitious targets."
-- Garrett AG Forde, chief executive of Philips Lighting.

Finally, so what is my advice to businesses and executives here at Davos? As I said to one of my clients, my view is that "agility'" is of crucial importance to business as companies continue to face uncertainty over the future shape of a climate change deal. Companies need to enhance their strategic and operational agility at the same time as driving real progress and performance improvements, particularly in areas where there is a strong business case or a high probability of a future market.

So what does agility look like and what tools and approaches can help? Here are some key points:

Scenarios — Using scenario planning to move quickly and seize opportunities in a fast changing regulatory landscape will be increasingly important.

Signposts — Winners will align actions to the already visible "signposts" on policy at the regional and national level, for example with the national mitigation commitments and plans.

Quick Wins — Companies need to focus on quick wins in areas like energy efficiency, as well as understanding potential first mover advantages in accessible new growth markets.

Performance Management
— Creating a real performance management system that allows you to get to grips with your carbon emissions, to understand their financial impact and to set organizational and individual targets is an imperative to improve existing business benefits and sustainability impact, as well as to position for better future investments.

Execution, Execution, Execution… — What we see time and time again is that driving real impact and upside requires a ruthless focus on execution across the business from supply chains to the use of IT, from innovation to developing organizational and individual capabilities and behaviors. This will come as no surprise to business leaders but remains key.

So, in conclusion, Davos has demonstrated that climate change will continue to be a big ticket item in 2010 and beyond. Business leaders need to stay focused. Focused on setting flexible strategies and executing across their business to manage risk and position for the business opportunities that will create real winners and losers in the transition to a low carbon economy. 

Peter Lacy is managing director of Accenture Sustainability Services for Europe, Africa, Middle East and Latin America. Based in London, Peter is blogging from the World Economic Forum in Davos this week. Accenture is a strategic partner and an active member of the World Economic Forum.

Image credit by Sebastian Derungs, copyright by World Economic Forum.



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