Why businesses should lead on climate action
This article is sponsored by ENGIE Insight.
With COP21 and COP22 serving as launch pads in the fight against climate change, corporations with a global view are taking seriously their role as leaders in climate action. Despite uncertainty here in the United States, businesses are forging ahead with plans to achieve deep emission reductions and to implement strategies to mitigate climate change risks — not only to protect the environment, but to strengthen business resiliency and the global economy.
Over the past 12 months, several major international events have led to this point of action:
- The COP21 Paris Agreement is entered into force: On April 22, representatives from 175 countries convened at the United Nations in New York City and signed the Paris Agreement, which officially went into force Nov. 4, much earlier than predicted. The agreement outlines the collective path forward for national, state and municipal governments around the globe to keep global temperature rise well below 2 degrees Celsius above pre-industrial levels.
- COP22 "The COP of Action" convenes in Marrakesh: On Nov. 7, COP22 attendees arrived in Marrakesh excited and charged with the responsibility of developing implementation plans for the Paris Agreement, where attendees were able to tackle a number of key items. One of the most encouraging developments of COP22 was the growth in participation of "non-state actors" — in other words, businesses — in side events, such as the U.N. Framework Convention on Climate Change (UNFCCC) "Momentum for Change: Climate Neutral Now" panel. Representatives from Microsoft and Phillips Lighting spoke about their committed efforts to achieve climate neutrality by focusing their actions on deep efficiency gains, investing in renewable technology and setting an internal price on carbon.
- The World Economic Forum in Davos: Climate change played a much more significant role at the forum this year, in two major ways. First, nations formerly silent on climate action have stepped up into leadership roles. For example, President Xi Jinping of China opened the forum with strong messaging for maintaining global support of the Paris Agreement and emphasized China’s role in seizing economic opportunity from investment in clean tech. Second, the U.N. emphasized the role of the Sustainable Development Goals (SDGs) in providing a framework for how the private sector can mitigate risk while adapting to the low-carbon economy. The U.N. Secretary-General emphasized the opportunities of SDG adoption for business, citing a recent report that "…the returns on investments that can be generated by the full implementation of the sustainable development goals would mean something in the order of magnitude of $30 billion per year."
These events have served to underscore the importance of corporations addressing climate change and taking action. Despite the complexities inherent in implementing the Paris Agreement, coupled with market and policy uncertainty, there are encouraging signs that the corporate community is forging ahead. Perhaps the most visible expression of this focus on action is through the We Mean Business coalition, comprised internationally of more than 500 companies making ambitious commitments on corporate climate engagement, science-based targets, renewable energy, policy engagement and more.
One of the We Mean Business initiatives is RE100, comprising companies committing to 100 percent renewable power. According to the coalition, increased use of renewable electricity is critical to the transition to a low-carbon economy. Businesses can drive the creation of a thriving, global market for renewable power, a game-changer in reducing emissions, by committing to transition 100 percent of their electricity to renewable sources as quickly as possible.
To date, 87 companies have joined RE100 and publicly committed to 100 percent renewable power. RE100 is a meaningful way for business to take action today to reduce emissions using existing renewable energy technologies, resulting in positive financial and reputational benefits.
Financial risks and rewards
Companies are also taking action at the financial level. CFOs, investors, shareholders, lenders, insurers, credit rating agencies, coalitions and think tanks have supported or driven numerous actions to align business practices with energy and sustainability management. Examples include:
- Divestments: Major institutional investors are taking action to divest from fossil fuel assets and accelerate their investments in renewables. The Rockefeller Brother Funds' (RBF) recent divestment statement is a prime example.
- Capital reallocation: Leading banks such as Bank of America, Morgan Stanley, JP Morgan Chase, Citigroup and Deutsche Bank have halted financing coal-mining and coal-fired power plants to gradually reduce exposure to the thermal coal mining sector. This coincides with the green bond market doubling to $81 billion between 2015 and 2016, with the same level of growth expected in 2017.
- Disclosures: The CDP, a not-for-profit organization focusing on corporate sustainability disclosure, has united 827 investors holding $100 trillion in assets to request more transparency from corporations on their climate change exposure.
- Activism: In North America, shareholder resolutions related to environmental impact increased by more than 50 percent over the past three years. Their influence led to real policy change, from Archers Daniel Midland beginning to source deforestation-free palm oil and soy, to Colgate-Palmolive adopting science-based GHG goals.
These actions are already producing tangible results to curb corporate impact on climate change. As the energy industry experiences a multifaceted revolution — driven by the transition to a low-carbon economy, deregulation, decentralization and technology — organizations cannot afford not to be energy-efficient and not to understand, measure, mitigate and communicate their climate-related risk exposure.
Three steps companies should take
The UNFCCC’s Climate Neutral Now initiative highlights three steps companies should take to achieve climate neutrality:
- Measure carbon footprint. When it comes to measuring and reporting on a company’s carbon footprint, knowledge is power. It’s important to accurately track, measure and manage greenhouse gas (GHG) emissions using consistent methodologies, backed by verifiable data. Recently, ENGIE Insight client Caesars Entertainment achieved the highest possible CDP Climate Change score last year — a perfect A — and a place on the coveted CDP Climate A-List for developing and reporting its first science-based carbon target aligned with the Paris Agreement, and for demonstrating measurable year-over-year emissions reductions.
- Reduce emissions as much as possible. Once a company has a system for accurately measuring and reporting emissions, it can leverage the data to pinpoint areas for improving energy, water and waste usage, and create a targeted plan of action that reduces resource use and related GHG emissions. ENGIE Insight has helped numerous clients achieve these goals through our Energy Benchmarking and Intelligence and Continuous Monitoring & Managed Maintenance solutions.
- Offset what you cannot reduce with U.N. certified emission reductions. ENGIE Insight's expert capabilities around Renewable & Distributed Energy Solutions offer a direct match to meeting the U.N. directive for corporations to substantially reduce their emissions. ENGIE Insight is poised to help organizations plan and maintain a clear, actionable roadmap to renewable energy and provide consistent support to achieve these goals. ENGIE Insight works with businesses of every size in every location to identify renewable opportunities, procure distributed energy resources, source renewable energy credits and climate offsets, and more.
ENGIE Insight is committed to supporting businesses taking the lead on climate action. If you’re still trying to make sense of what it all means, please join ENGIE Insight’s free upcoming webinar March 9: "Corporate Climate Action: The Business Benefits to Forging Ahead." ENGIE Insight climate experts will be joined by a representative from CDP to discuss the risks and rewards of action. Register here.