Four Business Opportunities for Post-Cancun Climate Leadership

Four Business Opportunities for Post-Cancun Climate Leadership

Image licensed by stock.xchng user ToivoL

[Editor's note: This article was authored by BSR, a global business network and consultancy focused on sustainability.]

When the annual U.N. climate negotiations concluded in December with the establishment of the Cancun Agreements, they surpassed modest expectations by gaining consensus on a set of measures to achieve progress in climate change mitigation and adaptation.

The agreements expand on the elements of the unofficial Copenhagen Accord, formalizing them in a U.N. agreement. Setting forth a vision and framework that include commitments and action in mitigation, adaptation, technology transfer, reporting, and forestry, the Cancun Agreements lay the foundation for meaningful progress, while deliberately leaving some items to be picked up at next year's talks.

The Cancun Agreements formalize emissions pledges (targets and actions) for 80 countries, including all major economies and heavy emitters such as the United States, the European Union, China, India, and Brazil, into an official voluntary agreement for the first time. Additionally, developing countries will begin reporting mitigation actions to an international panel for consultation and analysis. Even if all pledges are met, however, the science still tells us that we'll fall short (PDF) of where we need to be to avoid surpassing the 2°C maximum increase that climate scientists warn will lead to irreversible change. The agreement establishes a commitment to stay within this threshold, while vulnerable countries already experiencing the effects of climate change insist that a stronger goal -- to stay within a 1.5°C increase -- is necessary.

While providing a critical forum to establish international consensus and cooperation on borderless issues, the U.N. Framework Convention on Climate Change's process is not designed to solve all of our climate problems, nor should it be. Without a formal voice in the negotiations themselves, the role of business leaders is simultaneously undocumented and implicit. Achieving progress toward these targets relies largely on the ability of the private sector to enable financing mechanisms, develop and deploy technologies, and, more broadly, be a source of innovation rather than stagnation.

Here are a few areas in which we expect to see more action and opportunity for private sector leadership:

Scaling Emissions Reductions Through Global Supply Chains

With country pledges on the table and a call to be even more aggressive, businesses should continue efforts to reduce emissions in their own operations and begin working with suppliers to do the same. There are increasing examples of companies moving beyond their owned operations to improve energy efficiency, driving energy and cost savings through their supply chains. It has long been recognized that tackling supply chain emissions is likely to have the most significant impact. With company reporting of Scope 3 emissions on the rise, we'll finally have guidance to improve measuring and reporting, allowing this trend to advance.

Innovating for Climate Needs

The Agreement's goals for mitigation, adaptation, and technology transfer (and associated financing mechanisms) increase the need for private sector leadership. For sectors that are already in the business of delivering solutions, such as information and communications technology, energy, and finance, there has never been a better time to think bigger about how to develop solutions that will enable business partners, suppliers, and customers in all markets to reduce their footprint. Companies outside the traditional enabling industries may be more like "enablers" than they think: There are many evolving opportunities to develop products and services to build consumer and community resilience to climate change.

Demand for new technology is no longer confined to mitigation. We need products and services to help us adapt to living and operating in a climate of instability. Declining natural resources, rising input costs, and increasing disruption will all drive pursuit of tools and technologies that enable efficient resource use and preservation of business and life as usual. The combined effect of climate change, a growing global population, and a burgeoning middle class mean that we are facing not only a climate crisis, but also a food, water (PDF), and health crisis. Companies in the consumer product, pharmaceutical and food, beverage and agricultural sectors can play a significant role in providing products that meet our health, nutritional, and lifestyle needs, while factoring in the increasing resource constraints and costs that they may be facing.

Also, companies and consumers located in areas of water scarcity, a trend exacerbated by climate change, will be well-served by products and services that allow them to reduce water use, maximize water productivity, or purify water where potable water is not available. In some cases, climate impacts will mean increased demand for existing products, such as air conditioners, and in other cases, it may require the development of new products or use of alternative materials.

Developing an Adaptation Strategy Now

Following a year of extreme weather patterns and events and urgent testimony from nations where climate change is hitting hardest, Cancun negotiators established the Green Climate Fund and Cancun Adaptation Framework to support the developing world's ability to cope with climate change, confirming what we already knew: It's too late to stop climate change, and time to start adapting.

Businesses with global operations, suppliers, and markets stand to gain from proactively assessing risks and taking action to build resiliency of physical assets, supply chains, raw material inputs, and business processes.

In a broad sense, adaptation involves measures to reduce vulnerability to the effects of climate change and increase resiliency to respond. For global businesses, adaptation means operating in a more unpredictable world and, consequently, learning to become even more nimble in managing short-term and long-term risk. In other words, businesses must balance short-term market pressures with investments (e.g., in research) to prepare for the longer term, which may not have an immediate or certain payoff. The magnitude of the projected slower-burn climate impacts indicates that the lead time and investment needed to prepare for some of these changes could be significant.

At the same time, the uncertainty of any one scenario materializing often makes it difficult to prioritize where to focus and how to move forward. Companies relying on agricultural inputs often approach this conundrum with a diverse strategy of increasing supplier and crop resiliency, commodity hedging, and investments in exploration of new materials, products, and cultivation regions. While climate impacts present many challenges for business, even risks can double as opportunities, depending on how prepared you are compared to your peers.

Looking for New Ways to Engage in Policy

The annual climate negotiations mark an important opportunity to advance international cooperation on climate change, but are by no means the main opportunity for business to have a say. Furthermore, not everyone is waiting for a global agreement or federal legislation to take action on climate change.

Signs of leadership and progress are strong and fast-moving at the sub-national level, where coalitions of state and city government leaders are working together to drive initiatives to reduce emissions. In the United States, the Western Climate Initiative is working to implement climate policies and establish a cap-and-trade scheme at the regional level. Companies seeking ways to engage in policy should look for opportunities to participate in these initiatives, which happily welcome participation from the business community.

While the Cancun Agreements set a positive tone for the way forward, the continued need for action, innovation, and leadership from business is clear. At the same time, as climate change sets in, its direct and indirect impacts are amplifying existing financial, risk management, and continuity challenges for business.

What does this mean? Those businesses prepared to manage climate risk and opportunity will be the most resilient in an increasingly unstable future. After Cancun, even as the urgency increases, so too have the opportunities to lead.

Image licensed by stock.xchng user ToivoL.