This Sunday sees the start of the 26th United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties, COP26, and focuses global attention on tackling the climate change crisis. The two-week conference in Scotland marks the biggest climate change event since COP21, six years ago. Taking place at a time of heightened environmental awareness post-pandemic, there is a real awareness of making this COP count and delivering action. But what will COP26 cover, why will it be important for businesses and what should organisations be doing in response?
What is COP26?
COP26 will bring together representatives from up to 190 countries, along with tens of thousands of negotiators, government representatives, agencies, businesses and citizens; all with the aim of reaching agreement on how to tackle climate change across the globe. There will be discussions around a wide range of key issues - from net-zero carbon emissions to clean energy, green finance and sustainable land development - and a focus on delivering decisive change.
The last major COP took place in Paris in 2015 (COP21) and gave rise to the landmark Paris Agreement - a legally binding commitment signed by almost every country around the world to reduce emissions. As summarised in our blog post on what to expect from COP26, the commitments made by those parties to the Paris Agreement resulted in each nation defining Nationally Determined Contributions (action plans for reducing emissions) to ensure climate change goals are met.
These NDCs will now be under review and there are high expectations that this year's climate change conference delivers decisive action. As COP26 Chairman Alok Sharma MP said earlier this month, "Paris promised, Glasgow must deliver".
What did the Paris Agreement set out?
There were 191 parties to the Paris Agreement - a historic outcome from COP21 in 2015. It set out that each nation must:
- reduce the amount of greenhouse gases produced and increase renewable types of energy, such as wind, solar and wave power;
- keep the global temperature increase "well below" 2 degrees centigrade and to try to limit it to 1.5 degrees;
- review progress made on the agreement - through each country's NDCs - every five years (i.e. at COP26); and
- collectively spend $100 billion dollars a year in climate finance to help poorer countries by 2020, with a commitment to further finance in the future.
While the last climate change summit, COP25 in Madrid in 2019, sought to finalise certain loose ends regarding the implementation of the Paris Agreement, there is now a real sense that more stretching commitments are needed to accelerate action plans.
According to the NDC Synthesis report published by UN Climate Change on 17 September 2021, "2021 is a make or break year to confront the global climate emergency". It calls for more ambitious national climate action plans in order to achieve the goal of limiting global temperature rises - to the extent that global emissions should be cut by 45% from 2010 levels by 2030.
So, what will COP26 cover?
With a clear focus on action, discussions over the two-week summit will revolve around achieving four major goals, which we discuss in more detail in our earlier blog. They are:
- Secure global net zero emissions by mid-century and keep 1.5 degrees celsius within reach - This recognises that action plans will need to go much further and faster towards decarbonisation if we are to keep global average temperature rises low.
- Adapt to protect communities and natural habitats - Delivering change here relies on protecting and restoring ecosystems, plus investment in systems, infrastructure and agriculture to avoid loss of homes and livelihoods.
- Green finance - Developed countries need to make good on their promise to mobilise at least $100 billion in climate finance money per year to raise the necessary funds required.
- Work together to deliver - Collaboration between governments, businesses and civil society will be key to accelerating action on climate change.
What does COP26 mean for businesses?
COP26 will not only bring nations and global leaders together to deliver action, but big business will be there too. As we talked about earlier this month, this industry presence at COP26 highlights the crucial part businesses can play in shaping the green economy.
There are many reasons why it's important for organisations to engage and embrace opportunities around Environmental, Social and Governance (ESG). As well as the wider societal benefits this will bring, it simply makes good business sense - potentially opening up new industries, tech, products and services. Consumer behaviour is likely to be affected by the outcomes of COP26 and the evolving news agenda. Those policies agreed at the summit will also filter down into regulations, with which businesses will need to comply, and substantial private finance is going to be needed to support action plans.
Depending on where you are at in terms of managing the risks and opportunities around climate change, will influence the steps you take following news from COP26. However, at foundation level it's important for all organisations to consider:
- how they impact the environment (e.g. the resources consumed and the environmental footprint made);
- how they will be affected by climate change;
- what information is shared with stakeholders; and
- what role the business can play in improving the planet.
More broadly, if the UK achieves zero carbon emissions before its target date of 2050, then UK plc will have the advantage of selling its knowhow, technology and skills elsewhere - helping to shape the green economy.
What can businesses be doing now?
With the conference only days away, we are already seeing a buzz of news, policy and interest in climate change and ESG related issues. There are likely to be more big announcements to come from nations, government and policy makers. And at the same time, businesses may take the opportunity to reflect on their own environmental issues and overall approach.
While we wait to hear what the major outcomes of COP26 will be, we've put together a short summary of key areas for businesses to consider:
- It's important to understand baselines - be thorough in the auditing process and look down the supply chain to ensure that your environmental impacts aren't being pushed to other regions or countries.
- Examine the natural resources you currently use - this should include looking at how much water is needed to support your operations, as well as greenhouse gas emissions. But think also about forest risk commodities (leather, timber, palm oil, pulp and paper, soya, rubber, beef, soya): where does it comes from? Is it sustainable? How sure are you?
- Review environmental management systems - are these internationally recognised as being reliable? Are they robust?
- Communication of environmental messages - consider how your environmental story is shared with employees, customers, shareholders and other stakeholders. Does perception match with your messaging and communication aims?
- Reporting - are you reporting on a mandatory basis? If so, are you reporting the right things and meeting the legal requirements imposed on your business? For those reporting voluntarily, consider how much information it is necessary to disclose.
- Benchmarking - it's important to look at what your competitors are doing and whether there is an industry standard/approach emerging. Either way, you'll want to ensure you are being consistent and even help to shape that wider approach.
- Keeping the Board informed - are they up-to-speed on all elements of your approach to ESG and the company's environmental performance? It's important they have all the details around these aspects of the business and understand the key issues and messages.
- Ownership - who is responsible for each of the steps towards meeting the environmental targets set? Are members of the senior leadership team responsible for key announcements on such matters?
- Finance - a key element of COP26 is about mobilising finance. Is your finance team currently using green finance? Are there ways to make further savings and could there be new financial products available that will benefit your business?
- Beware of greenwashing - in the eagerness to tune up your green dial it can be easy to expose yourself to risk. When positioning your products / services / operations as green, be sure that your claims are sound and evidence-based.
- Continual improvement - while climate change naturally presents risks, it's clear there are also opportunities. These can be big and small, so be mindful not to overlook the easy wins and see where small changes can be made that will contribute to the bigger, greener picture.
Are you ready for COP26? To help you keep on top of all the highlights, our cross-firm legal team of ESG experts will be closely following the summit. We expect some important announcements and more clarity on the changes needed to ensure climate change goals are met. That's why we'll be sharing the latest highlights in our COP26 updates blog post and thoughts on what businesses and the public sector could be doing now in their approach to ESG matters.
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