The issue of the climate crisis has been at the forefront since the UN Paris Agreement in 2015, which aimed to limit the average rise in global temperatures to 2C° above pre-industrial levels and to try to keep the increase below 1.5C°. This agreement is forcing governments to act quickly and enact measures and policies to reduce emissions that will trickle down and affect your business. Are you prepared for the renewable revolution?
The climate crisis is taking hold with more extreme weather events around the world. With extreme weather comes extreme financial costs for governments and businesses as they have to mitigate their losses. Long gone are the days where companies can get by with an “it wouldn’t happen to me” approach. Countries have thought like this, only to have to spend billions in climate crisis response and relief, which gave motivation to the Paris climate accord. Global economic losses resulting from weather-related catastrophes accounted for over €1 trillion in losses in the past decade, more than half of which was uninsured. These losses have a ripple effect that can spread to other industries and in turn, spur an economic recession and a loss of profits. While some are more vulnerable, no country is safe and policies and laws are beginning to reflect this.
Businesses bear a lot of responsibility for carbon emissions. Just 100 companies all around the world are responsible for about 70% of carbon emissions that cause global warming. Government policies around climate action will directly impact businesses of all sizes. For example, the UK will require listed and large private companies to disclose climate threats under a framework created by the Task Force on Climate-related Financial Disclosures. Disclosure is the first step, but it is the data collected that will allow companies and their investors to understand the risk associated with the climate crisis. In short, if your company is not contributing to climate goals, action in the form of higher taxing will be taken against your business. This will force organisations to think about risk management and governance, setting metrics and targeting, and establishing a strategy to deal with existential threats.
The race to net zero is an uphill battle, practical action will take centre stage first. Success will depend on cleaning up energy sources, reducing emissions from appliances and retrofitting buildings. Efficiency must be increased to enable energy demand to fall back to levels seen in 2006 despite a much larger global economy. This means that about 2% of the world’s entire GDP will need to be spent on things like infrastructure to meet these goals. Infrastructure in areas such as transit, electricity and green spaces has been neglected in many parts and will need to catch up in order to meet interim goals, otherwise, renewable energy use won’t reach its peak efficiency.
The power sector, something every business relies on, is the first priority for government interaction, most notably the coal sector. Last year, Global Energy Monitor reported in Carbon Brief that global coal-fired power capacity shrank for the first time since before the industrial revolution in the first half of 2020. Policies for greener economic growth and cleaner air have been marked by governments. Emissions related to energy supply have declined nearly two-thirds since 1990. However, more action will be taken towards businesses that still pollute in ways such as carbon taxing, especially if countrywide actions on renewable energy don’t meet targets right away.
The transport sector is next. In 2019, France became the first country to legislate a phase out of combustion engines, with a target year of 2040. By June 2020, according to the IEA, 17 countries had announced 100% zero emissions targets or the phasing out of vehicles powered by internal combustion by 2050. The UK will ban the sale of petrol and diesel cars and vans by 2030, bringing that target forward by 10 years. Even if your business doesn’t own a fleet, it could affect those in your supply chain and increase costs. Other sectors such as agriculture, packaging, water and waste management will most likely follow suit in the future.
Research shows that business is the best implementation partner for governments around the world as they strive to hit their climate targets. National and local governments can and should turn to business to help turn their climate commitments into tangible actions.Smart businesses aren’t waiting until they are forced to switch to renewables or cut emissions, they are acting now and forming these partnerships. Governments will put policies in place and while some will help and incentivise, internal innovation is what will set your business apart from the rest. Necessity is the mother of invention and in the new climate reality, businesses that can innovate and take advantage of the low-carbon transition will be the ones that secure a sustainable and successful future.