Climate change - will business save the planet?

11th of April 2019
Climate change - will business save the planet?

Scientists have issued their strongest warning yet that within little more than a decade global temperatures will surge beyond the point of no return. Amid dismay at the failure of politicians to agree what to do about it, businesses are taking it upon themselves to give the lead in pulling the planet back from the brink, writes Hartley Milner.

Donald Trump’s decision to renege on the United State’s commitment to the 2015 Paris accord on climate change triggered worldwide condemnation and accusations that he was fiddling while the planet burns. The leader of the world’s largest greenhouse gas emitter after China said the deal would disadvantage American businesses and put millions of jobs at risk.

Then late last year Trump rejected a report by his own administration saying taking no action would be even more disastrous for the economy. “I don’t believe it,” he said, insisting America is “the cleanest we’ve ever been” and it was other “dirty” countries that needed to clean up their act.

Not quite the response compilers of the National Climate Assessment were hoping for. The report concluded that the government “must act aggressively to adapt to current impacts and mitigate future catastrophes to avoid substantial damage to the US economy, environment and human health and wellbeing over the coming decades”.

But while Trump remains in denial, growing numbers of states and major cities are working unilaterally towards the primary goal set out in the Paris agreement: to keep global temperature rises this century to well below 2°C above pre-industrial levels while endeavouring to limit them even further, to 1.5°C. The American people are coming round too, with 66 per cent saying in a recent poll that they have seen enough evidence to justify action on climate change, up from 41 per cent two decades ago.

Clean energy goals

The US business community has not been idle either. More than 63 per cent of the largest companies in the Fortune 100, including Walmart, General Motors, Bank of America, Google and Microsoft, and nearly half of smaller 100 companies in the Fortune 500 say they are on target to meet one or more clean energy goals. Meanwhile the power sector, the country’s single largest carbon producer, has cut emissions by 28 per cent since 2005.

“American corporations understand that how we respond to environmental pressures today will define the legacy we leave behind for future generations, and they want to ensure it’s a sustainable legacy, not a dystopian one,” said manufacturing magnate and climate activist Eugene Morgan.

“That said, it’s also what their customers, employees and investors want, so to be seen giving the lead on climate action is to their reputational and economic advantage. Capitalism is a dirty word in some circles, but it’s capitalism, not governments, that will drive change, and not only in the United States but throughout the industrialised world.”

The latest America’s Pledge report shows the US is almost halfway to meeting its Paris emissions reduction goals, despite Trump intransigence. But Morgan added: “I believe Washington will come round in time, but it will take change at the top and time is a commodity that is fast running out.”

In December 2018 20,000 representatives of governments and other change-makers from 190 nations gathered in Poland for the COP24 annual UN climate conference. The core aim was to provide firm guidelines to enable countries signed up to the Paris pact to transparently report their greenhouse gas emissions and efforts to reduce them.

Ahead of the summit, an alliance comprising the heads of 50 major global businesses, representing more than €1.3 trillion in total revenue, published an open letter to government leaders urging greater collaboration to speed up progress towards a low-carbon economy. Thirty of the companies succeeded in slashing their emissions by nine per cent – more than 47 million metric tonnes in absolute terms – between 2015 and 2016, the equivalent of taking 10 million cars off the road for one year.

Bold leadership

Feike Sijbesma, chair of the Alliance of Climate Action CEOs, said: “Business has an increasingly vital role to play in accelerating the shift to a low-carbon and climate-resilient economy. This will require partnerships with other companies, governments at all levels and civil society. It also requires bold leadership and good governance, which will allow long-term creation of shareholder value alongside long-term value for our society.”

Sijbesma is delivering that ‘bold leadership’ as ceo at Netherlands-based Royal DSM. The global specialist in health, nutrition and sustainable living has set a myriad of climate goals, including making greenhouse gas emission reductions of 30 per cent by using 75 per cent purchased renewable electricity by 2030. DSM has also set an internal carbon price of €50 per ton of CO2.

Internal carbon pricing is a theoretical price on CO2 emissions that creates an incentive for polluters to reduce waste and invest in energy efficiency and cleaner power sources.

Other Alliance members in Europe that have been driving climate action within their businesses include:

BT: The UK-based telecom provider is aiming to buy 100 per cent renewable energy by 2020 and to have reduced carbon intensity by 87 per cent from 2017 levels by 2030. The company is also working to help customers cut their emissions by three times its own total carbon impact by 2030.

ENGIE: Having cut coal-fired capacity by 60 per cent since 2016 by closing or selling plants, the French electricity utility group is another multinational that has adopted internal carbon pricing. The business now focuses on low CO2 energy sources such as natural gas and renewables, which it had forecasted would represent over 90 per cent of its earnings by the end of 2018.

Large company commitments

ING Group: By 2025, the Dutch banking group will only finance existing utility clients that use coal for five per cent or less of their energy mix. New clients will only be financed if they have near-zero reliance on coal. Since November 2017, 60 per cent of all utilities project financing has gone towards renewables.

Ørsted: Denmark’s largest energy company changed its name in 2017 from Danish Oil and Natural Gas Energy to signal its switch from oil and gas to renewable energy. The company has pledged to reduce greenhouse gas emissions from energy production by 96 per cent by 2023, based on 2006 levels.

Signify: A global innovator in the production of sustainable lighting products. Formerly Philips Lighting, the Dutch electrical company has committed to making its buildings zero carbon by 2030 and to using only electric and hybrid lease fleet vehicles by 2030.

Not ambitious enough

So how ambitious are Europe’s political institutions in tackling global warming? Not nearly ambitious enough, according to some of the region’s biggest businesses and investors. Along with other environmental activists, the Coalition for Higher Ambition, representing more than €21 trillion in assets, has written to the European Union calling for it to beef up its goals by “considerably increasing the target for reducing carbon emissions by 2030 and cutting emissions to net zero by 2050, at the latest”.

Wendel Trio, director of Coalition member group Climate Action Network Europe, said: “Together, we believe that the full implementation of the Paris agreement means making much deeper emission cuts than currently planned. Europe must embark on a pathway that delivers on the 1.5°C objective of the Paris agreement.”

While most EU countries have indicated support for more radical objectives, others oppose them on cost grounds. These include coal-dependent states Slovakia, Hungary, the Czech Republic and COP24 host Poland. Germany has taken the pessimistic view that the targets would be unachievable by 2030.

For any global crusade to make a decisive impact it will need to bring on board a business sector frequently overlooked in the climate debate. Small to medium-sized enterprises comprise more than 95 per cent of businesses across the world – 99.8 per cent in the EU – and are collectively by far the biggest industrial polluter. But SMEs face particular issues around funding investment in greener technologies, according to the World Bank.

Project lead Matthias Gérard told ECJ: “The move to a low-carbon global economy will inevitably carry a cost. SMEs are frequently less able to obtain formal funding streams than large enterprises, especially in developing countries. Instead, they must turn to informal lending and alternative sources of finance. It is imperative that a greater variety of formal credit sources are opened up to them.”

The World Bank, which in December unveiled €176 billion in climate action investment for 2021 to 2025, is working to find innovative solutions to unlock sources of capital for the SME sector. Measures include early stage finance for start-ups and high growth firms that may otherwise not be able to access bank support.

Gérard added: “The green technologies market is set to boom in coming years, opening up new business opportunities for ecopreneurial young enterprises rapidly emerging in the sector. But if they are to prosper they will need to be adequately resourced, not only to secure their own future but that of the planet as well.”


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