Taking stock of COP: The Relevance of COP for Businesses
Every autumn, the news is filled with articles about COP, where world leaders meet with leading climate and environmental experts (sometimes in an exotic location), and Greta Thunberg tells everyone off.
The annual Conference of Parties (COP) should be the perfect opportunity for governments around the world to strategise actions to combat climate change, yet the stories that seem to be emerging are more often linked to controversies. Last year, COP27 famously made headlines for accepting sponsorship from one of the world’s largest plastic polluters, Coca-Cola. COP again made headlines when it announced the 28th summit would be held in the United Arab Emirates (UAE), a country where 30% of GDP is made up directly from the oil and gas industry. Criticism was also prevalent when the president-designate of COP28 was announced to be Sultan Al Jaber, who is simultaneously the UAE’s Special Envoy to climate change and Group CEO for Abu Dhabi National Oil Company (ADNOC).
These controversies, while significant, also bring to light the intricate and often challenging relationship between environmental policy and global economic interests, a balance that is especially crucial for businesses to understand and navigate.
But what relevance do these annual COP’s hold for businesses? In this article, we’ll take a look at the aims of COP28 and how COP has shaped climate trends and impacted businesses.
A quick recap of the COP
The United Nations Framework Convention on Climate Change (UNFCCC) is an agreement between the 197 countries of the United Nations. Each year, the countries or ‘parties’ meet at COP to share progress, assess the effectiveness of measures, and decide on future strategies towards achieving the aims of the UNFCCC.
One of the most notable outcomes from a COP was achieved at COP21, where The Paris Agreement was signed, in which countries agreed to limit global warming to “well below 2°C”. The impact of this for businesses has been the popularly used commitment of Net Zero by 2050, with 50% reductions achieved by 2030.
However, COP continues to face various criticisms over the years.
Many argue that the COP conferences have been slow in translating discussions and commitments into actionable results. With global emissions continuing to rise, increasing concern among leading climate scientists is being voiced around the ability of many nations to meet their Paris Agreement targets. Furthermore, other pledges, such as the $100bn per year in climate finance to be provided to developing nations from 2020 onwards, have not been fully realised.
COP has also faced scrutiny for the perceived imbalance in representation, with the voices of smaller and more vulnerable countries and communities not being adequately reflected.
Looking ahead to COP28
COP28, scheduled to take place between 30th November and 12th December, is expected to address several critical issues.
During the creation of the Paris Agreement in 2015, it was agreed that countries would regularly report on climate change progress and complete a review of the effectiveness of current actions. COP28 will see the first full ‘Global Stocktake’ of these results. We expect the findings to show that countries' commitments to meet the Paris Agreement Targets are largely insufficient and that many countries have failed to meet their targets. On a global scale, we are not on track to meet the Paris Agreement targets.
It will be interesting to see how countries respond to the Stocktake. Our hope is that the presentation of the findings at COP28 will spur renewed and enhanced commitments from countries to emissions reduction strategies.
COP28 President-designate announced four key focuses for the conference. These include:
1. ‘Fast-tracking the energy transition and slashing emissions before 2030’
We expect to see several countries wishing to introduce commitments to phase out the use of fossil fuels, however, historically commitments in this area have been opposed by several nations (which may now include the UK, after Prime Minister Rishi Sunak announced plans to grant new oil and gas licences in 2023).
If this aim succeeds, there will be commitments to accelerate the transition to renewable energy across all countries. Commitments should also consider ways to support developing nations in this journey.
2. ‘Deliver old promises and set the framework for a new deal on finance’
The Paris Agreement includes provisions for a new global climate finance goal to be set out at COP29. To achieve this goal, parties must lay out the foundations during COP28.
Previous COPs have already committed to other financial initiatives including a Loss & Damage fund and the Green Climate Fund, in which wealthier countries committed to investing $100 billion in climate finance annually by 2020 to support developing countries.
Success for this goal would see parties further commit to funding and operationalising funds.
3. ‘Put nature, people, lives and livelihoods at the heart of climate action’
Leaders at COP28 will be negotiating on a broad range of topics related to this focus area, including food systems and a framework for the Global Goal on Adaptation, land use and forest restoration.
Anticipation is growing for a Food System Declaration, which is hoped would encourage government commitments in tackling issues around food security, land use, and creating sustainable food systems.
4. ‘Mobilise for the most inclusive COP’
The commitment to inclusivity at COP28 highlights the importance of diverse voices in shaping climate policy. Success here would involve ensuring that all stakeholders, including women, Indigenous Peoples, youth, persons with disabilities, local communities, and faith-based organisations, are not only present but actively engaged in the decision-making process.
Human rights organisation Amnesty International has already raised concerns about how the inclusion of all stakeholders is being managed by the hosts, given the UAE's strict controls on rights to freedom of expression and peaceful assembly.
Relevance of COP to businesses
As we delve into the objectives and controversies of the upcoming COP28, it's crucial to understand the broader implications of this global summit, particularly from a business perspective. While COP discussions are often centred around government-level commitments and international policy, their outcomes can have far-reaching impacts. For businesses, understanding the outcomes, trends and opportunities that may arise off the back of COPs can be a useful way of setting themselves apart as a proactive, rather than reactive sustainable business. Particularly for SMEs, which may not have the extensive resources of larger corporations, comprehending and adapting to the outcomes of COP28 is useful for strategic planning and long-term sustainability.
With this in mind, we can take a look at some of the key ways in which COP28's outcomes may impact businesses:
1. Regulatory changes
International climate and environment conferences often set the tone for future policy creation in countries. Awareness of the outcomes of COP’s can help businesses anticipate regulatory changes that may arise in the next few years. Preemptive action can gain businesses a competitive advantage and can save on costs as businesses have time to adjust and implement changes.
Reputation and Brand Value
Demonstrating leadership in sustainability can significantly enhance a brand's value and appeal. Consumers are increasingly favouring companies with strong environmental credentials. Additionally, aligning business aims and goals with those of an internationally recognised event such as COP can boost public perception and trust in a brand.
COP’s focus and outcomes could drive demand for products and services that align with commitments. Companies innovating in areas like renewable energy, sustainable materials, and energy-efficient technologies can tap into new markets and customer segments.
Aligning with sustainable practices can help mitigate risks associated with environmental liabilities. This includes potential penalties for non-compliance with new sustainability regulations and the physical risks from climate change impacts. Adopting sustainable practices in line with key areas identified by leading climate scientists at events such as COP can also build business resilience against climate-related disruptions, ensuring long-term viability in a changing world.
There is a significant shift in the investment world towards Environmental, Social, and Governance (ESG) criteria. Companies aligned with COP28 outcomes, particularly those taking proactive steps in sustainability, are likely to be more attractive to investors focused on ESG.
Every year, COP brings critical issues in the fight against climate change to the forefront. It's important to acknowledge the controversies and challenges surrounding these conferences, from unmet financial commitments to concerns about greenwashing. Yet the outcomes each year still hold significant relevance for both governments and businesses.
For businesses, understanding and reacting to the developments at COP28 is not just about compliance; it’s about seizing opportunities in a rapidly evolving global landscape. The conference outcomes can shape market trends, inform regulatory changes, and drive consumer expectations. Staying abreast of these developments allows businesses to be proactive rather than reactive, aligning their strategies with both current and emerging sustainability trends.
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