Back in 2015, at COP21, the nations of the world met in Paris to support a strategy dedicated to reducing greenhouse gas emissions to decrease global warming and achieve net zero targets by 2050.
As well as agreements on limiting global temperature rises to 1.5C and keeping them 2.0C below pre-industrial levels, each nation committed to benchmarking its own emission-reduction targets and to reviewing its impact every five years. Wealthier countries also pledged to help developing nations by providing funding to support efforts in adapting to climate change and implementing renewable energy sources.
Fast forward eight years to the COP28 climate summit in Dubai and we have seen these nations come together again to evaluate the commitments made as part of the Paris agreement and to agree on more impactful action to tackling climate change.
What’s in the COP28 deal?
Whilst one of the headlines from the two week conference was that emissions would need to reduce by 43% to achieve the Paris agreement goal of 1.5C by 2030, more positively, a landmark deal was agreed: “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner… to achieve net zero by 2050 in keeping with the science.”
Also included in the deal was the tripling of renewable energy capacity across the globe by 2030, being quicker to reduce coal use and accelerating advanced technologies such as carbon capture and storage as well as calls for parties to set more ambitious emissions targets by 2025.
These are generally positive outcomes, however there will be concerns around the speed and ability to meet these targets and doing so in a just and fair manner.
Will the agreed changes be quick enough?
Scientifically, the speed of decarbonisation needs to increase significantly (estimated to be 5-7 times faster than the current rate) if we’re to achieve net zero by 2050 and to have any chance of achieving efforts to keep global temperatures well below 2.0C. However, there is also a recognition that this is ultimately about progress not perfection and importantly it’s about turning the ambitions into action and being accountable, but that we need to move at a faster pace than what has currently been seen.
The outcomes of COP28 are on balance positive, but climate talks need to move beyond the summit’s negotiation halls to have a greater impact. The ambitious climate strategy put in place provides a framework at a government level for nations to adhere to, however in larger economies, successfully achieving these ambitions relies a great deal on the private sector, in particular businesses.
Why does this matter for UK businesses?
Climate change has become a pivotal factor influencing the reputation of organisations, whether they directly contribute to or indirectly affect net-zero goals. Nearly all businesses must evaluate their stance on sustainability, with a particular focus on climate change and its impact. Businesses must be ready and agile to adapt to the ambitions set out at these summits and drive positive change.
This is particularly important as the Corporate Sustainability Reporting Directive (CSRD) will take effect from January 2024, requiring businesses to take control of their carbon reporting requirements and provide a detailed outline of sustainability disclosures. Even though this is an EU law, it’s anticipated to impact around 50,000 UK businesses.
Additionally, with two new sustainability standards (IFRS S1 and IFRS S2) from the International Sustainability Standards Board (ISSB) replacing the Taskforce on Climate-Related Financial Disclosures (TCFD) framework, businesses, in particular SMEs (who are the backbone to the UK economy), must start to manage their own climate-related risks.
SMEs who are proactive on this front will not only contribute towards achieving the goals set-out in decarbonising the planet, but will give themselves a competitive advantage and head start in any future climate reporting requirements that may well come their way sooner rather than later.
Why financial data is just as important
It’s more important than ever that the figures and data underpinning climate efforts is taken as seriously as financial data. Put simply, if this is left until 2030 when the nations of the world arrive at the next summit to complete another “stocktake”, it will be too late. Accountability has never been more important and if your business is not ahead of the curve and on top of reporting requirements, it could severely damage reputations and credibility not to mention reduce our chances of achieving the ambitions set out in these agreements.
A recent report from the Chartered Institute of Internal Auditors emphasises the importance for business leaders and boards to prioritise Environmental, Social, and Governance (ESG) risks within their supply chains. It explores the essential requirement for organisations to align their supply chain operations with their social values and environmental goals and highlights the increasing demands from regulators, customers, and investors for enhanced transparency and accountability in supply chain practices.
How we can help
At Saffery, we support our clients with creating sustainability-driven and net zero strategies and turning these ambitions into credible actions.
We work with a range of businesses to help achieve their sustainability targets. If you would like to discuss the outcomes of COP28 and what it means for your business, please get in touch with your usual Saffery contact, or speak to Stuart Macdougall.