COP26 is arguably the most important climate conference to date. But what does it mean for businesses? Depending on what sector your business operates in, the outcome of COP26 may impact your business in some shape or form. While it is unlikely the conference will result in radical new regulations or have any drastic effects on your business, the conference will set the mood for how businesses should adapt in order to take climate action.
Indication of regulation
Article 6 of the 2015 Paris Agreement aims to promote an integrated approach to tackling carbon emissions. It encourages voluntary cooperation that assists governments in cutting their emissions in line with their nationally determined contributions (NDC). Despite an agreement on the article itself, the previous COP ended without an agreement on the rules on how to implement Article 6, this is something we can expect to be discussed in Glasgow. Although we may not see a direct impact on businesses as a result of these rules (Article 6 promotes voluntary action of course), it could give us an indication of potential new regulations that could help us cut our emissions.
Race to Net-Zero
You may have heard of Race to Zero, you may even have joined the race already! If not, don’t worry, we’ve got you covered. Race to Zero is the UN-backed global campaign that aims to encourage non-state actors to halve their carbon emissions by 2030. This includes everything from educational institutions to businesses. Fighting the climate crisis should be a concern at a local level as well as on a national level. Race to Zero is empowering businesses, as well as other bodies, to take action into their own hands.
In the UK, small and medium enterprises (SMEs) account for 99.9% of the business population and it is estimated that SMEs account for 70% of pollution globally. The role these SMEs have to play in reducing our emissions will therefore be vital. COP26 will likely encourage more businesses to join the Race to Zero. And remember, no matter how big or small your business may be, everyone has an important part to play if we are to reach net-zero by 2050.
One major impact of COP26 is the way it will influence consumer behaviour. As all eyes are on Glasgow in what is being called the last chance to “pick the planet” by COP26 President, Alok Sharma, COP26 will undoubtedly highlight the importance of buying from brands that are committed to climate action. If you are one of these brands, then good for you, you’re ahead of the game. If you are not one of these brands, then perhaps COP26 will give you the push you need to commit to more tangible climate action.
As the world transitions to a net-zero economy, we will see a large-scale reallocation of private capital towards greener alternatives and sustainable activities. This is something we are starting to see already and includes both public and private finance. The mobilisation of finance also presents some exciting opportunities for businesses, with companies that comply with ESG reporting having greater access to finance.
As mentioned above, COP26 is likely to open up some new and exciting opportunities for businesses that play their cards right. If you are looking to move your business in a more sustainable direction then COP26 may accelerate this, by driving consumer demand and opening up green finance routes. The trick is not to be left behind. Climate action cannot wait any longer, we have delayed it enough already and now we are under huge time pressure to cut out emissions to Net-Zero before it is too late. This is not just a problem for governments, it is a problem that should be addressed at all levels, from individuals, to businesses, to regional.
According to McKinsey and Company, there are three main areas of opportunity that will arise for businesses as we transition to Net-Zero:
Reducing costs by reducing the company’s own emissions
This opportunity applies mainly to businesses in agriculture, oil and gas production, mining, energy and water utilities, many manufacturing sectors, and transport—but also to other sectors that are transport-intensive, such as retail and wholesale, construction, and waste collection.
Producing goods and services to feed the green capital expenditure revolution
This opportunity suggests major global growth plays for B2B companies—especially in sectors where the UK already has a leading position, such as professional, scientific, information, communication, and financial services. Due to the large size of the global market for capital goods, UK manufacturing and construction businesses can also benefit.
Enabling others in the value chain—suppliers and customers—to reduce their emissions
This opportunity is likely to grow as greenhouse gas (GHG) prices and regulations mature and consumer attitudes shift. Sectors, where green solutions could gain significant share, include manufacturing—for example, of food, apparel, and other consumer goods—as well as retail and hospitality.
Source: McKinsey & Company
To find out more about COP26 or joining the Race to Zero, we have included some helpful links below.