COP26: What’s In It For Business?
As the eyes of the world turned towards Glasgow last November, media chatter around COP26 amplified the most colourful disputes and disagreements among the gathered dignitaries and heads of state.
And yet, behind the headline-grabbing, top-level discussions about emissions targets, ecosystem protection and climate financing arrangements, thousands of business leaders met to debate policy and map out the strategies that will bring net zero within reach of millions.
These discussions and deliberations are key to any transformation: no amount of government regulation can address climate change, without the consensus of the organisations that will be responsible for turning rhetoric into practice.
Significantly, the list of companies signing up to net-zero targets is growing as the short-term costs and challenges of adaptation dwindle in comparison to the potential long-term savings and benefits of a more sustainable future. A report from last September showed that more than 1500 large corporations, representing revenues of USD 11.4tn had already made the net-zero commitment.
Stepping up to the challenge
Businesses are well placed to help effect change across multiple market sectors. Many are also beginning to view climate action through the lens of opportunity: a chance to explore the advantages of green growth rather than dismissing it as a barrier to expansion. Nonetheless, some organisations are still slow to embrace change – and even slower to develop the key strategies that will allow them to remain competitive in a rapidly evolving landscape.
Gary Connors is a partner at business consultancy group Oliver Wight EAME, with a wealth of experience leading and managing change in the manufacturing sector. He believes that while climate action hasn’t always resonated with clients, businesses will soon be forced to balance the implications of environmental legislation with shifts in consumer behaviour, as they try to plan for an uncertain future.
‘Organisations that choose to ignore the tide of change do so at their peril,’ he says. ‘Successful businesses will be those whose leaders play close attention to the developing political, social, technical and economic landscape, evaluating the impact of changes and helping them to stay ahead of the competition.’
Attracting green finance
This shift in emphasis is already making waves as capital increasingly flows away from exploitative business models and towards cleaner, greener investments that promise to deliver greater returns over time. That banks and other investors have begun to evaluate the risks from climate change in the same way as other financial risks – as opposed to viewing them as a corporate social responsibility issue – has helped reset the dial.
One of the goals of the COP26 summit was to encourage companies – together with their banks, insurers and investors – to take climate change into account at every stage of the value chain, developing the reporting frameworks necessary to finance a whole economy transition to a low-carbon world.
Hopefully, greater standardisation around what qualifies as ‘green’ finance will also reduce opportunities for ‘greenwashing’, instead rewarding those business models that prioritise sustainability in their environmental, social and governance (ESG) initiatives.
Ian Constance, CEO of the Advanced Propulsion Centre (APC UK), the government and industry body accelerating the transition to a net-zero automotive industry through funding, support and insights, sees COP26 as an opportunity to more closely align investor interest with business innovation.
‘Globally, automotive nations are at a pivotal point,’ he says. ‘International collaboration and cooperation will be essential to develop the kind of transformative zero-emission technology that will stimulate investors’ trust, at the same time delivering jobs and economic growth.’
There’s little doubt that the impact of emerging technologies, coupled with rising regulatory risks for polluting assets and the falling cost of capital for green investments will together result in a raft of new business opportunities. It’s already happening in sectors like architecture and construction, where innovative alternatives to energy-consuming, carbon-emitting materials like concrete are being successfully implemented.
Driving consumer behaviour
The ‘push’ from finance towards greener investments is matched by a ‘pull’ from consumers looking to model more sustainable habits. A recent Ernst Young (EY) report found that 38 percent of UK consumers felt their decisions were being influenced by sustainability issues, with almost two-thirds (62 percent) more likely to favour sustainable products and services.
There’s also evidence to suggest that consumers will spend in support of green gains: research from YouGov showed that a majority of grocery shoppers in Germany (60 percent), the US (58 percent), UK (57 percent) and Australia (53 percent) were prepared to pay more for products that were better for the environment.
This growing consumer sentiment represents a golden opportunity for savvy businesses to create value and cultivate revenues in response to the trend for sustainable consumption – a trajectory that can only be accelerated in the wake of COP26.
When B Corp schoolwear supplier One+All moved from being a shareholder-first, profits-driven business to an employee-owned company focused on putting people and planet first, profits actually increased and have been rising ever since. Company chair, Donald Moore, believes that organisations driven by sustainability can anticipate a positive boost to both their brand reputation and their bottom line.
‘Consumers have exhibited a strong shift in preferences for more sustainable products and services – and will move from companies that have a disregard for their environmental impact to more sustainable brands.’
Capturing the best talent
As millennials and Gen-Z become more dominant in the world’s workforce (currently around a third but set to double over the next decade), their concerns are increasingly shaping recruitment and retention priorities. A study from 2019 found that employees expect their employers to commit to better environmental policies and sustainability: around three quarters of office workers (73 percent) wanted improved sustainability policies, and nearly a quarter (24 percent) admitted they’d turn down a job offer if the employer had a poor sustainability record.
Greenwashing simply won’t wash anymore. Engaging around COP26 signals a willingness by business to recognise the impact of climate change and a desire to be part of the solution.
Florian Hübner, co-founder and CEO of SaaS customer engagement platform Uberall believes that doing the right thing can also be the smart thing: business can attract top talent by embracing sustainable change.
‘COP26 presents an opportunity for business leaders to refocus on their sustainability efforts and ensure that tackling climate change is made an integral part of their overall business strategy,’ he comments. ‘More and more, businesses are realising that sustainability isn’t just the right thing to do, it’s vital to attracting and retaining business – and the best talent.’
COP26 matters to business because climate change simultaneously represents the biggest risk and the biggest opportunity of our time. Importantly, it enables companies to gain insights into how best to align their plans with regulation to have the best chance of charting a viable route through the choppy waters to come.
Businesses can drive, as well as follow, policy, supporting governments to go further and act faster to solve climate change. As the UN warns of disastrous temperature rises of at least 2.7 degrees should countries fail to strengthen their climate pledges, it’s vital that business lifts its own ambition to target more effective action.
Jamie Page, Managing Partner at executive recruitment specialist Granger Reis, sees business leaders as potential trailblazers for a net-zero world.
‘To achieve more ambitious emissions reduction targets that align with net zero by the middle of the century, we need strong leaders who can mobilise and inspire action,’ he says. ‘This means showing qualities that were previously never associated with ‘strong’ leadership: humility, vulnerability, transparency, emotional intelligence, and giving space to those that know better or those that inspire others.’
With profit and purpose becoming ever more closely aligned in the pursuit of common goals, business leaders will need to ensure they have the right skills in place – or plan to acquire them – so they can keep on top of emission targets while protecting jobs and driving growth. The clock is ticking.