By Alexis L. Leroy, CEO of ALLCOT Group
The Intergovenmental Panel on Climate Change last month published its special report on what action is required to keep global temperature increases to less than 1.5 degrees Celsius above pre-industrial levels.
That report made sobering reading, and underlines the scale of the challenge that faces the world today:
- The earth is already about 1 degree C warmer than in pre-industrial times, and temperatures are expected to rise to 1.5 degrees between 2022 and 2030 if emissions continue at the same level as today.
- We have already used up most of the carbon “budget” that is available if we want to keep temperature increases below 1.5 degrees.
- Two-thirds of all primary energy must be renewable by 2050, if we are to remain on track – that includes 97% of all electricity generation. The IEA estimates that at present, renewables provide about 14% of all power.
This is the goal of the Paris Agreement – for the world to become carbon neutral by the second half of the century. Together with the Sustainable Development Goals, this represents a roadmap for growth in the 21st century while minimising negative impacts on our climate and on our environment.
And yet, despite the scientific evidence, there are still nations that are either not convinced of the need to reduce emissions, or are unwilling to do so.
Some governments are resisting the call from the international community, fearing that the changes required will involve too much social upheaval. Countries that rely on coal-fired power are reluctant to create unemployment in their mining sectors, or they believe the investment required to shift to renewable power is too great.
Certain politicians continue to emphasise national interests above the needs of the global community, and reject calls for cooperative action among nations to achieve these necessary goals.
But real demand for change is growing at ground level. Consumers around the world are paying greater attention to the environment and the climate, and making changes to their own lifestyles.
They are also starting to ask uncomfortable questions of the businesses that supply them.
These enterprises, the ones that directly face the general public, such as retailers, service providers, utilities, are being asked to demonstrate that they are considering their impact on the environment and taking measures to reduce their footprint.
More and more people want climate-friendly, environment-friendly solutions. They want to reward those companies that are forward-thinking, that take concrete actions and which are committed to playing a strong role in the fight against climate change and efforts to build sustainability.
Consumers are choosing energy companies who can deliver electricity from wind-farms or solar parks, who are cutting down on single-use plastics, and who are committed to recycling.
Increasingly, retailers are demonstrating their commitment by boosting the use of renewable resources such as replacing plastic bags with paper ones, selecting logistics partners who run carbon-neutral supply chains and by becoming carbon-neutral by purchasing carbon offsets.
Offsets represent a simple and effective way to neutralise the carbon footprint, by ensuring that for every tonne of CO2 a business emits, or causes to be emitted, a reduction of one tonne of CO2 takes place elsewhere.
Planting trees, changing from fossil fuel-generated electricity, switching from petroleum-driven to electric vehicles, even reducing water consumption, are all ways in which the climate impact of business can be reduced.
And for service-oriented companies such as banks an investment funds, there are emerging standards that apply to lending and investment portfolios. The Taskforce on Climate-Related Financial Disclosure, for example, is building pressure on publicly-quoted companies to be more transparent about the impact of climate change on their businesses.
Action doesn’t stop at the retail level, however. In order to widen the scope of possible carbon reductions, these public-facing enterprises are in turn starting to ask the same questions of their own suppliers further up the supply chain.
And as these wholesale businesses encounter more demands for change, they will place increasing pressure on the heavy industries that supply them: the vehicle manufacturers, the electricity providers, and the industrial companies that produce their raw materials.
And once the pressure becomes too great, these primary industries will turn to governments and demand policy changes, such as putting a cost on emissions. Rather than take voluntary action themselves, which may put them at a competitive disadvantage, they will want to ensure a level playing field for all, which national regulation can provide.
Already, these giant primary industry businesses – the likes of Dow Chemical, Norsk Hydro, Akzo Nobel, Braskem and Lafarge Holcim, are banding together in organisations like the Carbon Pricing Leadership Coalition, the Climate Market Investment Association, the International Emissions Trading Association and the We Mean Business Coalition to put pressure on governments to put a price on carbon or to boost their climate and sustainability ambition in other ways..
National carbon price mechanisms are still at a relatively early stage: World Bank research shows that 51 countries and regions currently have a price on carbon, including the EU’s Emissions Trading System (ETS), or the Western Climate Initiative in California and Quebec.
More countries are considering or even planning pricing systems: China will launch the world’s biggest emissions market in a matter of months, while Latin American nations from Mexico to Chile are readying plans to launch their own carbon markets.
Ground-level demand for action, by consumers, is the most certain way in which to cause the changes we need to see. Companies will always seek to exploit potential growth opportunities, and with demand for climate-neutral and sustainable products growing fast, the opportunity is developing.
There are an increasing number of tools to manage climate exposure for consumers, retail and even light industrial companies. Demand for change from the consumer end of the supply chain is working its way up towards heavy industry, and when that primary sector begins to feel the pressure to shift towards sustainability and climate neutrality, governments will act.
It’s clear that the impetus for change is unlikely to come from above, so it must grow from the ground up. Millions of consumers are already calling for action on climate and sustainable development and business.
Thousands of businesses of all sizes are also responding, but there need to be more. Policymakers around the world must be left in no doubt that we cannot continue with business-as-usual in a world where we are perilously close to triggering catastrophic climate change.
The science tells us we have only a few years left to act, and leadership must come from a community of consumers and businesses. Only when governments are convinced by their people and by their economic actors of the need for change, for ambition, will they catch up.
Alexis L. Leroy, CEO of Spain-headquartered ALLCOT Group, which develops low-carbon projects and consults on sustainability and other environmental issues.