Tuesday, April 26, 2016

Business and the Paris Climate Agreement

The politicians have secured a climate deal and now it is up to the business community to do the heavy lifting. Less than five months after the conclusion of COP21 we have seen nations sign the Paris Climate Accord at a signing ceremony at UN headquarters in New York. Now we must pivot from diplomacy to implementation. A whole new economy is being born and the opportunities are endless. Fortunes await those who can secure emissions free growth.

It is often said that innovation is the key that will unlock the full potential of the green economy. The vast size of the opportunity is sure to attract innovation. Powerful incentives will provoke a deluge of solutions and some of those ideas will likely be good enough to disrupt our traditional way of doing things. Solutions will come from all directions. Newly elected Canadian Prime Minister Justin Trudeau has said that he plans to crowdsource climate solutions online.
Many good ideas are already in the pipeline and some others have already gone to market. The green revolution did not start in Paris last December, it has been ongoing for some time. However the Paris Climate Agreement has accelerated the timing.

Corporations are embracing sustainability as never before. Even before COP21 started, businesses were staking out sustainable ground. Businesses are already setting their own science based emissions targets. This includes companies like Coca-Cola Enterprises, Dell, Ikea, Kellogg and Walmart. They know that climate policy is coming.

Even power companies are calling for a transition to a low carbon energy economy but they also want "secure, stable, clear, consistent and long-term policies". This was the message in an October 2015 letter to government from the CEOs and chairmen of the companies in the Global Sustainable Electricity Partnership (GSEP).

Companies are pledging to invest fortunes in climate action and clean energy. Ikea alone has promised to invest more than a billion dollars and many others are also planning huge spends. US companies have also made a number of major climate pledges.

Fears about the costs of climate impacts and the risks associated with stranded assets are changing the calculus. Businesses and investors are altering the configuration of their analysis and changing the variables being assessed.

Businesses are not only being swayed by their aversion to risk they are being attracted by the market opportunities. The bigger the change the bigger the opportunity and transitioning to a low carbon economy offers enormous promise.

There are also tremendous rewards when a brand is shown to be on the right side of history and tremendous costs when they are not.

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