Does your boss think COP 21 is the next Arnold Schwarzenegger movie? For most medium size and smaller businesses, the upcoming conference in Paris is completely off the radar. Aside from the sustainability committee and the environmentally-minded colleague, mentioning the COP 21 to anyone elicits a blank stare. For those who are trying to get their voice heard on climate change, the lack of awareness at a senior level can be frustrating. Yet, spun the right way, COP 21 can provide an unexpected opportunity to draw real attention – and even resources – for climate action.
A sure way to garner interest from senior executives on any topic is to provide information about trends that may have implications for the future of the business. There is nothing that management likes less than being caught unprepared, especially if it could bode poorly for the bottom line. Even if your senior team tends to roll their eyes when you talk about climate policy, positioning COP 21 as an event with a seismic, game-changing potential for the private sector can turn the tables.
Why would COP 21 matter to mid-size and smaller businesses? Several reasons. First and most obviously, it could have significant policy implications. While the results of UN conferences in the recent past (such as Copenhagen) have been lackluster at best, there is a growing fervor and urgency around COP 21. This renewed energy stems from a variety of pressure points, such as a general increase in public awareness and bipartisan support for action, the Pope’s Encyclical on the environment, and growing number of increasingly foreboding reports on climate change. Oil and gas companies are even getting into the game. Earlier this summer six major oil companies sent a letter to the UN requesting a price on carbon and asking for linked carbon markets.
The Implications of a Commitment
Thus far, 56 countries, including the US, have submitted their climate change commitments (INDC’s) in advance of the conference in Paris. If a binding agreement among nations is reached, action will need to be taken at the federal and state level to support the US commitments. And lest you think this can’t happen, bi-partisan support is building here at home. Climate action will have both direct and indirect consequences on businesses, especially if a price or restrictions are put on carbon emissions.
The outcome of a binding agreement in Paris will translate to increased risk and/or cost for businesses that are behind the curve. For industry leaders who can help the US meet its energy reduction goals, it presents opportunities. Commitments made by other countries, especially impressive commitments from China, also hold significant implications for the US economy. Clean energy investment in China increased 32% last year to $89 billion. To meet its new energy goals, China will need to make further substantial increases to its renewable generation capacity. This could translate to a huge opportunity for US clean tech businesses.
Awareness and Action in the Private Sector
Whether or not COP 21 becomes a major factor in the policy arena, it is already raising the bar in terms of awareness and action in the private sector. More activity is seen with respect to companies signing onto climate related pledges. We Mean Business launched in 2014 to “amplify the business voice on climate change, catalyze bold climate action, and promote smart policy frameworks.” Through the coalition website, 180 companies representing more than $4.1 trillion in revenue have submitted 471 public commitments on climate. Since 2013, Ceres has had over 1,500 companies across a variety of sectors sign onto a Climate Declaration supporting leadership and coordination on climate change in the US. Most recently in July, thirteen of the largest US companies signed a $140 billion White House pledge to reduce carbon emissions. A second round of signatories is expected to be announced in the fall.
For a vast majority of companies, especially mid-size businesses, signing onto a pledge or making a significant public commitment is not up for discussion. However, many are still leveraging the general media coverage of the event to highlight their own work on climate change mitigation, energy reduction, and transition to renewables. And, the growing number of larger businesses that are upping the ante publicly puts direct and indirect pressure on those down the value chain.
Further adding to the pressure, media coverage, coupled with the commitments of large companies and climate negotiations overall (not to mention the US elections) will elevate public discourse on climate change. Studies already show that consumers are more engaged. They want to see companies responding and are voting with their dollars.
More Focus on Emerging Risks
Governments, politicians, NGOs, and private sector companies will be closely monitoring the discussions that will occur at COP 21. In depth conversations on risks are likely to spotlight important issues that have direct implications for business, such as the risk of fossil fuels in investment portfolios from carbon asset risk. These factors don’t only impact large banks and financial institutions; they are relevant for any company or individual relying on an investment portfolio to generate a future return. Mid-size and smaller organizations are no exception.
In short, regardless of the size of your company, there are several compelling talking points for an executive team to consider on COP 21:
- A binding agreement would likely mean policy changes in the US that will create risks and opportunities for businesses of all sizes.
- Big companies are doing more and committing to more in terms of climate action and carbon reductions. This creates direct pressure on companies in their supply chain and indirect pressure from competitors.
- COP 21 will be extensively covered by the media and will generate greater awareness with the public regarding climate change. This will translate into greater expectations from customers who already think businesses should do more.
- Discussions at COP 21 will bring emerging issues to the forefront, such as inherent risks in fossil fuel investments. This could lead to increased scrutiny of investments by shareholders and other stakeholders.
One last tip. Before you go into any conversation on COP 21, have your facts straight. Beyond understanding the trends set out above, arm yourself with the history of the conference, its goals, and predicted outcomes. And, most important, be prepared to answer questions about what the company should do about it all. Therein lies the opportunity!
Article originally published on GreenBiz.com.