Why the Private Sector Must Heed the COP26 Message on Climate Action

This article on COP26 and the private sector was written with Debbra Johnson.

The United Nations Climate Change Conference, or COP26, that begins on October 31 in Glasgow (at the venue shown above) will mobilize participants to step up their actions on resilience to global warming. Indications are the private sector will get the message and accelerate its slow, uncoordinated and graceless dance toward helping achieve net zero carbon emissions.

Arguably, COP26 should serve as a wake-up call to the private sector, seen as being both principally responsible for causing the global warming predicament and for fixing it. As for fixing it, the private sector has an essential role to play. A 2018 assessment by two Vanderbilt University climate change specialists estimated that private actions can close 10 to 30 percent of the so-called “Paris Gap,” the difference between the 2015 Paris climate accord and what that agreement will achieve by 2030 if all countries comply with their commitments.

A growing number of companies are moving to achieve their own climate- and risk-mitigation strategies and objectives. Roughly 300 global companies, for instance, are members of the RE100 initiative and aligned with that commitment to using 100 percent renewable electricity across their global operations. Climate warriors gaining kudos for leading the way to combat climate change are companies such as 3M, IKEA, John Deere, Patagonia and Unilever – and industries, notably agriculture, apparel and logistics.

But most private sector companies aren’t yet embracing an overall program to shrink their environmental footprint. Marsh & McLellan Companies’ Global Research Center concluded in a study that most companies focus narrowly on passively mitigating long-term climate risk while meeting short-term environmental or sustainability compliance standards. This approach fails to build climate resilience to gain a competitive advantage. A smaller, savvier group embeds climate risks in strategic assessment and operational planning to leverage resilience to their advantage.    

Private sector blind spots toward climate risk are surprising since practically every company is vulnerable and likely already experiencing global warming’s impacts, whether from disrupted output, higher operational and maintenance costs, or scarcer natural resources like water.

COP26 may prove most valuable in illuminating why the private sector can no longer shilly-shally. The 13-day conference is expected to identify at least six powerful forces already moving to require the private sector to play its critical role – or else. Those forces are investors, regulators, customers/clients, competitors, suppliers and employees.

Consider the potential clout of each group of stakeholders attending COP26:

Investors: Late last month (September), over 50 members of the Institutional Investors Group on Climate Change, which manage over $10 trillion in assets, urged 50 major at-risk companies – including energy companies as well as noted brands such as Nestlé, Clorox, Swatch and Campbell Soup – to identify and respond to climate threats and issued guidelines it expects all companies to do to address the issue. And in the 2021 proxy season, shareholder proposals submitted on environmental matters and climate-related proposals in particular climbed for the second consecutive year to 115 from 89.

Regulators: Watchdogs worldwide are signaling they plan to make climate-related disclosures mandatory – from U.S. banking regulators and the Securities & Exchange Commission to stock exchanges in Hong Kong, London and South Korea and regulators in Britain, New Zealand and Switzerland. Many are taking their cue from the Task Force on Climate-Related Financial Disclosures, a global group of regulators that has recommended a reporting standard comprising 11 broad climate-related categories that focus on material risks rather than environmental impacts.

Customers and Clients: Consumers increasingly communicate they want companies to take action on environmental issues. A Deloitte survey found that nearly one-fourth will switch to buying products from an organization that shares their environmental values, and 21 percent have encouraged others to switch, with consumers ages 18 to 24 three times more likely to switch brands based on values.

Competitors: As resource scarcity surfaces, companies that don’t innovate around climate resilience may falter behind direct and indirect rivals. Already, companies are factoring in climate change and resource supply into their business strategies, explaining why companies like Google and Apple are among the largest buyers of renewable energy.

Suppliers: Early adopters of climate resilience strategies are collaborating with suppliers to enhance their overall operational resilience. In May, for instance, Apple published its annual supplier responsibility report for 2021, outlining the progress it and its suppliers are making to further environmental protection goals. Apple partners that don’t meet the selection criteria face being dropped from the partnership. Walmart and others also make climate protection a requirement in selecting suppliers.  

Employees: The pandemic has sparked a new Employee Value Proposition with a stronger focus on employee well-being rivaling pay and advancement. In a recent study, Edelman, a longtime reporter of the link between brands and trust, concludes that today’s employees are belief-driven, with more than three-fourths expressing higher expectations of employers and 61 percent choosing their employer based on beliefs, especially about social issues. A growing number of companies that encourage employees to take action on climate and other issues find this approach helps during the current war for talent to attract and retain younger generations. And the nonprofit Drawdown has just published a guide, “Climate Solutions at Work: Unleashing your employee power.”

Which brings us to the 2015 Sendai Framework for Disaster Risk Reduction to 2030. It serves as a roadmap for how to make communities safer and more resilient. More specifically, it underscores how the private sector must collaborate in partnerships with the public sector to reduce disaster risk with a heavy emphasis on prevention.    

Indeed, while fading, a misperception continues to exist that climate risk prevention is the sole responsibility of governments and the public sector. The Sendai Framework and COP26 will help shatter that myth and emphasize the vital role of the private sector. It is essential to keep a fire under the private sector. The planet depends on it. 

Joyce Coffee, is founder and president of Climate Resilience Consulting and a Senior Sustainability Fellow at the Global Institute of Sustainability. Debbra Johnson is a strategic resilience and sustainability advisor. Both are on the U.S. board of ARISE, the volunteer Alliance for Disaster Resilient Societies led by the UN Office for Disaster Risk Reduction.

Image credit: Fredrika Carlsson via Unsplash