Recent announcements like the 2030 Agenda for Sustainable Development and The American Business Act on Climate Pledge propelled climate change and corporate sustainability into mainstream news channels. Most years, these agreements alone would constitute a banner year for climate policy, but 2015, by most accounts, was hardly a conventional year. The aforementioned measures, while important, paled in comparison to the hype, scale and media attention of The Paris Agreement, a comprehensive climate accord signed by 195 countries at the conclusion of the Conference of the Parties 21 (COP21) in December. The agreement was the culmination of years of negotiation between governments, the private sector, NGOs, UN agencies and intergovernmental organizations - however, the real undertaking, especially for businesses, is only just beginning.
The Paris pact will enter into force in 2020, once 55 nations that account for at least 55% of the world’s emissions ratify the agreement at the UN in New York. Four years may sound like an eternity in today’s business landscape, where many companies form decisions that appease investors’ short-term approach, and quarterly performance often triggers stock volatility. With the Paris Agreement on the horizon, businesses in all sectors have begun to realize the urgency and magnitude with which they must integrate corporate sustainability targets with long-term financial goals. In fact, the private sector’s presence during negotiations and its significant commitments to combat climate change were among the key factors that contributed to COP21’s success, experts say.
Forward-thinking corporations have already formed sustainable, low-carbon strategies, which will further align these plans with nationally determined contributions (NDCs) and industry-specific regulations. Procter & Gamble, for example, recently published its 17th annual sustainability report to update its progress toward reaching self-mandated sustainability goals. P&G is also among the several multinational corporations that, leading up to the Paris conference, pledged to reduce its greenhouse gas emissions. The company joined more than 150 other signatories on the American Business Act on Climate Pledge.
“The global governments were only going to go so far in how they approached the issues, and their commitments were, you could say, a little underwhelming on the national levels,” Chris Walker, Director North America, World Business Council for Sustainable Development, said during a recent event at Baruch College’s Robert Zicklin Center for Corporate Integrity in New York. The Baruch talk, sponsored by the Sustainability Practice Network and titled “The Business Climate in the Wake of the Paris Conference,” brought together panelists, a few of whom attended COP21, to discuss its impact on business. Bernhard Frey of the UN Global Compact and another panelist who attended the Baruch event said the mobilization of business was a key facilitator of the Paris Agreement.
If some companies had yet to realize the inevitability of the business community shifting to a more sustainable, low-carbon environment, the Paris Agreement should, at a minimum, encourage top executives to discuss long-term sustainability. Though the climate pact won’t be available for signature until April 22, 2016, and will enter into force even later, businesses risk falling behind if they don’t consider the agreement’s impact on their sustainability strategy. So what actions, if any, should the private sector examine to align corporate strategies with the Paris legislation?
It’s of crucial importance for stakeholders to first understand the Paris Agreement’s basic components, including which elements are legally binding. According to the official compact, the major objectives of the agreement are:
- to curb the global increase in temperature to 2 degrees Celsius compared to pre-industrial levels. Ideally, to reduce potential negative consequences of climate change, all parties should aim to restrict the rise in temperature to 1.5 degrees Celsius.
- to expedite the peaking of greenhouse gas emissions, and begin in the second half of the century to achieve a balance between GHG emissions and “removals by sinks of greenhouse gases.” Experts have called this language a “net-zero goal,” and acknowledged that realizing this balance will likely involve using technologies capable of removing carbon from the atmosphere.
- to require all signatories to publish NDCs - official climate plans - every five years. Most governments submitted intended nationally determined contributions (INDCs) prior to COP21, and these blueprints may be used as their first official NDC.
Despite these unprecedented, ambitious goals, it’s important to note the limited ability with which the agreement can enforce its stipulations. Under the terms of the Paris Agreement, countries are legally required only to submit NDCs, and to report their progress toward achieving specific NDCs. This is a positive development, but it’s potentially problematic that the UN will have no legal authority to mandate penalties against those which fail to meet their self-established targets. There is also language regarding countries’ funding to assist developing nations transition to clean energy, but this commitment of at least $100 Billion per year is not legally binding. Given the lack of legal authority, some experts question whether the agreement is enforceable. But that might not matter.
“The enforceability is not the driver of success,” Dale Bryk, Director of Programs, Natural Resources Defense Council, said at the Baruch climate talk. “Even for enforceable agreements, a lot of times what makes them successful are really the transparency and the reporting and the being called to account, not the use of the enforcement measures.”
The enforceability of the Paris Agreement will likely remain a debated topic for years, yet there’s little doubt each nation will implement enforceable domestic regulations that correspond to their respective NDC targets. For the private sector, now is the time to begin aligning corporate sustainability practices with core business strategies, and ideally, their nation’s NDC. The United States, for example, submitted last year its official INDC. The five-page document outlines in clear terms the U.S.’s emissions objectives and its recent regulatory actions to mitigate climate change.
For those companies that have yet to view sustainability as a mandatory business practice, there are several approaches each should consider. For starters, executives must examine these questions:
- As governments, investors and consumers shift to a more sustainable, clean and carbon-free environment, what impact, if any, will this have on our core business products, services and investments?
- Have similar companies in our sector launched corporate sustainability goals and strategies?
- What sustainability practices can we institute to align with domestic regulations, NDCs and the more global targets of the Sustainable Development Goals and The Paris Agreement?
- In what ways can we better integrate corporate sustainability with profitability?
Developing a detailed sustainability strategy is an essential first step, and it can be a long, time-consuming process. Communicating companies’ sustainability progress should be a multi-channel approach, as it’s likely that various stakeholders, such as investors and consumers, will seek access to information of different complexity. The Global Reporting Initiative (GRI), for instance, is a popular reporting standard for sustainability and Corporate Social Responsibility (CSR).Though GRI’s reporting metrics are a perfect tool for informing investors of companies’ sustainable programs, it’s also necessary to publish information that’s more suitable for consumers. To this end, Business Wire’s CSR circuit is a targeted news release distribution service that reaches magazines, news outlets, investors, trade publications and other organizations in the CSR and sustainability domains.
The Paris Agreement will continue to be a major topic on news programs, in investment circles and among corporate executives for the forseeable future. While the agreement is not yet official and is years from full implementation, nearly all governments, businesses and environmental experts believe its lasting effects will be vast, global and profound. However, as Frey said during the Baruch event, quoting Christiana Figueres of the UNFCCC, “COP21 was a success, but that was the easy part.”
To learn more about amplifying your CSR news visit Business Wire’s CSR circuit page here.