When it comes to being bold, nothing tops the Paris Agreement. In December 2015, 196 countries committed to a global climate change framework that is unprecedented in its level of ambition and participation, defining in its implications for the global economy and development pathways, and immediate in its implications for government policy and business practices across the globe. The agreement represents an unparalleled rallying cry for business to address global climate change and also a substantial opportunity to build companies that are both competitive and resilient in a low-carbon world.
Companies are seizing the market opportunity of the Paris Agreement with a growing volume of commitments to climate action. More than 400 companies with total revenue in excess of US$8 trillion and nearly 200 investors with assets under management above US$20 trillion have collectively made 1,000 commitments through We Mean Business to reduce greenhouse gas emissions through carbon pricing, science-based climate targets, increasing their share of renewable energy, and ending deforestation.
These companies are already thinking big in setting bold targets, so how can they take climate ambition to the next level?
Increasingly, being bold means demonstrating the confidence and courage to implement commitments—and not just set targets. If the past two years were about leadership, the next two need to be about demonstrating tangible success. This will create the internal support to progressively raise ambition over time, deepen the business case for action across sectors, harvest replicable lessons from first movers, spur innovation in low-carbon technology, and provide governments with the impetus to create appropriate regulatory environments that catalyze business action.
Being bold also means deepening the partnership between the private sector and government. Many of the companies committing to climate leadership are finding their efforts stalled by the policy environments in which they operate. For example, the company committing to procure 100 percent of its energy from renewable sources might be impeded by the presence of a monopoly utility that will only provide fossil fuel or by zoning regulations that prohibit the installation of onsite renewable sources. Shaping the policy environments in which we operate is often uncomfortable for the private sector, but it is becoming a necessary condition for success.
Being bold also means looking beyond traditional climate and energy policy to think about the disruptive, non-climate ideas that are essential to success. For example, driving down the cost of capital is essential to technology development and deployment. Tackling corruption and rule-of-law issues are vital to creating the business landscapes in emerging economies that will draw inward investment and drive low-carbon development. Increasing R&D expenditure will seed the breakthrough technologies that will enhance efficiencies and dramatically reduce greenhouse gas emissions.
And being bold also means understanding that the Paris Agreement, despite its many strengths, does not solve climate change as a material risk for business and society. Companies therefore need to develop a three-dimensional understanding of climate risk—one that looks beyond exposure to an extreme weather event and thinks holistically about deeper vulnerability across a range of business risk categories. For example, women are disproportionately impacted by climate change not because they are exposed to more extreme weather events than men, but because social, cultural, economic, and political conditions undermine their ability to adapt in a changing climate. Companies who depend on women for their workforce and consumer base need to do more to understand this differentiated risk and respond with appropriate strategies to build resilience.
The “Bold Climate Action” track at our annual BSR Conference 2016 is intended to help us implement climate commitments and to look beyond the horizon at what the next generation of climate ambition and business success looks like. I hope you’ll join us in these important discussions this November.