Now that 175 countries have signed the Paris Agreement, and the high-level legal treaty on climate is becoming a tangible reality, companies need to address a key question: What does the agreement mean for me?
Each industry and company will have its own new risks and opportunities, and BSR has developed a methodology to customize climate action strategies based on the new landscape the Paris Agreement has created.
As countries start to roll out their national climate action plans, the global regulatory landscape will change. The plans, also known as INDCs or intended nationally determined contributions, promise important changes in preparation for a low-carbon and low-emissions economy—but every INDC is different, so the implications for businesses will vary from market to market, industry to industry, and company to company.
However, all companies will need to review and understand the entire greenhouse gas footprint of their activities—including manufacturing, operations, product use, and disposal. And the characteristics of companies’ supply chains, energy use, logistics, and business models may need to be transformed.
Companies will need to understand the specific implications of key countries’ INDCs. For instance, China’s climate targets require increasing the share of non-fossil fuels in the country’s energy mix by 20 percent by 2030 and reducing carbon dioxide emissions per unit of GDP by 60-65 percent by 2030 (from 2005 levels). For a company with part of its value chain in China, energy procurement should be at the forefront of its climate strategy.
On the other hand, the European Union has set an economy-wide target of reducing domestic greenhouse gas emissions by 40 percent below 1990 levels by 2030. The target includes not only mitigating emissions from fossil fuels, but also accounting for land use, land use change, and forestry in the 2030 framework. As a result, companies in sectors that rely on timber and paper products in EU markets will need to consider reducing or eliminating deforestation in their supply chains.
All this is to say that the implications of the Paris Agreement can be complex to decipher in local markets and along the value chain. To solve this challenge, BSR has developed a four-part methodology that produces tailored translations of the Paris Agreement for companies.
- Conducting a baseline assessment: We first undertake a baseline assessment to identify how the Paris Agreement affects key operations, market locations, and the company’s overall greenhouse gas footprint. We also analyze relevant INDCs to highlight which policy developments are material to the company—and the potential impact on competiveness.
- Mapping the Paris Agreement to the business: We then analyze the components of the Paris Agreement through the lens of the company, including its unique strategy, products, services, technologies, and business model. This step identifies actionable, practical, and strategic actions to mitigate risks and seize the opportunities of the transition to a low-carbon economy.
- Benchmarking peers: We then benchmark the company against a group of peers to identify best practices, innovative strategies, or risk management approaches for bold climate action—including approaches that could lead to competitive advantage and market differentiation.
- Developing a strategy: Based on our identification of markets with the most material policy changes, key issues for a sector or company, and competitor benchmarking, we recommend strategic priorities and objectives for the company.
The Paris Agreement is a historic opportunity for companies to take ownership of the transition to a low-emissions world. But this opportunity can only be seized if companies understand, given their specific value chains and markets, the distinct and concrete ways the Paris Agreement will reshape their business.