7 COP28 decisions that are set to reshape the business landscape in 2024 and beyond

Why should the private sector rethink it's role in the global climate policy agenda? According to the recently released World Economic Forum (WEF) 2024 Global Risks Report, based on insights from over 1,400 experts, the private sector is less likely to view environmental risks as imminent in the near-term, showing that corporates and investors expressed less urgency in tackling environmental risks, despite a general consensus that these risks will materialize to some extent over the next decade.

The COP28 decision by all nations to transition away from fossil fuels was more than a political sign. It marks the beginning of a new trend. Understanding the relevance of this and other decisions for companies will be crucial to create long-term value and resilience. What are the most important COP28 decisions and how are they relevant for business?

1. Transition Away from Fossil Fuels

What was agreed: a. Rapid shift away from fossil fuels toward achieving net-zero by 2050, b. Agreement to triple global renewable energy capacity and double energy efficiency by 2030, c. call for accelerated emissions reductions in road transport through various pathways.

Why this is relevant: companies need to align their energy strategies with the global push for net-zero by 2050. Investments in renewable energy and energy efficiency are crucial for businesses to contribute to this transition. Embracing clean energy alternatives and reducing reliance on fossil fuels can enhance corporate sustainability and resilience. Yet, we know that turning the switch on renewable energy will be a costly investment for companies and that this will affect countries and regions differently. Planning for the most effective models that can integrate nature at its core will be key.

2. Global Goal on Adaptation (GGA) Framework and Adaptation Finance

What was agreed: a. establishment of the Global Goal on Adaptation (GGA) Framework, b. the need for a clear roadmap on increasing finance for adaptation, c. emphasis on doubling adaptation finance by 2025, d. adaptation gaps and accountability to be addressed at COP29.

Why this is relevant: the GGA framework highlights the importance of adaptation in climate strategies. For businesses, understanding and mitigating climate risks through adaptive measures are essential. Companies should incorporate climate resilience into their operations and supply chains, considering potential impacts on business continuity.

3. New Climate Finance Goal

What was agreed: a. adoption of the New Collective Qualitative Goal (NCQG) to replace the $100 billion annual climate finance commitment, b. $3.5 billion in new pledges to the Green Climate Fund, totaling $12.8 billion, c. addressing finance issues and setting a new climate finance goal that will be discussed at COP29.

Why this is relevant: the shift in climate finance commitments creates an opportunity for private sector engagement. Companies can explore partnerships, investments, and projects aligned with the new climate finance goal. Initiatives that contribute to climate resilience, emissions reduction, and sustainable development may attract funding and support. The shift in climate finance commitments creates an opportunity for private sector engagement.

4. Carbon Markets and Article 6

What was agreed (or not): no decision was reached on rules for carbon markets, leaving questions on international carbon trading unanswered, there were key areas of disagreement, including emissions authorization, review processes, cooperative approaches, and eligible activities.

Why this is relevant: The absence of clear rules on carbon markets poses challenges, but it also avoids potential risks. The uncertainty related to the rules of a carbon market emphasizes the importance of sustainable business practices and emissions reduction within company operations.

5. Food Systems and Land-Use

What was agreed: a. inclusion of food and food systems into countries' next round of NDCs by 2025, b. launch of the Alliance of Champions for Food Systems Transformation (ACF), c. $500 million in new climate financing for urban infrastructure, emphasizing urban climate actions.

Why this is relevant: Inclusion of food systems in Nationally Determined Contributions (NDCs) affects agribusiness and food companies. They must align practices with sustainability goals, focusing on supply chain resilience, reduced emissions, and sustainable land use. Companies should consider the commitments under the #COP28UAE Declaration in their strategies.

6. Methane Pollution

What was agreed: a. Over $1 billion in new grants announced to cut methane in various sectors, b. new regulations on methane unveiled by the U.S., and China committed to include methane in its next NDC, c. five more nations joined the Global Methane Pledge, committing to a 30% reduction by 2030.

Why this is relevant: Companies in sectors contributing to methane emissions, such as oil and gas, must address this potent greenhouse gas. Investments in technologies and practices that reduce methane emissions are not only environmentally responsible but can also enhance corporate reputation and compliance with future regulations.

7. Forests and Climate Leaders' Partnership

What was agreed: a. continued commitment to the Glasgow Leaders' Declaration on Forests and Land Use, b. launch of the Forests and Climate Leaders' Partnership (FCLP), providing funds and capacity to countries, c. announcements on new financing mechanisms, including Brazil's proposal for a global Tropical Forests Forever fund. Brazil's proposal to set up a global fund to finance forest conservation calls for the provision of funding to 80 countries that have tropical forests to help maintain them, with annual payments based on the hectares conserved or restored.

Why this is relevant: Commitments to halt forest loss and support conservation align with sustainable sourcing practices, promoting responsible supply chain management. Brazil's proposal aims to fill a gap that currently exists in financing mechanisms that mostly focus on payments for carbon capture or environmental services.

A new trend

This is not an exhaustive list, it's a collaborative list. The urgency for countries to translate COP28 agreed commitments into action needs corporate alignment that proactively contribute to national goals, integrate sustainability into operations and products, adapting business models to address climate challenges to position them as leaders in the global sustainability transition. The private sector can significantly contribute to NDCs and by COP30, to be held in Brazil in 2025, demonstrate how they are adopting energy-efficient practices, developing sustainable supply chains and responsible sourcing practices that align operations with environmental goals.