How do we bridge the corporate climate gap?

This was a speech I gave at The Carbon Trust's 2024 Accelerate to Net Zero Summit.

I had the great misfortune, early on in my leadership journey, of having a deputy who was absolutely brilliant. I would set my big picture vision, and then she would make it happen: operationalise and resource a strategy, stand up a crisis team at the drop of a hat. You name it, she could do it. I thought leadership was a walk in the park.???

So it wasn’t until later that I realised quite how hard it is, normally, to turn a strategic intent into reality. How you need the right wiring, the right levers, the right incentives, the right processes and the right ways of working.?

And the same is true in the climate world. Both Governments and Corporates are great at making commitments – but less good at the follow through, because it’s hard.

So how do we “turn climate ambition into impact”? How do we move from targets to robust action and bridge the corporate climate gap??

I’ll start by giving you a snapshot of where I think we’ve got to on corporate climate action.?

I’ll reinforce the business case for why it’s so important.?

Then I’ll talk about what role the law can play, as part of a wider movement, in bridging the climate gap.?

1. So where we are now???

We are nine years on from the Paris Agreement. Paris, and the IPCC Special Report on 1.5 degrees, cemented the idea that we should be setting 2050 net-zero targets.?

And by 2022, 91% of the global economy was covered by net-zero pledges. That includes swathes of the corporate world, largely on a voluntary basis.?

Our problem is not quantity of pledges – it’s quality.???

• For many companies, pledges have not been backed by robust transition plans anchored at the heart of the organisation – they have been PR exercises.???

• Most have not set 2030 emissions targets, as required by the science - yet we know we need to reduce emissions by 45% by 2030.?

• And many corporate plans are over-relying on the ‘net’ in ‘net-zero’, with speculative or opaque offsets assigned to do most of the heavy lifting.?

So plans, where they do exist, are largely not up to scratch.?

That’s partly because of an inadequate understanding of the climate risk that companies are exposed to: a PWC survey of CEOs this year found only 45% of companies have made strides in incorporating climate risk into financial planning. Even fewer do the same for biodiversity risk.?

And to be clear, when we talk about climate risk, we’re talking about:?

1. The physical risks to businesses and their assets from floods, heatwaves and other extreme weather.?
2. The regulatory and market changes that will leave emissions-intensive business models unfeasible.?
3. And the growing legal and reputational risks of failing to transition.?

So a proper understanding and management of climate risk, and proper transition planning is critical for a company’s long-term commercial viability. It’s not good PR, it’s good business.???

Climate needs to be brought into top-level strategy planning now, to get a head start in the economies of the future, and because of the very real risks of not acting.?

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2. What can the law do???

So what can the law do to help? At ClientEarth, we use the law to accelerate the action needed: enforcing the law and holding laggards to account; filling the gaps in legislation and regulation; and – importantly - setting out what good looks like.

Let me take each of those in turn.??

Firstly, enforcement. There are legal guardrails across various areas of the law that compel companies to act. From human rights law, to financial regulation, to consumer protection law.? But it’s not enough just to have a law in place: it needs to be upheld.?

So at ClientEarth, we litigate to enforce these legal guardrails, to set precedent, and change behaviours.???

A greenwashing case we supported recently, against KLM, is a good example. We argued that KLM’s advertising had misled the public by saying the airline is tackling climate change, despite having plans to increase its flights. The case challenged the aviation industry’s reliance on speculative solutions in their climate targets, such as sustainable aviation fuels and offsetting.?

We won the case, and the outcome has set a major legal precedent. The legal risks of greenwashing continue to escalate: the European Commission is now investigating 20 airlines over potentially ‘misleading greenwashing practices’.?

Greenwashing litigation has begun between corporates, too: with renewable energy company Iberdrola suing Repsol energy.

Then there are changes afoot in fiduciary duties.?Our case against Shell’s directors, filed last year, was a world first challenge attempting to hold directors personally liable for mismanaging climate risk.?The case was unsuccessful, but boardrooms around the world sat up and paid attention.?

Fiduciary duty cases are increasing. Earlier this year for example, ENEA, a Polish energy company, sued its former directors for a coal power investment that went wrong.?

And of course it's not just about climate: Biodiversity risk is just as significant, and companies need to manage it or risk legal action.?

Secondly, we work to strengthen the law and fill legal and regulatory gaps by engaging directly with policymakers. The corporate leaders we speak to want high standards, they want legal clarity to help guide the transition. For example, because:

• There's a huge amount going on in the EU, with new laws: requiring companies to set and implement credible, 1.5 aligned transition plans; to ensure they’re not greenwashing; and on supply chain integrity and circularity – to name a few.???

• Meanwhile the UK Labour party have said they are considering introducing Net Zero legislation that compels companies to outline 1.5 aligned transition plans.?

Change is underway – and here to stay.????

And thirdly, we work to demonstrate what good looks like from a legal perspective. How can companies manage climate risk and bridge the ambition gap??

A while back, ClientEarth published some Principles for Paris Aligned Transition Strategies to show what good looks like. We set out 3 key requirements – transition plans must be:?

1. Reasonable and science based, with short, medium and long term emissions reduction targets;?
2. Transparent in terms of their targets, assumptions, uncertainties, methodologies, performance and impacts; and??
3. Accountable:?Decision-makers must be incentivised and accountable for meeting targets. For example, with responsibility for meeting targets allocated to specific individuals and tied to remuneration and performance incentives.?

More recently we published guidance on how the seafood and agricultural sector can manage biodiversity risk.?

There are some great examples of companies out there who are doing this and have taken the transition seriously, and gained first mover advantage.

The Danish company Orsted is one. It decided, in 2009, to shift its business from oil and gas to renewable energy.?It has transitioned almost completely to becoming a wind energy company, and it is now a global leader in a sector that will power the future.?

And I know there will be many other corporate leaders gathered here today. Those who see the transition not as burden but as an opportunity.???

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3. How to we bridge the ambition gap within companies??

To conclude: how do we bridge the corporate climate gap between pledges and reality????

The right rules, regulations and guidance have a huge role to play. As of course does litigation, in enforcing the law and holding laggards to account.

But we don’t really want to litigate. What we really need is for the corporate world to show the way.???

We need companies to be bold, to show ambitious leadership, and move beyond short term thinking to take the long view: focusing on long-term sustainability for the good of the company, the planet, and future generations.?

That means setting and communicating the vision – and the sustained hard work to turn that vision into reality. And the law should be there to help. Thank you.???