What does COP26 mean for U.K. businesses?

Last week COP26 came to an end after a long session of brainstorming, discussing policies, initiatives and goals and leaders taking pledges. Coming at a time of heightened environmental awareness among the common citizens and the post-pandemic needs of businesses and corporations, the conference came through with heavy discussions on ways to combat climate change. Whether it was considered a success or not, it is clear that COP26 will usher in new changes for businesses and leaders in line with new-set agendas.

What happened at COP26?

The agenda for the 12-day conference was to find ways to achieve net-zero emissions, globally. And this conference saw a lot of deals made and promises reiterated. Some of the highlights were as follows:

More than 100 countries signed a pledge to cut 30% of their methane emissions by 2030 — one of the most powerful greenhouse gasses, currently responsible for one-third of human-generated warming, with its source primarily being cattle production and waste disposal. If countries follow through, it has the potential to reduce global temperatures by 0.2°C in the coming decades. Critics on the other hand say this is a balancing measure, rather than a strong incentive to reduce warming.?

Further, more than 130 countries promised to end deforestation by 2030 to preserve carbon-rich foreign sinks and biodiversity hotspots.

But the most striking points were made on the use of coal, as it is one of the largest polluters of the environment. In the 2015 Paris Conference, it was agreed that global emissions need to be reduced by 45% by 2030 to curb climate change. And coal makes up almost 40% of annual CO2 emissions. Under the Glasgow Pact, explicit plans ask countries to press for urgent emission cuts and to set up financial banks to help developing countries achieve carbon neutrality as well. Although, the pledges so far do not seem promising enough to maintain the 1.5°C limit.

40 countries, excluding the U.S., China, and India, vowed to?“phase down” rather than “phase out” coal. Further, 450 financial organisations agreed to shift to clean technology (including renewable energy) in efforts to remove funding from fossil fuels.

However, no clear protocols or monitoring systems are set to reach these goals. There’s also no clear definition for what net-zero emissions mean. But, if these long-term targets are followed as pledged, global temperature rise can be held to 1.8℃, according to independent analysts from the Climate Action Tracker (CAT) organization.

Why is it important for businesses?

Having clearly omitted the goals set out in 2015 under the Paris Agreement, curbing climate change is becoming challenging by the day. I have previously spoken about the?need for ESGs ?and embracing environmental management systems for the societal, businesses and financial benefits they bring. The discussions from COP26 will likely dictate the governance rules for opening up new industries, products and services, and consumer behaviour towards these organisations.

For already established organisations, the upcoming goal will be to manage the risks and opportunities around climate change. For example, businesses will have to monitor their impact on the environment, their energy consumption, the nature of information shared with stakeholders, etc.

As for the U.K. government’s plans for big businesses, under the new proposed Treasury rules, most of the big firms will now have to be more transparent in their functions.

In line with the net-zero goal for 2050, large corporations and financial institutions will have to show how they propose to move towards a green and low-carbon future, starting in 2023. Policies being self-governed, grant stakeholders and business leaders and to decide their own terms and plans to move towards decarbonisation. However, the U.K. is not making firm-level net-zero commitments mandatory, but is pushing this mandate to increase transparency and accountability from large institutions.?

How are U.K. businesses doing?

Several reports note that Britain’s largest businesses are at the forefront of reaching net-zero emissions. Over half of the FTSE100 companies have committed to eliminating their contribution to climate change by 2050. These include GlaxoSmithKline, which committed to using 100% renewable energy by 2050, including investments in wind and solar power.

Further, despite a growing economy, carbon emissions have starkly reduced — between 1990 and 2019, Britain’s economy grew by 78% while carbon emissions fell by 44%, the fastest reduction in the G7.?

The U.K. government has called on the global private sector to follow their example in joining the UN Race to Zero. Through COP26, over 2,000 small businesses in the U.K. pledged to reduce their emissions by joining this campaign launched by the Prime Minister earlier this year to help small businesses go green. The campaign urges organisations to become more dependent on clean energy, be more energy-efficient and become landfill-free.

How to prepare for the future?

There are a number of steps businesses can take to match the race to zero. Right from aligning SDGs to your EMS systems, it’s imperative to analyse the action plan for curbing your emissions.

There are three clauses to assess before investing in an EMS programme — auditing, disclosure, research. At first, look down your supply chain to ensure that its environmental impacts aren’t being spilled over to other regions and countries and can be done via scrutinising the resources in use, like examining the water used to support your production or tracking your greenhouse gas emissions.

Understand the nature of disclosure your target market, investors, stakeholders and other partners look for from you. Right from communication with your employees to the environmental message put forth to your customers, assess your brand to add to your legitimacy. Track your reporting history too, whether you are on the right path, working effectively or meeting the legal requirements as mandated.?

Lastly, understand all possible options for your ESG plans. Inform yourself of your possible greenwashing tendencies, finances, improvements with respect to climate change, sustainable growth, etc. Assessing these factors will ease your way to contributing towards green goals.