At the times of confluence of crisis 'Integrity Matters'

On the stage of COP 27 at Sharm El – Sheikh, an expert group officially called as ‘UN High Level Expert Group on the Net Zero Emissions Commitments of Non – State Entities’, formed by United Nations Secretary General Antonio Guterres in end – Mar. 2022. The expert group chaired by Catherine McKenna (former Canadian Minister of Environment and Climate Change) and composed of 16 other members, after the consultations encompassing over seven – months prepared a report titled ‘Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions’, which was released on November 8th, 2022, details the universal definition of net zero based on 5 principles and 10 recommendations to guide the further net zero pathways, negate the greenwashing (primary task) and focused actions that need to be taken by these non – state entities and those who regulate them.

The following is the gist of the principles, recommendations and its key highlights, and pathway to the action (conclusion):

Further, the experts disseminated their recommendations under the 3 key heads.

• Following are the key highlights of the 10 recommendations provided by the expert group:

1. A net zero pledge must be a commitment by entire entity, made in public by the leadership and be reflective of city, region or corporation’s fair share of needed global climate mitigation.
2. A net zero pledge must contain stepping stone targets for every 5 years and set out concrete ways to reach net zero in line with Intergovernmental Panel on Climate Change (IPCC) or International Energy Agency (IEA) net zero greenhouse gas (GHG) emissions modelled pathways that limit warming to 1.5°C with no or limited overshoot. The plan must cover the entire value chain of a city, state or business, including end – use emissions. It needs to start fast and not delay action to the last minute, reflecting the fact that global emissions must decline by at least 50% by 2030.
3. Non – state actors (NSAs) must prioritize urgent and deep reduction of emissions across their value chain. High integrity carbon credits in voluntary markets should be used for beyond value chain mitigation but cannot be counted toward a NSA’s interim emissions reductions required by its net zero pathway.
4. NSAs must publicly share their comprehensive net zero transition plans detailing what they will do to meet all targets, align governance and incentivise structures, capital expenditures (CAPEX), research and development (R&D), skills and human resource development and public advocacy, while also supporting a just transition.
5. City, region, finance and business net zero plans must not support new supply of fossil fuels: there is no room for new investment in fossil fuel supply and there is a need to decommission and cancel existing assets.
6. NSAs must lobby for positive climate action and not against it. By working with governments to create strong standards, NSAs can help create an ambition loop and ensure a level playing field for ambitious net zero pledges and to further de – risk a speedy transition and maximize the economic benefits of rigorous net zero alignment.
7. By 2025, businesses, cities and regions with significant land – use emissions must make sure that their operations and supply chains don’t contribute to deforestation, peatland loss and destruction of remaining natural ecosystems. Financial institutions (FIs) should have a policy of not investing or financing businesses linked to deforestation and should eliminate agricultural commodity – driven deforestation from their investment and credit portfolios by 2025.
8. NSAs must report publicly every year and in detail, on their progress, including greenhouse gas data, in a way that can be compared with baseline they set. Reports should be independently verified and added to UNFCCC Global Climate Action Portal. Special attention will be needed to build sufficient capacity in developing countries to verify emission reductions. The recommendations of this report are therefore relevant to both UNFCCC global stocktake (GST) process and anticipated mitigation work programme.
9. To achieve net zero globally, while also ensuring a just transition and sustainable development, there needs to be a new deal for development which includes FIs and multinational corporations working with governments, Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) to consistently take more risk and set targets to greatly scale their investments in clean energy transition in developing countries.
10. To make net zero work and to create a level playing field, regulators should develop regulation and standards starting with high?impact corporate emitters, including private and state – owned enterprises and FIs. Countries should launch a new Task Force on net zero Regulation to convene regulators across borders and across regulatory domains, alongside leading voluntary and standard – setting initiatives and independent experts, to drive reconfiguration of ground rules of global economy to align to the goals of Paris Agreement.

• The expert group also provides a pathway to the action, which is as follows:

1. NSAs should review their net zero commitments against these recommendations to see how they stack up with a focus on their interim targets, how they set targets and how they report progress.
2. Existing alliances of NSAs should support their members in these reviews by updating their guidance and membership requirements in line with these recommendations as soon as possible.
3. NSAs should build support to small?and medium?sized enterprises (SMEs) and micro enterprises in their efforts to decarbonise and green their businesses. Small businesses are a key part of economic fabric in most countries and are especially present in industries vital for the transition. They provide key services, livelihoods and employment opportunities: globally, they represent about 90% of businesses and more than 50% of employment (and even higher in developing countries). As they are part of bigger entities’ value chains and contribute to scope 3 emissions, they are crucial to meeting net zero objectives. Under pressure to transition themselves, in order to retain customers and access finance, small and micro businesses will need help from bigger entities with data collection, capacity building, and creating and sharing needed technology. While support is needed across the board, SMEs and micro enterprises in developing countries find it particularly difficult to access the necessary finance and technology to transition. Initiatives such as SME Climate Hub founded by We Mean Business coalition, Exponential Roadmap Initiative, International Chamber of Commerce and Race to Zero Campaign have started doing this. But we need to ramp up efforts to reach the necessary scale to make a difference where it matters most.
4. The net zero Financial Service Providers Alliance, as part of their effort to “align all relevant services and products to achieve net zero” should add a ninth commitment to support SMEs and other NSAs in developing countries with limited resources, to develop high – quality data and have their net zero pledges and transition plans verified.
5. It is widely recognized that there is a need to provide assurance on emission reductions reporting for net zero pledges. It is also needed on NSAs net zero claims and reporting with regards to their pledges and annual progress reporting. The accuracy of such information is currently difficult to assess for most stakeholders including investors and FIs. We call for an assessment of the extent to which the ISAE 3000 (Revised) in Sustainability Assurance and ISAE 3410 for Greenhouse gas statements are fit for providing assurance on net zero pledges and annual progress reporting.
6. Policymakers and regulators should integrate these recommendations in key existing policies that guide NSAs working on net zero. This will make the minimum requirements clearer and more transparent.
7. There is a need for a Task Force on net zero Regulation to convene a community of international regulators covering all industries to work together towards net zero. Using the TCFD process as a useful precedent, this community would be broader, and could include members from all regions and bodies such as FSB, IOSCO, ISSB and other experts.
8. Building on existing comprehensive frameworks for net zero transition plans, the aim of the Task Force would be to:

a) Connect policymakers and regulators both across borders and across regulatory domains to identify and address major challenges holding back climate?positive regulation.

b) Help policymakers and regulators complement voluntary climate action with clear rules that are both nationally appropriate and internationally consistent.