The Paris Agreement to tackle global warming is bigger than most realise and may be the signal that the marketplace was waiting for to unleash investment in clean technologies, writes Alice Garton.
Alice Garton is a Company Lawyer at ClientEarth, an organisation of activist environmental lawyers committed to securing a healthy planet.
After months of debate, world leaders gathered in New York on 22 April to sign the historic Paris Agreement. It was formalisation of the COP21 pact to keep global temperature increases well below 2°C, and ideally 1.5 C – a deal set to have far broader consequences than many imagine. Once ratified, it will be a legally-binding global commitment and, with politicians on board, the onus is now on businesses to step up.
But Paris is bigger even than most realise. If the age-old adage for industries facing disruptors is ‘adapt or die’, Paris poses a similar dilemma to today’s businesses.
Some will be sceptical they can or will. But in a sign that the mood is changing, there are signals that big business is starting to embrace change, and taking climate change and sustainability increasingly seriously. It’s a complex transition but we are moving to a time when climate risk is recognised less as a corporate, social duty and more a material business risk, one big businesses need to stay ahead of.
The adoption of progressive shareholder resolutions at major extractive companies like Rio Tinto, Anglo American and Glencore this spring could be a watershed moment. Shareholders are now rightly demanding much greater transparency on how these multinationals report their activities and how they are dealing with climate risk and opportunity. They are being pushed to come clean on how they will make the move to a low-carbon future, and how they will innovate to get a lead on competitors.
As US Secretary of State John Kerry said at the signing ceremony: “The power of this agreement is what it is going to do to unleash the private sector. The power is the message that it sends to the marketplace.” If the big companies don’t act in time, smaller insurgent companies will.
This would be exciting in isolation, but it is just part of a wider movement of change which recognises the business imperatives of going green. And the downsides and existential risks of inaction. In one corner you have growing investor activism, in another, genuine traction for a move towards a whole new way of doing business with the circular economy, which aims to extend the life of goods and tackle the ‘design for disposability’ mind-set.
The Ellen MacArthur Foundation, one of the leading advocates of the circular economy, recently estimated that it would generate around €1.8 trillion for Europe’s economies by 2030. It is working with large, multinational corporations across a variety of sectors such as retail, automotive and technology to identify how they might change how they produce and sell. The European Commission’s Circular Economy Package of waste and recycling laws and more stringent enforcement is the stick to this carrot.
So the mind-set is definitely changing. Whether it be the Paris imperative, shareholder resolutions at multinationals, or the circular economy, there are encouraging signs that businesses are heeding the need to flex and adapt, and be brave. Smart firms are taking counter-intuitive moves, and taking chances to gain a competitive advantage by embracing these initiatives.
But this transition must happen faster, and the big carbon-intensive firms need to lead the way. ClientEarth’s Chief Executive James Thornton co-signed a letter to the Financial Times on 26 April urging BP, Chevron, ENI, Statoil, ExxonMobil, Shell and Total to recognise their role in bringing about radical change post-Paris.
As we stated in that letter: “The economic development and technological innovation afforded to us by fossil fuels is what makes it possible now to move beyond them.” We must learn some lessons from the tech industry about the speed of disruption – could it be that the ultimate disruptor is Mother Nature?
May 3 ,2016
Alice Garton, ClientEarth