In November 2021, 197 nations, world leaders, financial specialists and environmental experts met for the UN’s first COP international one-to-one talking shop in six years for what was meant to be a vital turning point in resolving the world’s worsening climate emergency. The global forum did finally agree a rulebook of mechanisms to put the historic 2015 COP21 Paris climate agreement into practice, but it did not gather enough carbon-reduction “commitments” from individual nations to keep future temperature rises down to no more than 1.5°C.

From a downward spiral to a steep upward slope

As a result, the world still faces the double challenge of leaving the slippery downward slope of emitting more and more greenhouse gases, while moving up the steep investment gradient needed to develop low- or no-carbon infrastructure and new green technologies — especially renewable energy. However, many researchers are also worried that the current model for a sustainable future relies on unrealistic quantities of clean electricity, carbon capture and biomass that will be hard to deliver in the tight 30-year timeframe global warming allows.

One alternative is a radical reduction — up to 50% — in the amount of electricity society uses. Another concern is that the 1.5°C limit, which is now generally regarded as “safe”, is nowhere near low enough.

Handing over the baton

The problem identified by some climate experts is a substantial gap between policy, action and science that is also reflected in the relationship between Government, business and researchers. It is widely agreed that COP26 saw a significant shift in the relationship between the limitations of governments to get things done and the “can-do” net zero delivery power of business. One explanation is that the “world” has been asking too much of politicians who could be out of power five years from now to create the bold policies needed to shape new vibrant green markets by 2050. For many, the pandemic and economic downturn are still more pressing.

Big bet on business

Before the summit, COP26 President Alok Sharma, stressed that the UK cannot reach net zero “without business behind us”, adding that companies should join the UN’s Race to Zero campaign with science-backed emissions-reduction targets.

His view was echoed by small companies in the summit’s public Green Zone. While fewer than expected “strict” net zero announcements came from negotiations in the diplomatic Blue Zone, there was said to be a clear rise in net zero engagement and momentum among businesses themselves. This was seen in greater enthusiasm to understand carbon footprints and how they can be reduced through good low-carbon behaviour, firm controls, and greener technologies, such as on-site renewable power generation, LED lighting, and heat recovery. In addition to the Race to Zero Campaign, Planet Mark is another option. October 2021 also saw the new SBTI – corporate net zero standard launch.

Networking, collaboration and policy changes

A further comment was that the wider business community “came together in the back rooms of Glasgow” to share strategies and promises, and through wider networking, and collaboration showed that there is a “significant business-led desire to make a difference.” One of the most radical changes triggered by COP26 could be that governments in the future focus their political powers on setting policy frameworks in which industry can deliver practical carbon cuts and pioneer clean technologies.

Instead of investing large amounts of taxpayers’ money, the idea is for the Government to firm up low-carbon action by changing the rules industry and society work by. This has been described as a cheap and easy option. Banks could similarly set net zero conditions for finance to speed up the transition from fossil-fuels to renewable energy, sustainable procurement, and the zero-waste circular economy.

The upshot could be that national and local Government sets new net zero standards for planning and materials procurement so that no planning consent is granted for new-build residential, industrial, or municipal developments, unless their carefully calculated carbon footprints meet strict criteria.

COP26 gains and losses

What did the summit achieve — and not achieve — in the big picture?

The glass-half-full case is that progressively lowering the world’s temperature rise trajectory from above 6°C before COP21 in 2015 to between 1.8°C and 2.4°C at COP26, en route to a viable if fragile 1.5°C, is a positive result. The alternative view is that more should have been achieved, and in the context of recent environmental impacts — from Arctic wildfires, droughts and heat domes, to severe flooding in the UK, Germany, Canada, Egypt and China — the summit was a failure.

What was agreed

Three key COP26 outcomes are as follows.

  1. Keeping 1.5°C alive”.
  2. The Glasgow Climate Pact that sets the climate change agenda to 2030.
  3. COP27, in Egypt, in 2022, which will aim to fill the carbon-reduction commitments gap COP26 couldn’t.

Summaries of what was achieved can be seen at ukcop26.org/wp-content/uploads/2021/11/COP26-Negotiations-Explained.pdf and www.gov.uk/government/news/cop-26-ends-with-global-agreement-to-speed-up-action-on-climate-change.

Agreements were struck on coal, adaptation finance for developing countries, ending fossil-fuel subsidies, deforestation and methane leaks, funding for “clean” technologies, plus an historic co-operation agreement between the US and China. There were also further initiatives described below, designed to support the development of new low-carbon technologies and put public and private green finance behind the net zero by 2050 goal.

Companies eye up net zero systems

Business is already leading the way. More than 50% of UK large businesses are said to be planning to reach net zero by 2050. However, many are not yet taking indirect Scope 3 emissions into account. This is where SMEs in the value chain can help by setting their own tailored targets. Indirect (Scope 3) emissions from complex global supply chains typically account for circa 90% of a business’s emissions footprint. The new Value Change Initiative will also now help organisations —large and small — measure and reduce them in line science-based climate research.

Launched since COP26, Value Change is based on more than three years of work by two co-founders, Gold Standard and certifying body SustainCERT, is a forum for businesses to share best-practice and advice on carbon data collection, reporting, cutting emissions, and accurate offsetting.

Further COP26 successes

Other agreements that should not be missed.-

To direct “trillions” towards the energy transition, there have also been calls for the International Monetary Fund and the World Bank to “derisk” lending by absorbing early projects losses. This could mirror the UK Government’s confidence in underwriting the UK’s fledgling offshore wind industry which has gone on in recent years to slash its costs to the point where today, there are fears that revenues may be too low to support further development and expansion.

Better big green finance

The Treasury will make it mandatory for large firms and financial institutions to show plans for meeting the UK’s tough net zero target. An expert panel will set standards to avoid “greenwashing”. Chancellor Rishi Sunak wants the UK to be the “first-ever net zero aligned global financial centre,” with “better and more consistent climate data; sovereign green bonds; mandatory sustainability disclosures: proper climate risk surveillance: and proper global reporting standards.” The Government is also creating a verification scheme for corporate net zero transition plans; high-emitting sectors must publish their plans by 2023.

Reporting standards and assurance

Because many initiatives require accurate data, environmental, social, governance (ESG) analysis and reporting is becoming increasingly important in bringing non-financial issues onto the balance sheet.

To provide uniformity, the global Task Force on Climate-related Financial Disclosures (TCFD) initiative has “developed a set of recommendations that are changing the way organisations manage climate risks and opportunities”. As of January 2021, all top UK companies have had to state in their annual reports whether their disclosures of information meet TCFD recommendations, and if not, explain clearly why. By 2025, TCFD-aligned disclosures will be mandatory across the UK economy.