By now, you are all well aware of the huge climate challenge the world is facing, the policies certain governments are implementing to meet a target of net zero greenhouse gas emissions by 2050, and the major role that business has to play.
2020 will be a pivotal year for businesses’ response to climate change as the emissions gap widens and the ratchet mechanism in the Paris Agreement calls for strengthened contributions. During this decade, we may start to see contention over the licence to operate if action is inadequate.
At Chapter Zero, we help chairs and non-executive directors across all sectors prepare to address the business risks and opportunities presented by climate change and the transition to a net zero economy.
The year 2020 marks five years since the Paris Agreement was signed at the Conference of the Parties in 2015 (COP21). The parties to the Agreement identified 2020 as a critical step in the process, inviting countries to communicate or update their Nationally Determined Contributions (NDCs) by this time. The NDCs are expected to be updated when the UK hosts the next Conference of the Parties in November, in Glasgow.
Chapter Zero would like to highlight the UN Environment Programme Emissions Gap Report that we expect will have the impact of accelerating new policy on climate change, thereby increasing the demands on all businesses. Published in late 2019, the report provides the latest assessment of scientific studies on current and estimated future greenhouse gas emission (GHG) levels permissible for the world to progress on a least-cost pathway to achieve the goals of the Paris Agreement. It also includes some of the most promising options available to decarbonise businesses in the G20 economies to bridge the gap.
In the report, the emissions gap between estimated total global emissions by 2030 under the current NDCs and those required by the pathways limiting warming to below 1.5°C is wide. If unconditional NDCs are fully implemented, estimates indicate a gap of 32 GtCO2e. Total GHG emissions, including from land-use change, reached a record high of 55.3 GtCO2 in 2018. This means, even if current commitments are fully implemented, there is only a 66 per cent chance that warming will be limited to 3.2°C by the end of the century. Therefore, there needs to be a massive strengthening of the NDCs in line with the ratchet mechanism of the Paris Agreement, which is expected to take place at COP26 in November 2020. The G20 members, account for 78 percent of global GHG emissions and will need to increase their ambitions more than fivefold to achieve the 1.5°C goal.
This agenda is likely to increase the scrutiny on businesses, and create an impetus to accelerate significantly efforts to reduce GHG emissions. There is no evidence of emissions peaking in the next few years, and every year of delay means that deeper and faster cuts will be required. By 2030, emissions would need to be at least 55 per cent lower than in 2018 to put the world on the least-cost pathway to limiting global warming to below 1.5°C.
Fundamental structural changes are needed within most businesses and may require substantial capital investment compared with a business-as-usual scenario. The resilience of your company’s business model in light of these changes must be considered early on, so that value can be generated and preserved.
Chapter Zero, the UK directors climate forum, was launched in the summer of 2019, and started 2020 with a membership of more than 450, representing more than 25% of the largest companies listed on the London Stock Exchange. Our aim is to reach 1,000 members (which equates to two members on each UK listed company board) by the 2020 United Nation’s climate change conference (COP26) in Glasgow in November when the world’s governments will showcase their climate action and innovation. As part of the World Economic Forum’s Climate Governance Initiative, Chapter Zero looks forward to helping lead the way in providing thought leadership on climate change to non-executive directors. There are also Chapters forming around the world, assisting businesses to tackle the issue. Look out for those either already established or being developed in Australia, Brazil, Canada, China, Hong Kong, Italy, Japan, Malaysia, New Zealand, South Africa, Singapore and Thailand.
Visit our website to access the resources available to increase awareness of the business implications of climate change; to provide knowledge on the issues, as well as toolkits and frameworks; and to sign up for seminars and modules for members giving access to pools of experts and other board directors. We also offer the opportunity to shape the dialogue when it comes to the business response to climate change, through our platform, by providing feedback and communicating companies’ concerns to government, investors and other stakeholders, which will be relayed at the many events and roundtables the Chapters attend and host.
If you serve on a board outside the UK, look out for your local Chapter, and access the World Economic Forum’s Principles of Climate Governance on Corporate Boards. In the UK non-executive directors and chairs are encouraged to register as members to receive our bulletins, sign up for our events, and download our toolkit which will help you assess your company’s readiness to tackle this important challenge.