As the reality sinks in that we’ll breach 1.5°C of warming, the Paris Agreement is starting to show a very different face here in Egypt. Paris-aligned corporations should brace themselves for impact. Evan Stamatiou writes from Sharm El-Sheikh in Egypt.
In the end it only took seven years to realise that the Paris Agreement’s goal of limiting global warming to 1.5°C was dead. UN Secretary General Guterres didn’t have the heart to break the news earlier this year, instead choosing to frame 1.5°C as “on life support”. But it’s surely dead now, buried under a mountainous pile of bad news detailed in UNEP’s Emissions Gap Report 2022, just released.
The pace of global warming has been startling, already 1.2°C. Global annual GHG emissions are again at a record peak, with developed world emissions still stubbornly high. Emissions in some parts of the developing world are rising uncontrollably, due in part to the West’s dismal failure to provide promised finance to support their green transitions.
The final blow is the wave of new finance committed to oil and gas, now obscenely misaligned with a 1.5°C trajectory, with $742 billion in fossil fuel financing committed globally in 2021 alone. It’s no wonder UNEP concluded that we have no credible pathway in place to keep 1.5°C alive.
With breaching Paris’ 1.5°C goal now a fait accompli, what does this mean for businesses that are actively marketing alignment with “Paris 1.5°C” through emissions reduction targets, investment strategies, and services? Quite simply, it means that they’ll soon have to stop doing so. Even aggressive 2030 corporate emissions reduction targets and strategies won’t prevent the inevitable. This ambition is too little, too late to keep 1.5°C alive.
As this bitter reality gains widespread acceptance over the next few years, corporations that persist with selling their green credentials through 1.5°C alignment disclosures will be at heightened risk of being called out for greenwashing by investor groups and broader stakeholders. Regulators (read ASIC and ACCC) will also soon wise up to our new reality, and we can expect to see guidance from them warning against 1.5°C alignment marketing. Inevitably, even the Science-Based Targets initiative (SBTi) will have to scrap its 1.5°C guidance once the UN signs the death certificate.
How can business remain Paris-aligned from here?
Businesses now have the option of simply rebranding their 1.5°C-aligned targets and strategies as aligned to Paris’ less ambitious goal of <2°C. After all, if we double down on ambition there’s still a (very) slim chance that we might keep warming at this level.
The trouble here is that Paris’ <2°C target has been seriously on the nose since the 2018 IPCC Special Report on Global Warming of 1.5C, which highlighted the incredible difference in physical impacts between 1.5°C and 2°C, and hence the urgent need to double down on efforts to stop warming at 1.5°C.
So, corporations retreating to <2°C alignment will unavoidably be connecting themselves to the <2°C story; a story where developed economies ultimately failed to keep 1.5°C alive, and consequently inflicted increasingly extreme physical impacts on the developing world.
As an extension to this, corporations that want to advertise themselves as Paris-aligned will also need to contemplate how they support elements of the Paris Agreement coming to life here in Egypt dealing with impacts of failure. Poor countries, seething with resentment at being the most affected and yet least responsible for climate change, are forcing the energy of this Egyptian COP to turn towards neglected articles of the Paris Agreement that deal with climate impacts, including Article 9 on climate adaptation and mitigation finance to the developing world.
Attributing responsibility for historical emissions is a touchy subject at these COP negotiations, with considerable pushback from developed countries keen to avoid any admission of liability. But regardless of how national-level negotiations evolve, the business world must realise that Paris alignment is now taking on a different meaning. Corporations that persist with voluntary Paris alignment will now need clear strategies to 1) double down on ambition with aggressive Scopes 1, 2, and 3 decarbonisation targets (so that we actually stay below the 2°C barrier), and 2) deal with the consequences of their historical failures through emissions redress plans.
What might emissions redress strategies look like?
Article 9.2 of the Paris Agreement directly references non-state actors and encourages their support for mitigation and adaptation finance to the developing world. But we’re only just starting to see the emergence of mechanisms to operationalise support.
Supply chain engagement is a good starting point for corporations considering emissions redress. For most Australian corporations, supply chains are their most tangible link to the developing world. As corporations start to take climate risk assessments seriously, most are also discovering serious vulnerabilities to physical impacts within their supply chain networks.
Smart investments into sustainable products and supply chains models are already supporting select Australian corporations to improve their supply chain resilience while also helping their developing world partners adapt to climate impacts and finance their emissions mitigation efforts. CDP has useful guidance to help corporations conceptualise what supply chain engagement on climate change could look like.
Another layer to this is considering offsetting carbon legacy emissions like a very small group of corporations has already committed to (most notably Google, with Microsoft following in its footsteps). This idea is also coming to life here in Australia but remains below the radar.
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Global carbon markets are focused on overcoming integrity concerns and there is now a rush to develop high-end carbon offset products. And as we realise that the climate, biodiversity, and humanitarian crises are inextricably linked, voluntary markets are responding with nature-based solutions projects that deliver carbon, conservation, and sustainable development outcomes to protect vulnerable communities in developing countries.
In this context, investing in high quality carbon offset projects is an opportunity for corporations to offset a tranche of their historical emissions, but also support the flow of precious climate change mitigation and adaptation finance to the Global South. Of course, this all comes with a price-tag, but smart boardrooms are already opening their door to this idea because of its potential to strengthen a corporation’s social licence to operate and its ability to attract customers and capital over the longer term.
Ultimately each business will have to choose its own Paris alignment adventure in this strange new era, leveraging its unique ecosystem of partners, assets, investments, and relationships with developing world stakeholders.
Identifying win-win pathways that underpin an emissions redress strategy will be hard work and will require a degree of executive-level engagement on climate risk never seen before.
