The potential for growth and gaining a competitive edge through the sustainability imperative is now clearer than it was before the start of COP28. While achieving profitable growth, especially in climate technology, has traditionally been challenging, COP28 alleviated some of these difficulties.
Harry highlighted that despite initial skepticism, the integration of public sector policy and private sector innovation at COP28 was noteworthy. He for example observed a lively debate on the role of fossil fuels amid the transition to dual energy systems, witnessed greenhouse gas mission set in proper context of natural boundaries, and saw more prominence given to adaptation and resilience than ever before.
At COP28, three distinct, yet interconnected, elements came into play:
- The negotiation of a joint text, UAE consensus, marked several notable milestones: a commitment to shift from fossil fuels, recognition of peak emissions in 2025, a pledge to triple renewable capacity by 2030, and the establishment of a Loss & Damage fund.
- Parallel to negotiations, COP28 featured a robust Presidential Action Agenda. Agreements like the Oil & Gas Decarbonization Charter and the Cement and Concrete breakthrough showcased the potential of smaller groups driving innovation and technology adoption.
- Beyond headlines, the convergence of businesses and investors at COP28 was instrumental. Deals, like the $30 billion climate technology fund joint venture, Alterra, signaled real capital formation to accelerate the transition towards sustainable practices.
How can businesses respond?
While acknowledging we're not where we need to be, there's promising progress on all three fronts. Now, how can businesses respond? Harry proposes two framing thoughts worth considering. Firstly, the transition can generate substantial value pools, potentially reaching $12 trillion this decade if on a 1.5°C path. To achieve net zero, someone must capture that value—could it be you? Secondly, climate change is just one facet of the broader challenges our world faces. The Global Stock Take, macro-economic conditions, inflationary pressures, high-interest rates, and concurrent geopolitical tensions create uncertainties. However, they also provide a roadmap for companies to navigate through these complexities.
According to Harry, there are five considerations for businesses:
- Unlocking sustainability value: Do businesses understand the risks and opportunities presented by the sustainability imperative, such as declining market share or securing green premiums? A robust understanding is crucial for strategic advantage.
- Dual mission approach: Can a focus on carbon reduction align with cost-cutting objectives? A dual mission approach often yields more significant cost reductions, with motivated employees driving implementation.
- Optimizing structural economics: How well do businesses understand geographic or technology-based taxes and incentives? A clear understanding can optimize structural economics and enhance profitable growth.
- Cost advantage of technology: Is the business technology competitively priced compared to incumbent alternatives? Ensuring cost parity from day one is essential for rapid scaling and market leadership.
- Ensuring business continuity: How prepared is the business for rising temperatures, supply constraints, and geopolitical uncertainties? Leaders are focusing on supply chain diversification, resilience measures, and circularity to ensure continuity.
In conclusion, COP28 marks a crucial step towards a net-zero global economy. For businesses, embracing sustainability is not just a responsibility but an opportunity for profitable growth. By addressing these questions, firms can lead in their markets, accelerate climate technology deployment, and mitigate the worst consequences of climate change. COP has set the direction; it's now up to us to seize the opportunity for ourselves and our planet.