Three keys to transforming business for the low-carbon transition
Nigel Topping, CEO, of the We Mean Business coalition
In the run-up to COP21 in Paris, the voice of forward-looking business taking bold climate action needed to be heard loud and clear by world leaders. Rising to this challenge, a group of organisations working with hundreds of the world’s largest companies came together to form the We Mean Business Coalition, delivering the collective voice of progressive business.
This helped give policymakers the confidence and political cover to raise ambition and deliver the Paris Agreement. Since the Agreement was made, the coalition has gone on to help drive transformational change towards a low-carbon economy, applying three principles of systems change in particular.
Radical collaboration
The coalition seeks to engage all the major stakeholders of a system to help drive progress that doesn’t leave anyone behind. A great example of this is the Science Based Targets initiative, which set a framework for use by other partners and investor groups to drive Paris-compliant pathways for business.
This collaboration is helping bring science-based targets to scale, with Mahindra Group CEO Anand Mahindra now calling on all businesses around the world to join the growing number committed to setting them. Mahindra’s aim is to have 500 companies signed up by the Global Climate Action Summit in September 2018.
Reciprocity
By raising their climate ambitions, businesses can send a clear signal to governments that they see the low-carbon economy as a driver of innovation, competitiveness, risk management and growth. Similarly, bold long-term climate policies set by governments encourage businesses to invest and innovate to create the solutions needed. This reciprocal relationship between leading businesses and ambitious government can create an upward spiral of ambition and action.
For example in the energy system, over 120 of the world’s most influential companies have now committed to source 100% renewable electricity. Such powerful demand signals are allowing utilities to invest with greater confidence and help transform the sector. This in turn gives governments greater confidence to push ahead with ambitious national climate plans. India is now ahead of schedule with its commitment to increase the share of non-fossil energy and expects to reach 57% renewable energy capacity by 2027. The UK and Canadian governments are leading the Powering Past Coal Alliance. Business can take confidence from these strong policy signals, allowing them to invest for the low-carbon future and step up as the key implementation partner for government.
Reflexivity
As George Soros describes in his General Theory of Reflexivity, firmly held beliefs around future trends can create positive feedback loops that go on to reinforce and ultimately create that future through a process of self-referral. Put simply, the way we think about the future influences how we act today.
For example, the current market share of electric vehicles (EVs) in the overall light car market is only around 2%, which seems too low to have any impact. However, countries like the UK, Norway and India have set an end date for the sale of new non-electric cars, and many of the largest auto-makers have committed to rapidly electrify their fleets. Mayors of many of the world’s great cities are committing to cut pollution from their streets, and leading companies are committing to accelerate the transition to EVs. Meanwhile, increased investment in battery technology is pushing costs down, allowing EVs to become more cost-competitive, which is driving up demand from customers.
This is creating a tipping point where the EV market share could continue its current trend and roughly double every two years or less. Such exponential growth would deliver 100% EV market share before the close of the 2020s, and rewrite the script around EVs. The We Mean Business coalition helps with this by amplifying the signals of change from both business and government, to create political cover for bold government decisions and give business the confidence to invest in the low- carbon future.
Finishing the job
As we make progress in some areas of action on climate change, we see the need for more attention in two areas. Firstly, some parts of the climate-economy nexus do not yet have sufficient momentum or an emerging solutions pathway. More systemic focus on the built environment and the food-land systems will be needed if we are to achieve the Paris goals.
Secondly, we have learnt that collaboration across multiple actors requires more attention to nurturing ‘communities of practice’ – those groups of change-agents who should naturally be working together because they share transformational objectives but who often work in isolation. The lack of convening of these communities around more granular goals leads to duplication, missed opportunities for synergy, and sub-scale impact. Having prototyped radical collaboration at the macro-level, we are now focused on how to convene and support radical collaboration at this more granular level.
Based on some early successes and many lessons, we see these two frontiers as being key to delivering on our ambition – a prosperous world, with a thriving economy, safe from the worst impacts of runaway climate change.
This blog was produced in partnership with the Royal Scottish Geographical Society.