What business needs to know about taking climate action in 2023María Mendiluce, CEO, We Mean Business Coalition
With 2023 upon us, we have just seven years left to halve emissions in line with limiting global temperature rise to 1.5°C. If 2021 was the year for setting climate ambition, 2022 was the year of implementation. The agreement at COP27 reaffirmed the need to phase down coal. However, it was a missed opportunity to be bolder and propose to phase out all fossil fuels. The ongoing conflict in Ukraine has produced shocks to the energy and economic system globally. Reassuringly, we’ve seen a drive towards clean energy with investment in wind, solar and electric vehicles continuing to gather pace. Companies continue to decarbonize their own business operations and are increasingly looking at decarbonization across their supply chains.
Business leaders at COP27 were aligned: 1.5°C is a limit not a target for climate action. Ensuring we don’t surpass this limit is challenging. More and more companies are working towards 1.5°C aligned climate strategies and seeing positive impacts on their results, the environment, and the communities where they operate. In an increasingly connected world, the collaboration between business, policymakers and local communities is essential. Business will have a vital role to play in both delivering and holding governments accountable on the 1.5°C pathway.
We are seeing the rise of corporate climate leaders as leading businesses respond to the climate crisis and what We Mean Business Coalition identified as the 4A’s of Climate Leadership: Ambition, Action, Advocacy and Accountability. Accountability will increase in importance as reporting becomes standardized, with a growing movement to make climate-related financial disclosure mandatory for corporations, in line with the Task Force on Climate-Related Financial Disclosures and International Sustainability Standards Board recommendations.
In 2023, business leaders will step up action on tackling climate change because it makes business sense. Below are key considerations for businesses on climate this year and some steps they can take to demonstrate climate leadership.
- Phasing in more clean energy: Geo-political conflict and tensions will continue to drive higher energy prices this year, with many preparing for next year’s winter in Europe. Greater investment will go into green energy, which has already proven to be a smart business strategy. Companies that are not making the switch will be left behind.
- Phasing down fossil fuels: Obviously, there is no place for fossil fuel emissions in a 1.5°C world. Companies and investors will start to monitor and limit their dependence and vulnerability to fossil fuels, both in their own operations and across entire supply chains. Transitioning fossil fuel companies to become green companies will be a key theme at COP28 in Dubai. The transition needs to be just, which will involve innovative reskilling. It also needs to be fast.
- ‘Building in’ more nature: The impact of nature on climate change was highlighted recently during both COP27 and the COP15 Biodiversity Summit, which saw a historic deal agreed to protect nature. Business can make credible, high-quality investments in nature alongside cutting their emissions. Guidance on what high quality means will be available in 2023 providing business with a safe operating space to make their investments.
- Decarbonizing heavy industry and transport: Aviation, shipping and cement are among the industries that now have greater clarity on what they must do to decarbonize. The Mission Possible Partnership recently launched its ‘2030 milestones’ that will define the specific requirements needed in heavy industry in 2023 and beyond.
- Financing the transition: To finance the transition and encourage investment in companies that are climate leaders, markets need full information on climate risks and opportunities, clear pricing signals and policies, and public climate finance support. For example, Climate Action 100+ released a Net Zero Company Benchmark to help investors evaluate the ambition of systemically important carbon-emitting companies.
- Building credible Climate Transition Action Plans (CTAPs): With more than 4,000 companies committed to set science-based targets and more than 5,000 small-to-medium enterprises committing to net zero, companies are now taking near-term action to achieve those goals. We Mean Business Coalition has provided guidance on what is required to create a credible CTAP: an emissions reduction plan in the company and across the value chain; integration of climate plans into business strategy and governance; advocacy for climate policy; and special focus on a just transition.
Business has an existential interest and key role to play in maintaining the 1.5°C pathway. Integrating climate plans in their strategies will be crucial to their long-term success, to attract clients, finance and talent, and to navigate the risks and opportunities that the energy transition brings.