Emission ambition: What does business action on climate change mean for investment, jobs and emissions?

09 November 2015

Oliver Willmott, one of the authors of a new PwC report for the World Business Council for Sustainable Development (WBCSD), examines the prize at stake from business action to reduce emissions.

Our impact analysis of a new business partnership to cut emissions shows that major businesses are starting to adopt a similar level of climate ambition as governments. If it is successful in overcoming the barriers to action, this could redirect investment flows and have broader economic and social implications.

But to achieve this ambition businesses need to follow up plans with solid actions and scale up their efforts across whole sectors. And – crucially – they need governments to provide strong, clear policy incentives for low carbon investment.

Can business make a meaningful climate contribution?

We hear a lot about the need for an ambitious deal in Paris this December at the UN Climate Summit and what it means for business. But some companies are asking a different question: how can business contribute to meaningful climate action? And, how can they get real value out of it? Our new report for the WBCSD provides some answers – and some ideas on what businesses that want to understand the ‘new normal’ should think about.

Our analysis shows that some businesses have big ambitions.

The WBCSD’s Low Carbon Technology Partnerships initiative* is a business partnership with big ambitions. Our impact analysis, launched earlier this week, shows that:

  • It could cut emissions by around 25% from business as usual and get society 65% of the way to a 2 degrees emissions pathway.
  • It could channel $5-10 trillion of investment toward low carbon sectors of the economy and support 20-45 million person-years of employment.
  • It provides a platform for businesses to play a leading role in helping achieve the UN Sustainable Development Goals.

What does this mean for businesses that are considering climate action or wondering how it might affect them?

  • Major businesses are starting to adopt the same level of climate ambition as governments, but achieving the full potential needs strong government policy and real business action.

 

Our analysis shows that major businesses are starting to adopt the same level of climate ambition as governments in the lead up to COP21, as shown by our Low Carbon Economy Index (see charts). And, it suggests that an increasing number do not see a conflict between economic success and climate action – and that a stable climate is a key part of a productive business environment.

The LCTPi should be seen as an impetus rather than a fig leaf for government action. These reductions aren’t additional to governments’ actions. To realise their ambition, LCTPi companies have called on clear, stable and strong policy from governments that provides both immediate and long-term incentives to invest in low carbon technologies.

As Peter Bakker, WBCSD’s CEO, said on Tuesday: “We urgently need an ambitious climate agreement in Paris to set the policy framework that will enable us deliver on our mutual goals.”

But neither can businesses be complacent. To achieve this ambition, firms need to back up the LCTPi plans with solid actions, and for the LCTPi to scale up – drawing in more companies, and developing its action plans.

  LCTPi  graphs

 

2. Overcoming market failures and barriers could redirect trillions of dollars of investment to the low carbon economy.

Our analysis shows that action on climate change means shifting investment flows and stimulating the development of new industries. Our report suggests that the LCTPi could unlock low carbon business opportunities worth $5-10 trillion between now and 2030, above and beyond what would happen without climate action.

These flows could mean multi-trillion dollar business opportunities for companies to take advantage of. But while many leading economists think fighting climate change will bring overall economic benefits[1], this investment and the jobs it could support are not all ‘net’ changes – money always comes from somewhere.

So businesses across the economy will increasingly need to take a holistic view and plan how best to take advantage of a low carbon transition. Our Low Carbon Economy Index gives a starting point for companies looking at how climate policy in the countries they operate in might affect their business. But our analysis for WBCSD shows that some companies already see business benefits from being proactive in their approach to emissions reduction.

3. Business has an opportunity to contribute to sustainable development in new ways. More broadly, our analysis shows that actions to address climate change have the potential to contribute to a sustainable development, and the UN’s new Sustainable Development Goals (SDGs). Recently, we asked leading companies what they thought about the SDGs. They told us that they saw the SDGs as both a business opportunity and a potential impact to manage.

But the actual contribution of the LCTPi companies, and businesses in general, depends on the choices they make. It depends on them understanding which Goals are most material for them and understanding the trade-offs and benefits of different ways of operating. Our research suggests that many firms see the Goals as business-relevant but often don’t have the tools to take action.

Our report shows the prize that is at stake, if business and governments can work together to achieve their emission ambition. If they can do this, they stand a much greater chance of putting in place the policies and actions that are needed to avoid the most dangerous climate change and provide a stable environment for business.

But to achieve this ambition businesses need to follow up plans with solid actions and scale up their efforts across whole sectors. And – crucially – they need governments to provide strong, clear policy incentives for low carbon investment.

Read the report here

LCTPi is a business collaboration led by the WBCSD that brings together over 140 companies to scale up the development and deployment of low carbon technology across nine areas, from renewable energy to agriculture. The overall goal is to show that business can and will play a critical role in limiting warming to two degrees and is a central part of the outcome of COP21.

Connect with Oliver Willmott @olliewillmott



[1] For example, the Stern Review: http://webarchive.nationalarchives.gov.uk/+/http:/www.hm-treasury.gov.uk/sternreview_index.htm