Cash in on the climate revolution

The landmark Paris Agreement on climate change offers big opportunities for businesses that move fast, writes Frances Way.

The low-carbon revolution is here. That’s the message sent to the private sector by the landmark Paris Agreement on climate change, which became international law in November after ratification at unprecedented speed by the international community.

The low-carbon transition is one of the biggest economic opportunities the world has ever seen. Game-changing technologies and new ways of working and doing business will open the door to growth and innovation, and the companies that move fast will be the ones that thrive.

Recent research from CDP, in partnership with We Mean Business, shows that many companies are already racing to seize the opportunities that await. Some 85% of a thousand or so major global companies analysed in our “Out of the Starting Blocks” report have emissions reduction targets in place – a significant improvement on previous years and a clear sign that business is on the low-carbon path.

Consumer companies are among the best-performing, with higher than average numbers of businesses reporting an emissions-cutting goal (86% in the “consumer discretionary” group and 91% of “consumer staples” companies). Moreover, these companies are leading the way in terms of aligning their targets with the world’s new climate goals, showing they realise the growth opportunity this presents and are ready to take bold steps to adapt.

Across all sectors, 9% of companies we analysed have committed to setting a target in line with what’s required by science for a below 2°C pathway; this rises to 16% for consumer discretionary companies and 19% for consumer staples, with companies such as Danone, Nestlé and Unilever committing to set targets via the Science Based Targets initiative.

Walmart recently became the 26th company to have its emissions reduction targets approved by the initiative. The world’s largest retailer has committed to reduce its absolute emissions by 18% by 2025, from 2015 levels; it has also pledged to work with suppliers and customers to reduce greenhouse gas emissions from the manufacture and use of its products by 1 billion tonnes between 2015 and 2030.

By targeting emissions in its supply chain, Walmart is addressing a significant part of its carbon footprint and incentivising its suppliers (some of which, such as Diageo, General Mills and Kellogg’s, already have science-based targets) to do the same. By setting targets in line with the goal that governments have signed up to via the Paris Agreement, these companies are placing themselves well ahead of the pack and showing their customers and investors that they are ready for the low-carbon future.

Our research also showed that the companies starting to reduce their emissions are already seeing the financial benefits. In a historic shift, we identified a group of 62 major companies that are successfully decoupling their emissions from revenue. What’s more, we found that this isn’t just possible, it also pays: those 62 corporations cut their emissions by an average of 26% while increasing average revenue by 29% over five years. The remaining companies, whose emissions went up by an average 6%, saw their revenues drop by an average 6%.

One company that successfully decoupled, Sainsbury’s, achieved revenue growth of 18% over five years alongside a 22% fall in emissions. Carboncutting measures included the introduction of low-carbon energy technology at stores and depots, liquid natural gas and liquid bio-methane in its dual-fuel vehicle fleet, and LED lighting on its sales floors.

A momentous global effort is required to keep temperature rises below dangerous levels. Businesses have a vital role to play, and a growing number – including many food and hospitality companies – are already playing their part. But while the majority of businesses we analysed are planning to reduce their emissions, overall company targets are short-term and lack ambition: if every company achieved its current climate goals, it would still only take the group one quarter of the way to a 2°C pathway. There is every reason for business to act fast to ramp up ambition. Hundreds of companies have disclosed to CDP that they anticipate big changes to their operations as a result of the Paris deal, and the business case for speedy climate action has never been stronger. More than 800 institutional investors, representing more than $100 trillion (£80 trillion) in assets, backed CDP’s disclosure request to companies this year. As the Paris Agreement is implemented, they are increasingly interested in knowing which companies look likely to be the winners and losers from the low-carbon transition.

Firms from all sectors are showing that bold and meaningful climate action is not only possible but makes sound business sense; from science-based targets, to setting an internal price on carbon, to committing to 100% renewable energy. An exciting era has begun for the global economy, and the race is on to see who will grasp the opportunities on offer.

Frances Way is co-chief operating officer of the Carbon Disclosure Project (@FrancesWay, @CDP).

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