The 2020s must be the decade of climate action by businesses across all sectors says Natasha Fortuin from Deloitte. In this blog she explains why.
By now, you are all well aware of the huge climate challenge the world is facing, the policies certain governments are implementing to meet a target of net zero greenhouse gas emissions by 2050, and the major role that business has to play.
2020 will be a pivotal year for businesses’ response to climate change as the emissions gap widens and the ratchet mechanism in the Paris Agreement calls for strengthened contributions. During this decade, we may start to see contention over the licence to operate if action is inadequate.
The year 2020 marks five years since the Paris Agreement was signed at the Conference of the Parties in 2015 (COP21). The parties to the Agreement identified 2020 as a critical step in the process, inviting countries to communicate or update their Nationally Determined Contributions (NDCs) by this time. The NDCs are expected to be updated when the UK hosts the next Conference of the Parties in November, in Glasgow.
The UN Environment Programme Emissions Gap Report provides the latest assessment of scientific studies on current and estimated future greenhouse gas emission (GHG) levels permissible for the world to progress on a least-cost pathway to achieve the goals of the Paris Agreement. It also includes some of the most promising options available to decarbonise businesses in the G20 economies to bridge the gap.
In the report, the emissions gap between estimated total global emissions by 2030 under the current NDCs and those required by the pathways limiting warming to below 1.5°C is wide. There needs to be a massive strengthening of the NDCs in line with the ratchet mechanism of the Paris Agreement, which is expected to take place at COP26 in November 2020. The G20 members, account for 78 percent of global GHG emissions and will need to increase their ambitions more than fivefold to achieve the 1.5°C goal.
This agenda is likely to increase the scrutiny on businesses, and create an impetus to accelerate significantly efforts to reduce GHG emissions. There is no evidence of emissions peaking in the next few years, and every year of delay means that deeper and faster cuts will be required. By 2030, emissions would need to be at least 55 per cent lower than in 2018 to put the world on the least-cost pathway to limiting global warming to below 1.5°C.
Fundamental structural changes are needed within most businesses and may require substantial capital investment compared with a business-as-usual scenario. The resilience of your company’s business model in light of these changes must be considered early on, so that value can be generated and preserved.
Written by Natasha Fortuin, while on secondment as Project Director of Chapter Zero from Deloitte