What happened at COP27 and what’s next for business?

There has been speculation around how this year’s climate conference would follow on from COP26 in Glasgow and there are varied opinions on the progress that was made. However the urgency for businesses, and their boards, to keep driving progress remains very clear.

What are the key outcomes from COP27 and how are they relevant to your boards?

Current pledges by national governments put the world on track for 2.5C warming by the end of the century. Business has a crucial role to play to increase ambition and boards are critical in driving this change.

COP27 achieved several breakthroughs, including the first Just Transition Energy Partnerships (JETPs) and an agreement to provide loss and damage funding to vulnerable countries. However, the global meeting received criticism for the lack of progress at country level to keep within 1.5C of warming by 2050, and to view this as a limit not a target. Private sector initiatives called for greater government action on climate change including the We Mean Business Coalition and a coalition of 602 investors representing $42 trillion in assets under management, in their 2022 Global Investor Statement to Governments on the Climate Crisis.

The important role for businesses to deliver and drive climate action throughout their operations and industries has never been more urgent and was made clear by the active business participation at COP27. The role of boards in guiding their executive teams and stewarding their companies in the net zero transition will be crucial to keeping the world within the 1.5C limit.

Key takeaways for non-executive directors

Our partners at the Centre for Climate Engagement and the Climate Governance Initiative have summarised the key climate trends and announcements of most importance for non-executive directors and industry leaders from COP27.

The top takeaways for non-executive directors from this briefing are:

1. Official regulatory bodies are working hard to clarify and harmonise standards for climate-related reporting which will support transparency and help to combat greenwash.

The International Sustainability Standard’s Board (ISSB), part of the IFRS (International Financial Reporting Standards), announced a new Partnership Framework to increase alignment between standards. As part of this partnership, CDP will incorporate ISSB climate-related disclosure standards into its global environmental disclosure platform.

ISSB also announced that companies will be required to use climate-related scenario analysis to inform resilience analysis.

2. Acting on climate targets and developing credible action plans was an important focus of COP27.

Tools and guidance for businesses to create and implement climate action plans were released by key initiatives including the Glasgow Financial Alliance for Net Zero (GFANZ) which published recommendations and guidance for financial institutions; as well as the Transition Plan Taskforce (TPT), announced at COP26 by the UK government, who collaborated with international partners, such as GFANZ and ISSB to develop a disclosure framework with implementation guidance for companies and financial institutions to develop gold-standard transition plans.

3. An increasing number of organisations are facing legal challenges for not providing credible pathways and action plans to support and achieve their net zero targets.

A list of robust recommendations have been published by the UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities to guide and support businesses to set and attain their net zero targets, and not be undermined by greenwash. These recommendations align with a set of Net Zero Guidelines also published at COP27 by the International Organisation for Standardization (ISO), which offers a single core reference text for credible net zero action.

4. The importance of public-private sector partnerships and international collaboration was reinforced over the two weeks of COP27.

Businesses should engage and collaborate with state actors throughout their supply chain and with private-sector actors within and across industry, to reduce emissions across the whole value chain of their organisation. The Yearbook of Global Climate Action 2022 from the Marrakech Partnership, provides an outline on how to accelerate sectoral systems transformation, with case studies and recommendations, by strengthening international collaboration in the sectors from both parties and non-party stakeholders.

Looking ahead

In December 2022, Montreal will host the UN Biodiversity Conference (COP15) with the aim to adopt and agree the post-2020 Global Biodiversity Framework to halt and reverse nature loss. It is expected that this year’s biodiversity COP will bring together more businesses than ever before, signalling the private sector ambition to reduce nature loss and enhance biodiversity, and also emphasising the intrinsic links between action on climate and action to protect and enhance nature.

Next year’s UN global climate meeting, COP28, will be hosted in the United Arab Emirates and significantly mark the end of the first Global Stocktake. This stocktake process began at COP26 and will inform the 2025 Nationally Determined Contributions (NDCs) to ensure the levels of ambition align with the requirements to reach the goals of the Paris Agreement. It will be crucial to ensure the accountability of climate commitments from businesses, investors, cities and regions, and will provide an opportunity for non-state actors to offer solutions to challenges faced by governments.