COP27 took place 6-18 November 2022 in Sharm El Sheikh, Egypt. Although the COP27 participants made progress in some areas, overall, COP27 fell short, leaving more work to be done at future COP meetings.
Key takeaways
- A historic agreement to set up a loss and damage fund was reached. The purpose of the fund is to pay for climate-related damages in poorer countries.
- The agreement failed to raise ambitions on reducing emissions. The parties made no commitments to cut greenhouse gas emissions or to end fossil fuel use.
- Governments were urged to revisit and strengthen their 2030 targets by the end of 2023. Countries are using different criteria for their climate change targets making it hard to compare.
- There was pressure to reform multilateral lenders to align them better with climate goals, to ensure that financing flows are directed to energy-transition projects and climate adaptation.
- At the previous COP countries agreed to create rules that would allow nations to trade carbon credits. At COP27 a more detailed framework for how this would work was outlined.
What does it mean for your business?
1. Increasing carbon legislation
National regulations are getting tighter. The UK has established the Transition Plan Taskforce (TPT), which will outline requirements for listed companies and financial firms to disclose their transition plans. The TPT is currently providing stakeholders with the opportunity to provide feedback on the Disclosure Framework and Implementation Guidance until the end of February 2023.
Federal Supplier Climate Risks and Resilience Proposed Rule in the US will require suppliers to disclose GHG emissions, climate-related financial risks and set science-based targets. We can only expect this will cascade down into supply chains beyond US borders.
The EU’s Corporate Sustainability Reporting Directive (CSRD) is intended to ensure that companies report reliable and comparable sustainability information that investors and other stakeholders need.
2. Your peers are getting better
Businesses are recognising the need to act. They are aware climate change will affect their business models. Companies are going beyond carbon reporting and setting net zero targets. They are actively investing in their supply chains and their own operations to reduce emissions and future proof their businesses to make their assets, operations, and supply chains more resilient.
For example, the Science Based Targets initiative (SBTi) reports that over 4,000 companies are actively taking climate action and almost half of them have science-based targets. Companies are also using a range of tools, such as internal carbon pricing to support investment and decision making.
"We are on a highway to climate hell with our foot on the accelerator."
- From the speech of UN Secretary-General Antonio Guterres at COP27
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3. Greenwashing, greenwishing, and greenhushing
Trust takes a lifetime to build and can disappear with just a small mistake. Companies exposed to greenwashing are gambling with their brand reputation. Similarly, green-wishing and green-hushing can also damage the image of the business in the eyes of the public. To increase public confidence, companies should align their actions and communications with a number of recently launched guidance, such as:
- UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities has published a report titled Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions;
- ISO standards have launched Net Zero guidelines; and
- CDP will incorporate the ISSB climate-related disclosure standard into its global environmental disclosure platform.
4. You will need climate adaptation measures
With extreme events increasing in frequency and severity they can significantly impact corporate operations and supply chains. Companies are increasingly trying to understand how their assets are exposed to climate change hazards and are developing mitigation actions.
Control Risks can assist in securing the long-term viability of your business through expert guidance on carbon-related legislation, evaluating your carbon footprint, creating plans to achieve net-zero emissions, and identifying potential climate-related risks. To ensure your claims are credible and to prevent greenwashing, we can provide assistance in understanding and adhering to best practices for carbon reporting. Trust Control Risks to support your business in maintaining a sustainable path into the future.
Find out more about our ESG and Sustainable Business services.