22 April 2022

COP26 and What Top Companies Are Doing to Lead the Way

While individuals can do their part to reduce their carbon footprint, significant change needs to start at the top, as global corporations are responsible for up to 71 percent of the world's greenhouse gas emissions.

Fortunately, more and more companies have acknowledged their essential role in mitigating global warming, according to David Victor, professor of international relations at UC San Diego's School of Global Policy and Strategy. He points to the outsized private-sector attendance at COP26, the UN Climate Change Conference of the Parties held in Glasgow, Scotland, in October and November 2021.

More than 5,200 businesses at COP26 voluntarily pledged to meet net-zero carbon targets, and some 450 banks, insurers and investors committed to making their portfolios climate-neutral all by 2050.

"Society, overall, isn't doing enough to reduce emissions, although that is starting to shift," Victor said. "More companies are under pressure – partly for reasons of law and mainly for reasons of reputational concern – to make emission reductions."

Sponsors of the global climate change conference included some of the biggest brands in their respective industries, setting the example for others in their field. Among them:

Healthcare company GSK has pledged to be carbon net-zero by 2030 as part of a long-term environmental sustainability plan;
Technology company Hitachi intends to achieve carbon neutrality at all its business sites by 2030, and Microsoft has committed to being carbon negative and zero waste by 2030;
And consumer goods manufacturer Unilever, which manages over 400 brands including Knorr, Dove, Axe, and Lipton, plans to reduce operational emissions to zero by 2030, with net-zero emissions by 2039.

COP26 resulted in a compromise among 200 countries known as the Glasgow Climate Pact. The pact – intended to further the ambitious 2015 Paris Agreement climate treaty – seeks to reduce global warming by reducing reliance on fossil fuels, cutting methane emissions, reversing forest loss and land degradation and bolstering sales of zero-emission cars.

World leaders want companies to set emission reduction targets that would help limit global warming to 1.5-degrees Celsius.

Climate pacts are increasingly effective at compelling corporations to improve their practices, Victor said. It's not all talk.

"Those pacts are based on a new theory of change, one that relies more on companies and governments to figure out the best way to control emissions and then push them to do more," he said.

Accountability is a big concern. An analysis issued by the Berlin-based New Climate Institute in February 2021 asserted that 25 of the world's largest companies are exaggerating their progress toward net-zero and carbon-neutral goals. In its annual Corporate Climate Responsibility Monitor publication, the institute said the climate targets of companies like Amazon, IKEA and Nestle are ambitious but too vague to meaningfully reduce emissions.

An oft-cited 2017 report from the Colorado-based Climate Accountability Institute said more than 70 percent of the world's greenhouse gas emissions were generated by just 100 companies.

There are legislative efforts to make big companies accountable. In August 2021, U.S. Senate Democrats presented the Polluters Pay Climate Fund proposal, which would require the largest U.S.-based gas and oil companies to pay fees based on a percentage of their global emissions.

According to Maryland Senator Chris Van Hollen, companies like ExxonMobil, BP, Shell and Chevron would each likely be assessed about $5 billion to $6 billion a year.

There's also an effort to standardize climate goals on a global scale. The Science Based Targets initiative is a partnership between the CDP (a nonprofit that collects corporations' carbon disclosure ratings), the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature. The consortium wants companies to consider the latest climate science when setting goals. So far, more than 2,800 companies have signed on to work with the Science Based Targets initiative to reduce their greenhouse gas emissions.

For example, consumer products company Colgate-Palmolive has earned initiative approval for its goals, including plans to source 100 percent renewable electricity for global operations by 2030.

Renee Bowen, economics professor and director of the Center for Commerce and Diplomacy in UC San Diego's School of Global Policy and Strategy, said progress is being made toward greater cooperation between countries, corporations, climate experts and trade scholars.

"We're a long time away from the ideal on any part of the climate agenda," Bowen said. "We're already up against the clock."

Bowen attended COP26, presenting the report "The Role of Trade in Addressing Climate Change: Recommendations for Policies and Practices." which summarizes findings by the Center for Commerce and Diplomacy's task force on climate and trade.

Bowen said the task force's recommendations include leveling the playing field for domestic and foreign manufacturers of products like steel. Government tariffs and environmental regulations need to compel companies to buy and produce steel made in sustainable conditions rather than seeking "cheap but dirty" alternatives.

"Governments worldwide and global companies looking to address climate issues need to know that those goals are moot unless we're looking at the trade issues that go alongside them," Bowen said.

Climate finance is in every nation's direct interest, Bowen notes, especially since extreme weather can create supply chain vulnerabilities for rich and poor nations alike.

"Corporations do have a responsibility to think about the environment as part of their long-term sustainability," Bowen said.

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