Insight Article: COP26 – What Does It Mean For Business?

For many SMEs COP26 is another climate conference attended by Heads of State, and those ‘in the business’ of climate change prevention. So, what does it have to do with business in the real world? Indeed, the cynics among us may consider if perhaps the leaders of the 190 countries attending are only there because it looks good for their re-election.

But the underlying facts are stark…climate change will affect everyone, everywhere. Action is required now by SMEs and individuals around the world, it all adds up. The cumulative effect of a small difference made by thousands of people and SMEs can make a substantial difference.

Hopefully, COP26 will be unlike most of its predecessors. The UK Government is putting in considerable effort to ensure it won’t be a conference of words but a conference to show action. Each country will have to show the level of CO2 reduced according to their pledge in 2015 and a detailed plan of exactly how they are going to reach their target by 2050. The world is watching COP26 and that means your stakeholders are likely to be watching you and will want you to do your part.

With just a few months to go, here are some background key facts:-

• COP – Stands for ‘Conference of the Parties’, led by the UN, with 190 world leaders, with the first treaty agreed in 1994, 26 Years ago, hence 26.
• The Paris Agreement was made in 2015 at COP21 – It was momentous because every country agreed to work together to limit global warming to well below 2 degrees and aim for 1.5 degrees, to adapt to the impacts of a changing climate and to make money available to deliver on these aims.
• NDCs are Nationally Determined Contributions. Every five years nations would come back to COP with an updated plan to reach their highest goal. 2020 is the first of these five-year cycles. 80+ countries have formally updated their NDCs and all G7 countries have announced new NDC targets that put them on the path to net zero emissions by 2050.
• Net Zero – To keep the temperature of the planet under control – limiting its increase to 1.5 degrees – the science dictates that by the second half of the century, we should be producing less carbon than we take out of the atmosphere. This is what reaching ‘net zero’ means. For businesses, net zero includes Scope 1, 2 and 3 emissions.
• To be carbon neutral, a business needs to offset the carbon they directly emit into the atmosphere and look at the energy they are using, and the emissions associated with this power generation. Just Scope 1 and 2 only.
  70% of the world economy is now covered by net zero targets.

COP 26 has 4 main goals:

1. Secure global net zero by mid-century and keep 1.5 degree increase in temperature within reach.
2. Adapt to protect communities and natural habitats.
3. Mobilise finance to release $100 billion into climate funding promised by developed countries.
4. Accelerate collaboration by working together to deliver the Paris Agreement.

So far, the UK Government:-

• Has decarbonised the economy faster than any other country in the G20 since 2000.
• Between 1990 and 2019 the British governments have grown the economy by 78% while cutting emissions by 44%.
• Has reduced the amount of electricity from coal from 40% in 2012 to 2% now. (0% by 2024)
• Has become the first major economy to put into law that we will reach net zero carbon emissions by 2050.
• Is the largest producer of offshore wind energy in the world.
• Will double the international climate finance to help developing nations with £11.6bn over the next five years up to 2025/2026.
• Will ban the sale of new petrol and diesel cars by 2030, putting the UK on course to be the fastest G7 country to decarbonise cars and vans.
• Has announced that 30,000 hectares of land per year will be planted with trees by 2025.
• Will put farmers at the forefront of reversing environmental decline and tackling climate change.
• Will make climate-related disclosures mandatory across the economy by 2025, with most requirements coming in by 2023.

This means that the Government has already picked the ‘low hanging fruit’ and now needs to put in place the plan to reach net zero by 2050. As the UK is hosting COP26, the Government will want to showcase to the world that we are the world leader in climate change prevention with even more commitment.

And that means that SMEs will be asked, then persuaded, then forced to change. Why wait when change will be inevitable? The cost will be the same whether you spend now or later. BUT the reward will be substantially greater if you change now.

Some of the cost savings and revenue generators for ESG are:-

1. Energy efficiency – You will save money on your energy bills.
2. Larger loyal customers – You will increase your turnover as the public will respond to sustainable SMEs and promote you to new customers.
3. Greater access to finance – Banks and other funds already require substantial environmental commitment, and this will only increase.
4. Opens more business opportunities – Public bodies, charities and many large corps will only allow ESG established companies to tender for work.
5. Save money – Lower recruitment costs as staff will be more likely to stay with you. Especially the younger generations.
6. Greater efficiency – Happy employees work better and harder.
7. Positive PR – Good news stories will be spread for free by staff, customers, suppliers, investors and, of course, your own marketing publications. ROI will be sizeable.
8. Morally right.

At SKCI, we have developed the 5KQ Strategy system that is simple yet extraordinarily effective. We understand that protection of the bottom line is paramount to every SME and to every individual. We believe that we can show you how to make a small, yet meaningful first step to becoming sustainable and join the 1000’s of other SMEs that are making ESG strategic change.