Reed Shapiro, Pianpian Wang
Attending Climate Week NYC every year is Carbon Credit Capital (“CCC”)’s tradition. This year’s Climate Week events were mostly digital due to the pandemic, making it possible to hear more perspectives than ever before. More importantly, it also generated less carbon emissions from these events. This recap aims to share observations and trends happening in the business world.
Businesses Are Taking the Lead in a More in-depth Way
Climate Week NYC 2020, put on by the Climate Group, issued in a new decade of perspectives on climate action around the world, with the business sector communicating higher levels of ambition both in terms of intensity of efforts, as well as overall scope of participants. The past several years have featured a few market leaders trying to galvanize action from others by making commitments to, say procure or produce 100% renewable energy, or to reaching net-zero emissions by 2030 or 2050. However, this year saw companies beginning to work with their value chains to mobilize action beyond their own walls. This encouraging shift beyond operations, out into supply chains was met with another interesting development: the inclusion of small and medium sized enterprises in these national and international discussions. These two developments—a more robust address of impact from larger organizations, and the inclusion of the remaining 70% of businesses in the world into these discussions and plans—will hopefully prove to be a turning point in humanity’s losing battle against runaway emissions.
Since its inception, the Paris Climate Accord has been labeled an inadequate effort to keep global warming to less than 2 degrees Celsius. Utilities and governments have determined legitimate pathways for renewable energy, and efficient electrification to account for significant percentages of the emissions reductions required to minimize warming. However, much of the conversations observed last week highlighted equally significant gaps in our understanding of where the rest of our global emissions reductions will come from. Throughout the week, any experts, whether they be service providers, regulatory compliance officers, holders of political offices and business leaders referenced voluntary action to reduce emissions, and voluntary carbon markets as avenues that will complement the emissions reductions achieved by a green energy and infrastructure transition.
As a result, companies, both private and public, big and small, have stepped up. Prior to this year, the conversation revolved primarily around eliminating operational emissions (Scope 1 and 2) emissions. However, in many cases, direct emissions from fuel use (Scope 1) and purchased electricity (Scope 2) are only small portions of an organizations total emissions across their value chain (Scope 3). This year however, there was a demonstrable focus on Scope 3 emissions, and how enterprises both large and small can measure and manage them. The number of companies committing to net-zero emissions by 2050 across their total scopes of operation reached upwards of 1,000. Several different collectives of businesses, such as the UN Global Compact’s Business Ambition for 1.5 C, which has signatures from over 290 global business leaders; Amazon’s The Climate Pledge for companies to achieve net-zero carbon emissions across their businesses by 2040, the B Corp Climate Collaborative’s Net Zero by 2030 commitment, of which CCC is a signatory, and which now has over 1,000 members, have all gained significant momentum since 2019.
This momentum, while encouraging, still requires the inclusion of “the rest of the world” in order to achieve a less than 2C or less than 1.5 C in warming. Enter the SME Climate Hub. Millions of small and medium sized enterprises will now have guidance on how to do what the biggest firms in the world are doing at scale. CCC has been advocating for the inclusion of these millions of firms into what have often been carefully guarded discussions for years. We consider the introduction of this resource, as well as this larger narrative that everyone has a part to play as major progress towards our collective human goal.
CCC is tracking updates to carbon accounting best practices around the world, as well as working with clients to create Science Based Targets to ensure that as more companies make these commitments, there is trustworthy guidance on how to meet them.
Beyond Legal Compliance
During this year’s Climate Week, the business sector has advocated for more political support and policies in place for guiding business action to tackle climate impacts. Meanwhile, many businesses are using voluntary approaches to do their part in this movement.
Firstly, as mentioned, more and more companies are making climate commitments to reduce carbon emissions or to reach other sustainable development goals. Even though these commitments’ nature is voluntary, the commitments still create legal obligations to the companies. In-house counsels need to carefully communicate the commitments in an accurate and responsible way. It is also important for companies to establish governance and auditing programs to track these commitments’ progress.
ESG investment is another trend that would require further legal compliance. ESG investment helps fund projects that can bring benefits to the environment and society, as well as a return to investors. Currently, many companies use ESG investment as part of their corporate sustainability focus. However, many businesses, including those with a good story and robust ESG management practices, are giving their shareholders the right information in the right format. While the US lacks such regulations, it is becoming popular for public and private companies alike to use available voluntary climate disclosure standards as options to guide their disclosures on climate change-related information. This includes ESG investment, such as the Task Force on Climate-related Financial Disclosures Recommendations (TCFD recommendations) and the standard developed by The Sustainability Accounting Standard Board (SASB standard).
Last but not least, companies can still use conventional legal tools, such as contracts and MOUs, when multiple stakeholders collaborate to take action to achieve climate mitigation. It is becoming common to see big corporations use these types of tools to set stricter standards for their suppliers, in order to ensure suppliers follow low carbon practices.