Why the private sector will play an increasingly bigger role in climate change and sustainability

In 2017, the US, famously and controversially, made the decision to withdraw from the Paris climate change agreement. And some of the 187 countries that remain in the agreement are struggling to meet their commitments. Recently, Australia came under international criticism for proposing to use a dubious accounting method to meet its 2030 carbon reduction targets.

Sweeping climate action on a national and international level faces hurdles such as divided governments, intense lobbying, and climate change denialism. According to the World Economic Forum, 67 countries have ambitions to be carbon-neutral, but only about eight “have strong targets supported by an effective policy framework.”

In response, the private sector is playing a much bigger role in climate action and sustainability. In the US, thousands of individual enterprises, universities, cities, states, and other organizations have committed to the goals of the Paris Agreement as part of the We Are Still In initiative. Private sector organizations are announcing the appointment of chief sustainability officers and ambitious carbon reduction targets. Global management consultancy EY recently appointed its global sustainability leader; two weeks later, the firm announced that it would become carbon-neutral by the end of 2020.

Why is the private sector stepping up where many federal governments are falling short? Two reasons:

  • It is in their own self-interest. Companies are already feeling the effects of the increasing frequency and intensity of wildfires, droughts, and hurricanes, the supply chain impact of biodiversity loss and water scarcity, and the increasing political instability caused by climate refugees and migration. So the private sector is taking action. To secure its supply chains against biodiversity loss, Starbucks works directly with farmers to help them adapt their practices to climate change. To ensure their energy independence while promoting renewable energy, NV Energy will provide 350 megawatts of solar and 280 megawatts of battery storage for a new Google data center. Meanwhile, financial services (FS) firms are using sophisticated software to assess the exposure of their portfolios to climate risk. Some FS firms will go one step further and even help companies in their portfolio become more sustainable. ING has an “energy robot” that helps its real estate clients identify the technologies that will help ensure individual properties meet required eco-efficiency ratings.
  • It’s an opportunity to create an emotional connection to values-based customers. Think of how powerful an emotional connection someone would have to a brand if that organization came to their rescue during the types of episodic events that we’ve been seeing. For example, Cisco can mobilize its highly skilled TacOps team to respond to extreme weather events all over the world. As the bushfires devastated Australia, financial services firm ANZ created an entire disaster response just for its affected customers (with ability to suspend loan payments, elimination of certain fees, temporary interest relief, etc.) and employees (extended leave for those that volunteer with emergency services), plus donations to local communities. And in the US, Waffle House has earned widespread fame and loyal customers for its ability and commitment to stay open during some of the most extreme weather, even while every other establishment around it is closed.

As the private sector takes more action, we’ll be analyzing the global Fortune 100 to determine which companies have appointed corporate sustainability officers, how influential they are, whether the firm has ambitious carbon-neutral targets, and what efforts they’ve made to report their greenhouse gas emissions and other sustainability efforts to cdp.net. We’ll start with the global Fortune 100 and expand our research and analysis to the global Fortune 500. This research will help us to determine what concrete sustainability steps the private sector has taken, when it makes sense for companies to do so, and what are some of the early best practices and lessons we can glean from these early efforts.

This post was written by VP, Group Director Stephanie Balaouras, and it originally appeared here.

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