Is business ready to confront climate change?

Global mean temperature is “extremely likely” to be 1.5°C higher than in pre-industrial times, says IPCC report

The IPCC met at the Münchenbryggeriet, The Brewery Conference Centre, in Stockholm last week. (Pic: Holger Ellgaard)

By Johan L. Kuylenstierna

The launch of the Intergovernmental Panel on Climate Change (IPCC) Working Group I report in Stockholm last week marked a milestone in the lead-up to the global climate deal expected to be reached at COP21 in Paris in 2015.

The report speaks of both increased certainty and lingering uncertainties. The warming of the climate system, the IPCC says, is unequivocal.

Since the 1950s, many changes have been observed that were unprecedented over hundreds or thousands of years. By the century’s end, the global mean temperature is “extremely likely” to be at least 1.5°C higher than in pre-industrial times – and depending on the level of greenhouse gas emissions over the next few decades, warming could be much greater.

The “near-to-flat” temperature curve over the past 13 years have raised questions about climate sensitivity and motivates further research into the role of the oceans and ecosystems “buffering” changes.

In keeping with the IPCC’s scientific integrity, the report doesn’t advocate for a particular pathway – it just stresses that we have a choice. As Professor Thomas Stocker, co-chair of WGI so eloquently put it, “IPCC is not about headlines, it is about science”. It is now up to others to act, based on the facts and despite the uncertainties.

Some of the most important work has to be done by government leaders at the upcoming COP19 in Warsaw.

By 2015 in Paris, we expect them to have come together and made a substantial commitment to reducing GHG emissions.

Are there reasons to be optimistic? Always!

A positive vision about the future and human ingenuity is essential if we want to achieve change. While there is no clear option besides “firm action”, we need to respect the complexity of the climate talks.

Negotiators need to address the very foundation of our societies and lifestyles, and there are huge issues related to equity, social and economic policies, innovation, global trade, etc.

At the same time, it is crucial that others take action even without a global agreement. Individual progressive governments play a major role: they can be trailblazers, lead by example and highlight the benefits of climate action.

A great example is the Climate and Clean Air Coalition to Reduce Short-lived Climate Pollutants (CCAC). Most recently, seven countries launched the New Climate Economy initiative, which will closely analyse the costs and the benefits of acting on climate change – at the global level and in individual sectors – and gauge the potential for aligning climate and development interests.

The Stockholm Environment Institute (SEI) is pleased to be part of both initiatives.

Business engagement is also essential to addressing climate change.

We need “all hands on deck”, and businesses can bring great resources and capacity to the table – if they chose to.

Shortly before the IPCC report launch, SEI, the Haga Initiative and the major Nordic bank NORDEA organized a seminar to discuss the business implications of the latest climate science. Several other events, briefing notes and blogposts also sought to engage business leaders in conjunction with the IPCC report.

Business leaders increasingly recognise that climate change is directly relevant to their operations – not only as a matter of corporate social responsibility, but also in terms of supply-chain risks and resilience.

Yet understanding climate science is difficult, and “translating” it into action, even more so.

The seminars addressed ways for businesses to internalise climate action, and make significant investments in mitigation and adaptation.

In short, business leaders told us, the private sector is prepared to take action, but they need long-term and reliable legal and economic frameworks to support them and create a level playing field.

Below we share some further insights from our discussions:

Trust and communication between business leaders, policy makers and scientists must improve. This will require more interaction and a concerted effort to explain climate science in terms that business leaders and policy-makers can understand, and to help them understand the practical implications for their operations and politics.

Long-term investments must be encouraged. Sometimes, businesses that have to answer to shareholders and/or investors find it hard to invest in emission reduction or other sustainability measures, because they may not pay off for several years. Corporate policies, investor policies, and laws and regulations can all play a role in easing the pressure to focus on short-term profits and encourage long-term investments.

Carbon taxes and clear, consistent climate policies provide long-term and strong economic incentives. We heard repeatedly, “we need a carbon tax” – as an economic incentive and to raise revenues to finance other policy incentives. However, if policies keep shifting, or it’s unclear what the government may do in the future, the uncertainty can discourage action and create challenges for businesses.

Policy and financial incentives should support low-carbon innovation. New, lower-GHG technologies are costly to develop and can be expensive when first brought to market. Public support can boost R&D and also help accelerate the take-up of low-carbon innovations by reducing costs to consumers.

Some business leaders are committed to addressing climate change, but they are still outliers; strong business lobby groups continue to try to stifle almost any climate action.

The majority of consumers also continue to favour cheap prices and convenience over environmental benefits. And the investment community is doing little to change companies’ focus on short-term profits. At this point, business action on climate change is mostly driven by a handful of committed leaders.

We cannot lose sight of the magnitude of our task: in order to sharply reduce GHG emissions, we need to fundamentally change how we do business and how our economy works.

Climate science only gives us a starting point; we also need to understand how systems change, how policy can support change, and how we can overcome cognitive barriers to change.

Will the new IPCC report inspire businesses – and all of us – to do the hard work required for a sustainability transition? It’s our choice, and our future.

Johan L. Kuylenstierna is executive director of the Stockholm Environment Institute.


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