5 key corporate net-zero considerations based on the latest IPCC report

The Intergovernmental Panel on Climate Change (IPCC) has issued a report warning that irreversible and unprecedented changes to the planet are being caused by the climate crisis. Here, edie summarises how businesses should respond to the warnings in the new landmark report.

edie outlines how businesses can begin to respond to the report in order to accelerate decarbonisation and improve long-term resiliency against a changing climate

edie outlines how businesses can begin to respond to the report in order to accelerate decarbonisation and improve long-term resiliency against a changing climate

The IPCC’s latest report has been delivered ahead of the panel’s full Sixth Assessment Report due this October. It warns that the window in which to deliver the "deep emissions cuts" needed to prevent the worst impacts of the climate crisis is closing rapidly, meaning that our best chance of delivering the Paris Agreement is to reach "at least net-zero" by 2050.

Echoing the conclusion of the UN’s most recent 'emissions gap' report, the new IPCC paper states that the global temperature increase is likely to exceed 3C this century without “deep” cuts to emissions, taking place “immediately”. This would breach the aims of the Paris Agreement and deliver a plethora of climate-induced calamities related to extreme weather events and rising sea levels.

Green groups have been quick to respond to the report, with many calling on policymakers to urgently ramp up climate ambitions prior to COP26 later this year. However, the report has some stark implications for businesses, many of which have been quick to align themselves with the net-zero movement.

Here, edie outlines some of the key warnings issued in the report and how businesses can begin to respond in order to accelerate decarbonisation and improve long-term resiliency against a changing climate.

1) Net-zero is not the end destination

The report states that net-zero carbon by 2050 should be the “minimum” target to strive for to deliver a 1.5C world and reiterates the importance of at least halving global emissions this decade as an interim ambition. Moreover, it urges policymakers to look beyond carbon and ensure that other greenhouse gas (GHG) emissions, like methane, are accounted for and reduced dramatically.

Globally, there has been a concerted effort to shift the private sector to net-zero emissions. The UN’s own Race to Zero campaign, for example, collectively cover nearly 25% of global carbon emissions and more than 50% of global GDP, with almost one in three FTSE100 companies signed up to the UN's Race to Zero campaign.

However, even as businesses strive to reach net-zero, many well before 2050, the impacts of the climate crisis will still be felt beyond 2050, according to the report. If global average temperature levels can be limited to 1.5C, flooding, drought, heatwaves, storms and other impacts would be less severe and frequent, and would affect fewer regions of the world, according to the report. There would also be notable improvements in air quality as a result of the decarbonisation of the global economy.

As businesses strive towards their net-zero targets, they should start considering how they can move beyond that target and implement industry-leading ambitions that help contribute to a more prosperous planet. Doing so will ensure that a business is playing its role in stopping future tipping points from being reached that would cause widespread devastation across select regions.

Already, we’re seeing some businesses go beyond net-zero. Global technology giant Microsoft - the latest Principal Partner for COP26 – has a target in place to become "carbon-negative" by 2030, which includes plans to remove more carbon than it emits annually and cover its historic emissions. Elsewhere, Waste management firm Viridor has committed to becoming a net-zero emissions business by 2040 and to then move further by reaching net-negative emissions five years later by investing in carbon removal technologies.

While the market for some carbon removal technologies is not yet mature enough to incite business confidence, these types of leading commitments can help spur policymakers to incentivise and grow key low and zero-carbon markets moving forward. This in turn creates a ripple effect that could help accelerate decarbonisation, firstly to net-zero by 2050, and then beyond it thereafter.

2) Science-based targets should be a prerequisite to the net-zero movement

Last week, a report from Oxfam warned that nations and businesses were hiding behind a “net-zero smokescreen” and were relying too much on 'unproven and unrealistic' carbon removal and offsetting schemes rather than actual efforts to decarbonise.

The latest IPCC report builds on this by highlighting the sense of urgency in accelerating decarbonisation over the next decade. Indeed, one of the headline warnings from the report is that rapid reductions in emissions are required this decade to prevent long-term ecological and climate breakdown, with every fraction of a degree making a huge difference in avoiding impending climate disaster.

As such, businesses and nations can no longer rely on long-term net-zero targets. These have to be backed up with short-term plans to decarbonise over the coming decades, aligned to the scientific advice and warnings outlined in the IPCC report.

Earlier this year, the Science Based Targets initiative (SBTi) confirmed it was updating its strategic approach to increase the minimum ambition for corporate climate action from "well below 2C" to 1.5C above pre-industrial levels, as envisioned by the Paris Agreement.

In total, more than 600 companies globally have committed to 1.5C targets through the SBTi’s Business Ambition for 1.5C since its launch in 2019. These companies represent $13trn in market capitalisation.

As part of the new strategy, “well below” 2C targets will be phased out from the validation framework. Any corporate that had targets approved in 2020 or earlier has until 2025 to update targets. The SBTi has also issued guidance on what will ultimately lead to the development of a new global standard to ensure that corporate net-zero carbon targets are aligned with climate science.

Commenting on the IPCC report, CDP’s global director of policy engagement and external affairs Pietro Bertazzi outlined the need for companies to accompany their net-zero aspirations with science-based targets to decarbonise in the interim.

“This latest report from the IPCC provides a stark warning that disastrous climate tipping points are nearing and that this is our final wake-up call. It is now evident that some climate change repercussions are already baked into the system and we must find a way of dealing with them,” Bertazzi said.

“Businesses too must act faster – whilst we are seeing huge momentum in net-zero pledges from corporates globally, it is vital that companies have interim science-based targets in line with 1.5C, that these are backed up by robust and credible transition plans, and that they can be held to account. Now is not the time for words, it is the time for action. We’d also urge all governments, investors and businesses to ensure that climate change isn’t approached in isolation. Environmental issues are inter-connected, and, as a result, the IPCC report confirms there is absolutely no way of managing global warming without tackling biodiversity, forests and oceans - if we don’t tackle nature and climate together, we solve neither.”

3) Offsets aren’t a long-term fix

Many business efforts to reach net-zero still lack the required blueprints that outline exactly how decarbonisation will be achieved. Additionally, some organisations and sectors have been accused of overtly relying on carbon offsetting over actual decarbonisation efforts.

Offsetting is a contentious part of any corporate sustainability plan. The global market for voluntary offsetting has been growing exponentially for more than a decade. Just 8.8 million tonnes of CO2e were covered in 2006 but, by 2017, the figure stood at 62.7 million tonnes. But the publication of the IPCC’s landmark report on global warming in 2018 – the science behind the global appetite for net-zero by 2050 – accelerated this trend. By late 2019, some NGOs and businesses offering carbon credits were reporting a tenfold increase in interest from businesses.

A swathe of businesses committed to either offset the entirety of their emissions as soon as possible (think Aldi or EY) or dramatically upped their investment in carbon credits. Major airlines like British AirwaysEasyJet and Qantas took the latter approach. But organisations looking to claim carbon-neutrality or net-zero in the short-term are not able to say they are Paris-aligned in the long-term without robust reductions targets including goals for Scope 3.

While offsets have a role in covering unavoidable emissions in the short term (as businesses await for technologies and production methods to eventually account for these emissions), the latest IPCC report warns that the planet is drastically losing its ability to act as a carbon sink. Last week, for example, forests used by companies such as Microsoft and BP to offset emissions went up in flames in the US during a record wildfire year.

The IPCC report warns that while land and oceans currently absorb around half of all human-made carbon emissions, natural carbon sinks such as trees and soils could lose their carbon sequestrating abilities unless emissions are curbed.

As such, it is crucial that businesses align the use of offsets with the net-zero movement. The Voluntary Carbon Markets Integrity Initiative (VCMI) is currently developing guidance for businesses on how they can ensure that their claims around becoming ‘carbon-neutral’ or ‘net-zero’ using offsetting are credible.

4) Climate strategies require adaptation blueprints

The report reiterates that even reaching net-zero emissions by 2050 will drastically change the impacts that climate has on the planet’s natural ecosystems. Even if global net-negative CO2 emissions were to be achieved, the report warns that “the global CO2-induced surface temperature increase would be gradually reversed but other climate changes would continue in their current direction for decades to millennia”.

The report projects that in the coming decades climate change will cause different disruptions across different regions. The IPCC states that for 1.5C of global warming “there will be increasing heat waves, longer warm seasons and shorter cold seasons”. At 2C of global warming, “heat extremes would more often reach critical tolerance thresholds for agriculture and health” while intense rainfall and flooding and drought will become more common across certain regions.

The report highlights the array of weather-based disruptions that the climate crisis will cause and even businesses that play their part in reaching net-zero will not be immune to these changes.

Adaptation and resiliency are key themes at the upcoming COP26 event, and businesses should focus on these if they want to thrive across a range of potential future warming scenarios.

Already, businesses with combined annual revenues of more than $3trn, spanning a range of the global economy's biggest sectors, have formed a new network aimed at helping the private sector work with cities and governments to build climate resilience.

Convened by think tank The Resilience Shift and business network Resilience First, the new network has garnered the support of the likes of TescoStarbucks, Intel, HSBC, NBC Universal, BP, EY, WSP and Deloitte. All in all, 600 businesses have signed up. Additionally, the Task Force on Climate-Related Financial Disclosures’ (TCFD’s) approach to “scenario analysis” provides businesses with a framework to map corporate performance and resiliency against a variety of future physical and financial climate-based pathways.

Resilience has become more of a focus point for the private sector amid Covid-19. Some have described the immediate system shock of lockdown as a precursor for what the impacts of the nature and climate crises could look like in future decades, so, while some businesses are in crisis management mode, others are taking a longer-term and more holistic view of resilience. The need to act is financial as well as moral. A WWF analysis last year outlined how the global economy could lost $8trn per year to environment-related shocks by 2050.

Commenting on today's IPCC report, Emma Cox, global sustainability and climate change leader at PwC, said: “While the analysis underscores that we only have a small carbon budget remaining to limit warming to 1.5C, meeting this goal is still achievable if we act quickly and decisively. This will require a doubling down of effort this decade, to rapidly accelerate emissions reductions.

“For companies with a global footprint, the report provides the most detailed analysis of where and how your operations, supply chains and markets are vulnerable to the impacts of climate change. Climate science should remain the hard basis for all decision making and target setting. In parallel, it must be used to inform and instigate a strong policy response to close the remaining ambition gap to keep the Paris Agreement objectives alive.”

5) Policymakers need pressing

The timing of the IPCC report is critical. The world is less than three months out from the start of COP26 in Glasgow, with many viewing this summit as the landmark moment to agree on new global efforts to raise climate action.

As hosts of the summit, the UK Government has been eager to leverage the scope and influence of the private sector in driving the net-zero narrative, with many Principal Partners having global footprints that span multiple countries and continents.

It is clear that COP26 has created a new way for businesses to interact with Government, and while policymakers have issued requirements for any business that wants to associate itself with the Summit, it has opened a door for businesses to lobby for stronger international climate action.

Lobbying from businesses and green groups has been critical and has seen the UK move forward plans to phase out new sales of polluting vehicles not just once, but twice. Businesses have also been unified and coherent in calls for nations to deliver a green recovery from the coronavirus pandemic.

Off the back of the warnings from the latest IPCC report, businesses have a key role in calling on policymakers and nations to urgently outline short and long-term efforts to decarbonise.

Commenting on the report, the Corporate Leaders Group’s director Eliot Whittington said: As the range and violence of extreme weather events from around the world reminds us, climate change is a critical and growing business risk, and the IPCC’s latest report gives the world the hard numbers showing the state and scale of that risk.

“Sensible and forward-looking businesses know they need to act now to change the way they do business and more and more governments are putting in place the plans and actions to deliver a resilient, net-zero economy. But the sad truth is that too much government commitment fails to live up to its rhetoric and, for every business committed to transformation, many more have yet to understand the significance of this challenge. We need to match our energy for climate action to the fierceness of our burning climate. Ambition needs to turn into action starting now.” 

Matt Mace



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