The Paris effect: Are businesses ready for a new climate reality?

As the UK joins a growing list of nations pledging to ratify the Paris Agreement on climate change, a new report released today (21 September) reveals that more than 600 big businesses - worth $12tn - have already started to factor in the profound impacts the deal could have on their operations.

Coming less than a day after Prime Minister Theresa May promised that the UK Government will put pen to paper and ratify the deal by the end of this year, the new report – titled ‘The Paris Effect’ – is based corporate climate-related data gathered by global disclosure organisation CDP.

CDP analysed information provided by 827 institutional investors, who had asked companies to identify any inherent climate change-related risks or opportunities that have the potential to generate substantive changes to their operations, revenue and expenditure, and to also detail their management responses to these risks and opportunities.

In total, 613 corporations said they were already factoring the Paris Agreement deal into their business plans, but those corporations are seemingly split on whether the deal should be seen as an ‘opportunity’ or a ‘risk’ – 341 of the corporations consider the Paris Agreement as a business opportunity, with the remaining 272 considering the deal a potential risk to their operations.

‘Competetive and sustainable’

One of the businesses quoted in the report is DIY retailer Kingfisher, which states: “Customers will expect the business community to play its part in making COP21 a reality, with much of the spotlight being placed on the global supply chain, and the labour and environmental standards within it.”

Meanwhile, US bank Anglo American, which this week joined The Climate Group’s RE100 scheme to source 100% renewable electricity, is also quoted in the CDP report. “The Agreement provides further signals that the global economy is becoming increasingly carbon constrained and as such we need to continue with efforts to reduce our direct and value chain emissions in order to remain competitive and sustainable,” it says.

And construction firm Carillion, which earlier this year revealed it had netted £33m profit from sustainable business action, states: “Following COP21, we re-committed to build on our climate action leadership to date and to support international carbon target outcomes. We have adopted the same challenging and ambitious carbon reduction targets across all of our operating regions.”

The report breaks down the climate change impact by business sector, revealing that firms in the utilities industry are the most likely to say that the Paris Agreement will impact their operations – 47% of high-emissions utility companies mentioned the Agreement in their climate-information disclosure to CDP.

Critical question

Commenting on the findings, CDP’s chief executive Paul Simpson said: “The entry into force of the Paris Agreement will be a watershed moment for global corporations, reaffirming the end of business as usual and the inevitability of our low-carbon future.

“These findings tell us that many companies are already aware of the momentous impact this new reality will have on their business operations, but they also suggest that an even larger number of companies are yet to grapple with the critical question of what the Paris Agreement means for them.

“This is a question that investors expect all companies to be able to address, and disclosure is the first step to answering this. Now the stage is set for governments and companies to focus on the urgent task of implementation: the low-carbon transition is one of our biggest economic opportunities.”

It is widely anticipated that the UK’s pledge to ratify the Paris Agreement will be followed by a slew of similar ratification commitments from other nations this week. A ‘High Level Event’ taking place today as part of Climate Week in New York is expected to see 29 states confirm their ratification. The Agreement requires at least 55 countries, representing at least 55% of global emissions, to ratify the deal for it to become active.

Climate Week 2016 has already seen a wave of major climate commitments from big businesses, provincial leaders and government representatives throughout a series of events taking place across the US capital.

Luke Nicholls & Alex Baldwin

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