The Next Economy
It’s Arrived:
Our ‘Uh-Oh’ Moment on Climate Change

Uh-oh …

Climate change is our specialisation at BWD. But we’re generally wary of placing too much emphasis on the catastrophic risks associated with a 2°C (35.6°F) rise in global temperatures. Research — and our own experience — tells us that fear generally turns people off.

But the first part of the IPCC’s sixth assessment report (AR6), released this week, is one of those ‘uh-oh’ moments that can’t be diminished or ignored. Despite my familiarity with the issue, I gulped at the concreteness of the science presented and the pace of nature’s unravelling before our eyes.

The Economist captured this sense of foreboding well:

AT A KEY moment in the film “Jaws,” police chief Martin Brody, having known that a shark attack was possible, witnesses one actually happen. The director, Stephen Spielberg, underlines the transformative nature of Brody’s shock with a shot which makes inspired use of a camera technique called a “dolly zoom.” Nothing on screen actually moves. But Brody’s guilty face seems to rush towards the audience, taking up more and more of the frame. At the same time his surroundings, rather than being displaced, are revealed more fully. The report released by the Intergovernmental Panel on Climate Change on August 9th presents the spectacle of the possible becoming actual in a similarly unnerving way.

Key takeaways

Unnerving is right. Here are some takeaways from the report.

1. Humans are responsible. Previous reports said it was “extremely likely” that humans had caused global warming. The science is now incontrovertible: “It is unequivocal that human influence has warmed the atmosphere, ocean and land.”

2. The world is already hot. Global temperatures have skyrocketed since the Industrial Revolution. To find a warmer period than 1850-2020, we must go back 100,000 years to before the last ice age.

3. It will get worse. All five of the new emission scenarios in the report predict at least 1.5°C of warming over pre-industrial levels by 2040.

4. It could be catastrophic. A 3°C (and beyond) rise is a real possibility. This could lead to some parts of the tropics becoming too hot for outdoor work; the death of coral reefs; the evisceration of the Amazon; the melting of the polar ice sheets; and catastrophic fires, floods, sea-level rises, water shortages and failed harvests.

5. We’re almost out of time. Limiting warming to 1.5°C requires the planet to stick to a carbon budget. We only have 400 billion tonnes left to emit — global emissions currently total 40 billion tonnes a year.

It does our species and planet a disservice to pretend the situation will miraculously reverse itself. Nor can we bank on a breakthrough technology appearing from the ether. It might happen, but it might not. We are in trouble and need to act like it. Even as our planetary boundaries are overrun, most governments continue to urge action without actually doing anything. Recent analysis of more than 800 policy decisions found that just 2 percent of global COVID-19 stimulus spending has been committed to the clean energy transition.

So, what now?

That said, there is room for cautious optimism. The International Energy Agency predicts that renewable electricity generation will set new records in 2021, expanding more than 8 percent to 8,300 TWh. Solar and wind will account for two-thirds of this growth. In addition, the share of renewables in electricity generation is expected to hit an all-time high of 30 percent this year. When combined with nuclear power, low-carbon sources of power generation will easily exceed output from coal plants in 2021.

Business is leading the way, with some of the world’s best entrepreneurs pursuing decarbonisation with the focus and intensity that this existential crisis demands: 155 companies with a combined market capitalisation of $2.4 trillion have called on governments to decarbonise and build net-zero targets into their pandemic recovery efforts. Climate and cleantech ETFs are proliferating, while institutional investors are targeting climate laggards with punitive resolutions at their annual general meetings. Money talks — and on the topic of climate change, it’s beginning to talk very loudly.

Your climate roadmap

We’re often asked what individual companies should be doing to help. The good news is that a credible response to climate change is relatively straightforward to develop, provided management understands the long-term return on investment. Below is a high-level summary of how to implement (or improve) your climate roadmap.

1. Measure your emissions. Find a provider who can measure your energy consumption across the business, and convert this into Scope 1 and 2 emissions. Consider how you can measure and report on your Scope 3 emissions. Assure your data.

2. Create a climate strategy (and tell everyone about it). Data is only useful if it provides insights you can use. Start by conducting a gap analysis to identify where your key climate risks and opportunities lie. Once finalised, create a climate strategy endorsed by your board and executives. To maximise the financial and reputational value of your efforts — and to signal that you’re committing to climate leadership — dedicate time and resources to developing an outstanding sustainability report. Ideally, align your report with leading frameworks such as the Integrated Reporting Framework, the SASB Standards, GRI and the TCFD (see below).

3. Set science-based targets. Next, set ambitious goals to hold your business to account. Science-based targets offer clear guidance on how you can reduce your emissions to support alignment with the Paris Agreement. Science-based targets do not allow carbon offsetting to achieve your targets. BWD strongly supports this stance, as offsetting tends to fund economically viable renewables projects that would have been built anyway. Best-practice climate strategies seek to reduce operational emissions as much as possible through energy efficiency and renewable energy use, before turning to offsets.

4. Commit to the TCFD. The Task Force on Climate-Related Financial Disclosures seeks to increase and improve reporting of climate-related financial information. It helps facilitate more informed investment, credit and insurance underwriting decisions — which in turn, enables greater market transparency around the financial system’s exposure to climate-related risks. We are almost certain that regulators and institutional investors will make TCFD reporting mandatory in all developed markets in the coming years, so get on board (or improve the quality of your disclosure) now.

5. Set a net-zero target (by 2030). A net-zero target is an aim to become carbon neutral by a certain date – offsetting is allowed to ‘balance’ the amount of carbon released. Short- and medium-term science-based targets can support a more ambitious net-zero target (a global standard for net-zero business is under development). From a public relations perspective, a net-zero target is also easier communicate to stakeholders and can generate additional brand value.

6. Become carbon negative. Becoming carbon negative means removing from the environment more carbon than you emit. The Future Fit Business Benchmark has more information on what sustainability pioneers can do to help speed this transition.