The Glasgow Climate Conference (COP26) was not the breakthrough that many scientists and activists had hoped for. Indeed, the agreements made are insufficient to combat dangerous climate change. On the other hand, important steps in the right direction were taken. Among other things, it was agreed that the global consumption of coal must be reduced and a large number of countries, including the Netherlands (although the signing of this in the B.V. Netherlands did not go without a fight) will no longer support fossil investments from 2023. Will the agreements made have an impact on Dutch business? And if so, how will companies notice?
Agreements COP26 are in line with existing agreements
The average Dutch company will not notice much of what was and was not concretely agreed upon in Glasgow. This is not only because the agreements made are not ambitious enough. In the first place, the climate summit was primarily intended to flesh out the implementation of the international agreements laid down in the Paris Agreement (2015). So setting new, comprehensive, global goals was not on the agenda at all. Secondly, and more importantly, we in the Netherlands fall under the EU, which with the Green Deal and the FIT for 55 package leads the world on climate. The directives from this ambitious package will be worked out by the new cabinet, and that is where Dutch companies will notice much more than the Glasgow agreements.
Perhaps more impactful than the concrete official agreements, then, is the fact that policymakers, researchers, organizations, media and investors from around the world have once again shown that they take climate seriously and that they can work together to halt climate change. In this way, further support was created for such things as the Green Deal and the provision of capital to pay for the climate transition. And that is going to have major consequences.
New opportunities and risks for businesses
Upcoming measures, such as pricing CO2 emissions, financially incentivizing renewable energy and making fossil investments more difficult, will radically change the playing field for companies. This presents risks, but also enormous opportunities for ambitious companies and startups that dare to lead through innovation. For example, companies that are already investing in sustainable products with a sustainable value chain will have a substantial lead in the near future over competitors that will have to start paying the real price for their emissions.
New opportunities for companies, particularly in the energy, road transport, steel, hydrogen and agriculture sectors, will also arise from the Breakthrough Agenda, which was supported and signed by more than 40 countries (including the Netherlands) during COP26. The mission of this initiative is to accelerate the development of sustainable technologies that have great potential but are currently still in their infancy. The goal is to ensure that by 2030, clean technology will be the most affordable and accessible option for companies in these CO2-intensive sectors.
All of these developments will accelerate the climate transition, which in turn may also pose risks and problems for businesses. This is because the growth in demand for renewable energy, raw materials and materials could well outpace the growth in their supply. The risk of shortages and rising procurement costs is therefore high. Think of shortages of electric trucks, charging stations and green steel. The current problems in the transportation sector due to the corona crisis already show where this could lead.
It’s time for a plan
It should be clear that entrepreneurs will have to work hard in the coming decade. Because not only keeping the planet livable is at stake, business models and business strategies will increasingly be affected by the transition. Mitigating risks, adapting to climate change and responding smartly to future opportunities will determine success more than ever. And since transparent and full reporting on environmental, social and governance (ESG) criteria will become mandatory for all medium- and large-sized companies starting in 2023, mere green promises will no longer be enough.
In short: it’s time for a plan. A plan in which green ambitions are translated into a future-proof strategy in which planet and profit go hand in hand. At Empact, we’re happy to help you with that. Want to know more? Read more about what we do for organizations here or contact us at martin.dejong@empact.nu.