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COP27: Avoiding Climate Catastrophe Through Private Sector Collaboration

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The message from COP27 in Egypt is loud and clear. To change course, avert climate catastrophe and ensure a just transition, governments, financial institutions and businesses must strengthen cooperation at all levels.

Areas of collaboration and the role of technology were discussed in detail during Bloomberg Green at COP27, an event where organizations outside chambers of commerce meet and dive into pragmatic strategies for climate action across sectors.

Private sector involvement

Is it still possible to keep global warming at 1.5°C? That was the main question that John Micklethwaite, Bloomberg’s editor-in-chief, put to John Kerry, the special presidential climate envoy at the US State Department. “I think so,” Mr. Kerry replied, “but the only way to do that is to bring the private sector massively to the negotiating table.”

One way to involve the private sector is to use carbon credits, which allow companies to emit greenhouse gases up to a certain limit. Thanks to the credit trading system, private companies have a double incentive to reduce greenhouse gas emissions. First, they must spend the money to get additional credits if their emissions exceed the fixed cap. Then they can make money by reducing their emissions and selling their excess allowance.

This topic took center stage at COP27. Whereas carbon offsetting involves projects not related to a company’s products, such as planting trees, integrated carbon offsetting involves projects related to production. Integrated carbon offsetting can actually contribute to Tier 3 emissions reductions, as it allows companies to take direct responsibility for their supply chain emissions.

The other way to get the private sector involved is to help them comply with regulations through emissions reporting. Mr. Kerry commended companies that have taken the initiative to reduce Scope 3 emissions, which is the hardest to achieve. The people who have taken this initiative are good citizens. There is no commitment to achieving zero emissions by 2050. There is a movement to get there, and business leaders have embraced it because ESG standards are one of the main topics on corporate boardrooms around the world.

Compliance also helps companies address the topic of “greenwashing,” which was raised time and time again at the event. According to Mr. Kerry, greenwashing can be avoided if companies use technology to track and control their emissions. Tracking and monitoring data provide companies with proof points of their progress. “If we want to achieve the 1.5°C climate target, we need to use investment money to reduce emissions, we need mechanisms to reduce risks to ensure a bankable deal, and then we can start putting up money for change. Every element of this process is measurable,” Mr. Kerry said.

Spread the data

Tracking and measuring require technology. With the vast majority of business transactions around the world touching the SAP system, there is no better company to help others on their data-driven sustainability journey. Sebastian Steinhauser, Chief Strategy Officer at SAP, was on hand to explain how software enables companies and governments to capture and monitor data to demonstrate compliance and use it to make better decisions.

“Climate data poses three big challenges,” Steinhauser said. The first is to record it accurately. Currently, a lot of data is collected manually into spreadsheets. Automating and standardizing data collection makes it more reliable. Having data in the system makes it easier to share it across the supply chain. The second major challenge is organizational.

“A lot of companies are very nervous about regulatory compliance,” Steinhauser said. “Automatic and standardized tracking and reporting solves this problem. The final challenge is to act faster.”

Sebastian Steinhauser urged each company to develop a strategy with clear ambitions and goals to guide their climate action plan. “The fact that most companies are already using SAP makes it easier to share data across the value chain,” he added.

SAP’s Ariba business network enables companies to share procurement and logistics data. Carbon data is still in its infancy. “Most companies may already have data on their carbon emissions, but they don’t have comprehensive product footprint data,” Steinhaeuser said, citing the auto industry as an example. “Cars are made up of thousands of parts, which would require a huge supply chain. We are developing standardized ways for suppliers to share their data, to help the entire industry track and trace their emissions.”

Change the market

When asked by John Micklethwait if the policy would block the path to zero emissions in the US, John Kerry replied that he thought the market was changing. “Ford Motor Company and General Motors are spending billions of dollars to retool their factories and their business plan to have 50% electric vehicles by 2030 and 100% by 2035,” he said. Capital markets are more powerful than politics, but the precautionary principle of governance is essential to creating a legitimate course of action. We now have the technologies to measure and manage this transition. »

General Motors (GM), the company that, according to Kerry, could bring a second wind, was another co-sponsor of Bloomberg Green at COP27. During their session, the GM team discussed the partnerships with investors and relationships with governments that are necessary to make changes for a better future.

“We made our commitments and delivered,” said Shilpan Amin, Senior Vice President, General Motors International. We have invested $750 million and are working with the public sector to expand freight infrastructure in many regions. We are the origin of the alliance to develop suppliers and manufacturers. The technology is there, the regulatory environment is there, and the infrastructure for change is there. »

In conclusion, Mr. Chilpan said that we should invest in the future now and not wait for it to come upon us. Achieving the 1.5°C climate target is possible through clear strategies, regulation, partnerships across sectors, and the use of data to keep all parties on track.

Translated article from the American magazine Forbes – Author: Judith Magyar

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