Climate talks and negotiations have largely focused on agreements between state actors. However, the growing involvement of non-state actors (a diverse category including the business sector, activists and non-government organisations) highlights the cross-cutting nature of climate action. The private sector has its own role to play. The sector’s innovation, resources, and reach can drive the necessary transformations.
Beyond a moral imperative, businesses and corporations have a vested interest to join the fight against climate change. The private sector is increasingly aware of the significant risks posed by climate change. Financial risks associated with climate-related events deter many businesses. Inconsistent and unclear climate policies create a complex operating environment for businesses. These hinder productivity and growth, which are both vital for operations. As part of the United Nations Framework Convention on Climate Change (UNFCCC), the Conference of the Parties (COP) and the Paris Agreement have laid the groundwork for global climate action. These frameworks provide a platform for governments and businesses to collaborate and develop strategies to address climate change.
The relationship between the private sector and COP has grown in recent years. COP26 launched the Glasgow Financial Alliance for Net Zero. Comprising over 450 finance firms across 45 countries, the alliance will jointly manage $130 trillion worth of funds towards achieving net zero by 2050. COP28 had a record number of representatives from the private sector. The summit also launched the Net-Zero Transition Charter. The Charter is meant to “encourage the private sector to take bolder action on climate and commit to greater transparency and integrity in their net-zero emissions pledges.” The Charter’s signatories include Standard Chartered Bank, First Abu Dhabi Bank, Century Financial and Freight Services PTE Limited.
Additionally, national and regional climate policies underscore the need for the private sector to be active participants in climate action. The European Union Green Deal outlines the bloc’s policy of achieving climate neutrality and a green economy by 2050. A report by the World Economic Forum’s CEO Action Group for the European Green Deal (EGD) emphasises that the Deal is fundamentally an economic strategy for economic growth and development without the depletion of natural resources. The report notes that “companies play a vital role in achieving a sustainable future, not only through business decisions that affect their own operations but also by influencing stakeholders along the whole value chain.” Private companies in turn have welcomed the regulations and frameworks outlined in the EGD, with 60 companies publishing an open letter calling the EU to act on ESG standards. Companies such as Vestas and Iberdrola are leaders in renewable energy, coupled with an increase in the sale of electric vehicles.
The private sector can and must be a key player in addressing climate change. Overcoming barriers to private sector engagement in climate action is crucial for achieving the goals of the Paris Agreement. By creating a supportive environment, governments can unlock the immense potential of businesses to drive innovation, create jobs, and build a sustainable future.
Photo by Matthew TenBruggencate on Unsplash
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