Reina Bayoud | Staff Writer
COP26 wrapped up on November 12, 2021, but left a significant impact. So what happened at the summit, what are some of the key takeaways, and how will it affect businesses?
But first and foremost, what is COP26? COP, or Conference of the Parties, is a UN Climate Change Conference that meets annually unless decided otherwise by the parties involved. This year marks COP’s 26th meeting, coming up with new studies and results of yearly research about how the countries can unite to control climate change.
We live in a world that is aware of the drastic results of global warming. However, everything remains easier said than done. In a fast-paced world, where mass consumerism is only satisfied with mass production, pollution is inevitable, and climate change in turn follows through.
COP26 established main goals for governments on an international scale, setting the goals to 2030. First, they agreed to have the countries present emission reductions by 2030. This is done by reducing coal usage, encouraging investments in sustainable products, and switching to electric vehicles.
Second, they agreed on protecting ecosystems and maintaining communities that are falling apart. By having ecosystems and natural habitats vanishing as a whole, nature is more likely to surrender to global warming.
Third, they agreed on setting the finances straight to achieve the above goals. For that, they allocated at least $100 Billion of a country’s finances to the climate. However, for many countries, especially the developing ones, financing that amount of money is challenging. This is why international financial institutions, such as the World Bank, also have the responsibility of unleashing trillions of dollars in the private and public sectors towards achieving COP26’s goals. In fact, the annual $100 B climate finance target was due by 2020; however, it was extended to 2023.
After the summit, which was supported by much scientific evidence and research, it became clear that COP26 significantly impacts businesses and the goals it aims to achieve. Decarbonization will now be a two-way plan, one from the consumer and the other from the investor, ensuring that both parties make conscious and educated decisions. Also, large companies in the UK will be obliged to disclose any climate risks by 2022. This new obligation will also be applied to all companies by 2025. This can strongly affect how consumers view the company and their buying decision process. From the investors’ point of view, they are now making conscious decisions to invest in companies that set a clear agenda. It is also predicted that when companies establish these plans, investments will be at an all-time high, being strongly encouraged by the company’s dedication to the COP26 goals and its development of well-thought-out plans.
By the year 2023, companies are also required to create net-zero transition plans. A net-zero transition plan ensures that a company meets the balance between the number of greenhouse gases emitted due to its actions and the amount of greenhouse emissions cleared from the atmosphere. Aside from the many environmental benefits doing so may have, companies that complete these requirements sooner will gain a competitive edge in the consumers’ minds.
These new requirements, more than others, challenge companies. Some started their sustainability and emission reduction plans. KPMG firms established KPMG IMPACT, which helps businesses and companies develop strategies and techniques for decarbonization and emission reductions. Not only will these organizations be able to create clear and effective plans aligning with COP26’s goals and requirements, but they will also strengthen ties with stakeholders. After the summit wrapped up, vital stakeholders in companies, such as employees and customers, have become intensely aware of the net-zero plan and are on a mission to make conscious decisions about where they are willing to take risks and become stakeholders. So, the faster KPMG IMPACT can work with these organizations, the more competitive advantage they will have in getting environmentally conscious stakeholders.
So how does this affect businesses and business students? Companies now have an extra responsibility and added expenses to take care of for the next few years. Those wanting to get into the business field need to make educated decisions about which companies to join and which to avoid, according to how committed they are to their COP26 goals and how hard they’re working to achieve these goals by the due date. Being educated about the summit and the significant effects on the business world will enable entrepreneurs to start their businesses on the right path and have their COP26-friendly strategies embedded in the company’s formation.