Harnessing company climate actions for Paris and beyond

Philipp Pattberg and Oscar Widerberg, Institute for Environmental Studies, VU Amsterdam

Additional and sustained action is needed to get climate politics back on track towards the 2°C target. In the run-up to Paris, companies and investors have been identified as having the potential to close the existing pre-2020 ambition gap.

By making public commitments and supporting ambitious climate policies, many companies are taking an active and public role in global climate governance. Examples include Microsoft’s ‘Carbon Fee’ model, IKEA’s €1 billion pledge to fight climate change, and Unilever’s high-profile engagement with sustainability issues. In addition, companies started to engage in cooperative initiatives, collaborative arrangements between stakeholders such as companies, regions, cities, NGOs and countries, which aim at implementing concrete climate actions.

The potential impact of non-state actors, including companies, could be substantial. PwC, a consultancy, estimated that one cooperative initiative – the Low Carbon Technology Partnership initiative (LCTPi), comprised of some 140 companies and additional 50 partners, could generate 65 per cent of the global GHG reductions needed to achieve the 2°C target.

What is needed to harness this potential? The previous and current COP presidencies in Lima and Paris, together with the UNFCCC secretariat, have actively supported companies by providing them with a podium to share commitments and collaborations. During COP 20 in Lima in 2014, the ‘Lima – Paris Action Agenda’ (LPAA) was launched, aiming to boost non-state climate action by companies, investors, cities, and regions. A Non-State Actor Zone for Climate Action (NAZCA) has been launched and linked to the UNFCCC homepage, providing a forum for companies and other non-state actors to showcase their climate commitments. To date, NAZCA contains over 10,000 climate commitments by companies, investors, cities and regions. It also engages over 700 companies in over 20 different cooperative initiatives.

A recent study scrutinised climate actions by over 2,100 companies spread across over 100 cooperative initiatives registered in NAZCA and part of the CONNECT data set (see CONNECT project). While the overall picture that emerges is cautiously positive, we have identified a few pressing challenges.

First, the geographical distribution of companies is heavily skewed towards the Global North. The vast majority of the companies in our study are headquartered in OECD countries, in particular in industrialised countries such as the United States, United Kingdom, Netherlands, Germany and Sweden. Similarly, in terms of numbers, the lion’s share of companies comes from sectors with relatively small carbon footprints, such as service sectors and finance.

Second, a few key players are more engaged than others. Of the 775 companies and investors in the NAZCA data set, 100 participate in more than one cooperative initiative. The Dutch electric appliances company Philips, for instance, is part of 30 per cent of the cooperative initiatives with companies in NAZCA. We identify 15 leading companies in terms of participation and found that, somewhat worryingly, their performance in terms of reducing greenhouse gas (GHG) emissions is mixed at best.

Third, we examined the potential versus achieved GHG reduction of companies in cooperative initiatives and found large discrepancies between expectations and reality. Moreover, in some instances, the intensity of GHG emissions per unit of product has been reduced considerably, while due to overall growth, the net effect in terms of carbon emissions is positive.

Fourth, ex-post data on performance in cooperative initiatives is largely unavailable. There are very few openly accessible progress reports on how companies are doing on their cooperative initative commitments, and even fewer repositories for registering them.

Against this background, what could governments do in Paris to create an enabling environment for companies to accelerate climate action and overcome the challenges listed above?

  • Building on NAZCA and similar data repositories, the creation of a common accounting framework could strengthen their legitimacy by recording real progress;
  • Based on a common assessment framework, leaders and laggards could be more easily identified, allowing for learning and knowledge exchange across different communities. Also, this would improve our understanding of why some cooperative initiatives and their participants do better than others; and
  • Encouraging more companies and cooperative initiatives from the Global South and emerging economies could address actions where they have the chance to make large, long-term effects.

Governments have started to recognise the positive contributions of companies taking climate actions. Companies on their side, increasingly make public commitments to take action. This positive momentum needs to continue after Paris to harness the mitigation potential inherent in collaborative arrangements on climate change.