A 100-Year-Old Warning
More than 100 years prior, some clever scientists identified a problematic issue that we are still currently grappling with: climate change.
According to these scientists, if you put too much of a certain type of gas in a closed system, such as earth, it could radically alter the opacity of the atmosphere to infrared light, trapping it. Ever so slowly, bit by bit, the closed system will warm up. This would then result in multitudes of knock-on effects, from affected rainfall patterns, increasing ocean temperatures, to changes in albedo due to icecaps melting.
Together, these changes would cause heatwaves, droughts, flooding, wildfires, rising sea levels, and so on. Does this sound familiar? That’s because it has already started. From flooding in Pakistan, to fires in the United States, to heatwaves across Europe. The writing is on the wall: if we keep doing the tried and failed ‘business as usual’, things will only get worse for all life on earth.
Thankfully, enough people are getting worried about it that governments and institutions, who for years had supported growth at all costs, have started to be swayed by voters and society wanting a planet that remains habitable.
Scaling the Problem
After many years since the inception of the congress of the parties (COP) in 1995, an international agreement was struck by 195 members of the United Nations: The Paris Climate Agreement, signed in 2015. Effectively, the world agreed to limit the remainder of their carbon budget to a maximum of 1.5°C of warming.
This is a strange metric because, instead of measuring and managing the root cause, we are focused on the effect, which is not solely influenced by greenhouse gases (GHGs). The pragmatic path, it therefore turned out, was to attempt to limit our GHG emissions so that we removed ourselves from the interference of planetary homeostasis.
Enter “net-zero”. A target of reducing GHG emissions to as close to zero as possible, by balancing the emissions released into the atmosphere with the emissions removed or reabsorbed. To say that actual net-zero is a long way off, with a narrowing time deadline, would not do the scale of the problem justice.
Is Reaching Net-Zero Even Possible?
Achieving net-zero emissions is possible, but it requires a significant reduction of greenhouse gas emissions in all sectors of the economy: a 50-80% reduction in CO2 by 2030, and 100% by 2050 to reach the 1.5°C goal. To jumpstart this difficult endeavour, solutions will need to be focused on transitioning to renewable energy, making agriculture greener, and making transport more sustainable and efficient.
Currently, we are not on track to achieving net-zero by 2050. Whilst a growing coalition of institutions, businesses, cities, and countries, including the biggest polluters – China, the United States, and the European Union – are pledging to reach net-zero emissions, commitments made by governments to date fall far short of what is required. Current national climate plans will lead to a sizable 14% increase in global greenhouse gas emissions by 2030, compared to 2010 levels.
What is the Cost of Achieving Net-Zero?
The public and private sectors spent USD501.3 billion on decarbonisation in 2020, beating the previous year by 9%, despite the economic disruption caused by the Covid-19 pandemic. However, the transition to a net-zero economy by 2050 will cost an estimated USD150 trillion.
While the task ahead is expensive, the potential consequences of inaction are even greater. Failing to combat climate change could, by 2030, account for a loss of more than 3% of global GDP.
The impact of climate change on biodiversity also poses a huge economic risk. The collapse of ecosystem services provided by nature, such as wild pollination, provision of food from marine fisheries, and timber from native forests, could result in a decline in global GDP of USD2.7 trillion annually by 2030.
The next decades will be critical in the push to reach net-zero. This is one of the greatest challenges humankind has faced. It calls for nothing less than a complete transformation of how we produce, consume, and move about.
What role will ESG play in addressing climate change and reaching our goal of net-zero emissions?
Net-Zero and ESG
With sustainability surfacing as a global objective and no longer just a buzzword, many investors, policy makers, and society at large are demanding businesses become more environmentally and socially responsible. These demands also include requiring businesses to come up with a plan that outlines a path to meet net-zero carbon emission targets.
Whilst ESG alone will not save the planet, it can be an effective approach and tool to help address climate change and net-zero emissions. Investors are devoting an increasing amount of capital to ESG investments that reduce emissions, such as renewable energy and climate smart agriculture, and organisations are focusing on improving their business operations through improved energy efficiency and waste management.
In addition, ESG also focuses on the impacts of business on people and their human rights. This is important because processes for sustainability, such as decarbonisation, should not come at the expense of the more vulnerable of the world’s population. In order to reach net-zero equitably, it needs to be aligned with broader sustainable development objectives, such as social sustainability and the pursuit of broad economic opportunities.
Moving forward, ESG-related data will factor more heavily into nearly every aspect of business to meet the growing demand of driving sustainability efforts.
We Can Help You
At EBS Advisory, we can support you in getting where you need to be in the shift towards net-zero economies – from compliance and climate risk mitigation & adaptation, to sustainability reports, shared value creation, and industry-leading good practice.
Let’s set up a call and chat about how we can help you.