Climate Action for Growth and Competitiveness

The commitment of many businesses to lead the transition to a low carbon economy is already yielding results.
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MILFORD, UT - MAY 11: Large wind turbines operate at a wind farm on May 11, 2016 outside Milford, Utah . The wind farm was built by First Wind and has a total of 165 wind turbines producing 306MW of power for Los Angeles, California. (Photo by George Frey/Getty Images)
MILFORD, UT - MAY 11: Large wind turbines operate at a wind farm on May 11, 2016 outside Milford, Utah . The wind farm was built by First Wind and has a total of 165 wind turbines producing 306MW of power for Los Angeles, California. (Photo by George Frey/Getty Images)

It's five months since the world's leaders adopted the historic Paris Agreement on climate change. In doing so they sent a powerful signal that the world wants to stay below 2 degrees warming and is on a path to decarbonise our economies.

In practical terms this means an end to unabated fossil fuel use by around 2050, an end to the deforestation of tropical rainforests and a revolution in the provision of clean energy.

It sounds incredible to a generation for whom growth and development have been synonymous with limitless exploitation of natural resources - from oil reserves to tropical forests.

Yet the transition world leaders signalled to a sustainable, low-carbon economy is not only necessary and overdue - it is also underway. And those who fail to get on board now risk losing out on what I believe will be the greatest growth opportunity the world has ever known.

Every day businesses and investors around the world are responding with new products and services, innovative solutions, reduced energy consumption - and they are reaping the benefits of doing so. Take Tesla, the manufacturer of electric vehicles. Demand for the Model 3 was so great that the company made $276 million in down-payments in its first weekend.

A group of enlightened venture capitalists, investors and corporations, including Bill Gates, Jack Ma and Mark Zuckerberg, have declared an intention - under their Breakthrough Energy Coalition - to scale up investment in early-stage energy companies committed to a near zero carbon emission future. They did so in support of Mission Innovation - an initiative backed by 20 governments - from the USA to Saudi Arabia - with the aim of making renewable energy widely affordable around the world.

Not surprisingly, investment in renewable energy hit a high of $286 billion in 2015, more than double that committed to fossil fuel power plants.

Everywhere we look, partnerships are forming to bring the scale needed to take advantage of these new opportunities. The 'We Mean Business Coalition', for example, representing 400 companies with revenues of $8 trillion and 180 investors managing $20.7 trillion in assets, have made nearly a thousand commitments to take action.

The Consumer Goods Forum, representing the world's largest retailers and consumer goods manufacturers, has committed to sustainable sourcing by 2020 of the key commodities that drive tropical deforestation, which represents nearly 15% of total carbon emissions.

Over 55 companies have pledged to use 100% renewable power through the RE100 campaign and are halfway towards the goal. And 150 companies have set emissions reduction targets in line with climate science through the Science-Based Targets campaign.

Impressive as these are, they only tell part of the story.

In fact, the NAZCA commitment registry - developed by the UNFCCC but named after the historic Peruvian landmark - counts no fewer than 12,000 commitments from non-state actors such as companies, regions, cities, and investors. Nearly half of these come from companies and over 440 from investors.

While the investor number is smaller, the impact can be greater. Consider the fossil fuel divestment movement. Investors worth over $2.6 trillion - including the Norwegian sovereign wealth fund and two Californian state pension funds - have withdrawn support for coal or other fossil fuels investments.

Energy sources, once the mainstay of high growth funds, are now shunned by mainstream investors. Peabody Coal, the world's largest privately owned coal company has filed for bankruptcy. It's not the first and I doubt it will be the last.

The commitment of many businesses to lead the transition to a low carbon economy is already yielding results. According to analysis by Arabesque Asset Management, sound sustainability practices lower the cost of capital, enhance a company's operational performance and positively influence stock prices.

The case for business to mainstream climate change and sustainability has never been greater. But just as business can lead this agenda, so governments must continue to set the right conditions in which to scale up efforts.

And there is no issue with more widespread support than carbon pricing. Already, 1,000 companies have committed to set an internal carbon price; and the same number back the World Bank Statement on Carbon Pricing, calling on governments to set a carbon price.

The momentum is building and the message is getting through. The IMF estimates that the true cost of fossil fuel subsidies - including externalities such as public health costs from air pollution and environmental damage - is close to $5.3 trillion per year.

This is no longer a 'rich country' agenda, but an 'every country' agenda.

No longer a "leave it to the next guy" problem, but a "leave it to me" opportunity.

All around there is evidence of a world waking up to climate action as a driver of growth:

  • China's new 5 year plan includes doubling renewables and cutting coal pollution;
  • India's Energy Minister has acknowledged new coal plants provide more costly power than solar;
  • Saudi Arabia is unveiling a blueprint for an era after oil;
  • Argentina and Australia have outlined plans to meet and beat their 2020 targets;

And it's working. According to the World Resources Institute, 21 countries are growing their economies whilst accelerating cuts in emissions.

Of course the transition won't be easy, especially for businesses having to adapt to a new climate economy. Many are asking themselves the same questions: What are the opportunities for me? How can I make this work in my industry, in my value chain, in my local context? How to create value in the future without destroying value today?

We can only solve these questions by working together.

Bodies such as the World Business Council for Sustainable Development or the United Nations Global Compact are providing invaluable networks for companies considering what the transition means from them:

  • Helping manufacturers consider what it means to become a circular economy company;
  • Helping fossil fuel companies consider what it means to become a new energy company;
  • Helping car companies consider what it would mean to become a mobility company.

Those that engage positively are sure to reap the benefits of the great transition underway. Those that don't are equally sure to miss the future.

As the author Carlos Castenada observed: "We either make ourselves miserable, or we make ourselves strong. The amount of work is the same."

Let's work together to make our economies strong and our climate sustainable. It can be done.

This blog has been adapted from a speech delivered by Paul Polman on Saturday 28th May 2016 at a private sector event organised by the Ministry of Environment of Peru, under the theme: "The Peruvian private sector and the new development scenario: leadership and vision."

Paul Polman is CEO of Unilever and Chairman of the World Business Council for Sustainable Development. You can follow Paul on Twitter @PaulPolman and on LinkedIn.

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