COP 27 Takeaways – World Kinect Energy Services
Amid the war in Ukraine, global energy crises, high inflation rates, and political instabilities around the world, this year’s United Nation’s Conference of Parties (COP27) was framed as the “Implementation COP.” In Sharm El-Sheikh, Egypt, global leaders, and other parties gathered to present action plans on a challenging agenda that included topics such as adaptation, implementation, and climate finance. The most discussed achievement is an agreement to establish and operationalize a new loss and damage fund.
Though overall progress was considered rather underwhelming, it was evident that corporations and other commercial enterprises are much needed in this process. In addition to the negotiations held in the COP27 "Blue Zone,” workshops, seminars, and sessions hosted by the likes of S&P Global Commodity Insights, BCIU, Bloomberg, and McKinsey were among the many “fringe” activities (COP27 term) that drew corporate leaders from around the globe to join in the climate action conversation.
In that light, World Kinect Energy Services advisors, including our team that attended sessions in Sharm El Sheik, share what we see as some of the key takeaways for businesses from this year’s COP:
Loss & Damage Fund:
The biggest discussion point at COP27 was the requirement for developed countries, which have historically benefited the most from the burning of fossil fuels, to provide financial support to developing nations, to pay for the ‘loss and damage’ caused by the effects of climate change. Whilst an agreement was reached that a ‘Loss and Damage’ fund is required, no further details regarding the structure of the fund, who will pay into the fund, and which countries will benefit from the fund were agreed upon. Whilst this is a positive step in the right direction, further negotiations and further action is required.
Global Shield Financing:
Another breakthrough in climate finance is the Global Shield which, championed by Germany, was set up by the World Bank Group during COP27 to support the Global Shield Financing Facility. Like the ‘Loss and Damage’ fund, the Global Shield is intended to provide financial support to developing countries for dealing with the worst effects of the climate crisis by channeling funding and grants to where they are needed most.
US Voluntary Carbon Trading Scheme:
U.S. Special Presidential Envoy for Climate John Kerry announced the launch of a new US carbon trading scheme aimed at increasing investment in developing countries by directing funding and supporting the transition to renewables and clean technologies. The trading scheme will be closed to fossil fuel companies. The scheme has received criticism, however, from some that believe the carbon markets, and the ability to purchase such credits, allow companies to continue polluting whilst artificially improving ESG performance. In his statement, Kerry acknowledged the “mistakes of the past,” and promised strong guardrails for how companies could participate and that only high-quality credits would be used.
Global Methane Pledge – Increased Signatories:
The Global Methane Pledge was launched in November 2021 at COP26, however, COP27 saw an increased number of nations join the pact and pledge to reduce methane emissions by 30% by 2030. As methane is considered a key contributor to climate change due to its relatively high global warming potential, the pledge was hailed as a watershed moment at COP26. Currently, more than 150 countries have joined the pact – 50 more than at COP26 in 2021. China, India, and Russia however have not yet acceded to the pledge.
US & China Relations:
Although climate talks between US and China had broken down a few months earlier, at COP27, the two countries announced they had engaged in close and active dialogue. Whilst a positive step, most agree further dialogue and more deliberate action is required by the two largest global emitters if the 1.5°C goal is to be achieved by 2050.
Just Energy Transition Partnership:
Alongside COP27, world leaders launched the Just Energy Transition Partnership at the G20 summit in Indonesia to mobilize up to $20bn for the nation over the next three to five years to support a just energy transition. The agreement has been hailed as a landmark achievement and is an example of climate equality in action where developed countries channel funding to less developed countries to provide guidance and help outline the path to net zero by 2050. The roadmap highlights key targets on the way to 2050 and analysis shows that Indonesia could reach peak emissions in the electricity sector by 2030.
First Movers Coalition:
The World Economic Forum and US Special Presidential Envoy for Climate, John Kerry, announced the expansion of the First Movers Coalition, a public-private partnership to “commercialize clean technologies through advance purchase commitments.” Consisting of 65 companies with a collective market value of approximately $8 trillion-plus ten government partners, First Movers Coalition members have pledged $12 billion in purchase commitments for green technologies to decarbonize hard-to-abate sectors. The announcement included the launch of new commitments focused on cement and concrete – with “First Movers” pledging purchases of at least 10% “near-zero” carbon cement and concrete per year by 2030.
Agricultural Sector Roadmap to 1.5°C:
Following up on the pledges made in Glasgow, this year leading agricultural commodity and trading companies released at COP27 a plan to address deforestation arising from their supply chains. Through mutual collaboration, 14 companies developed the Agricultural Sector Roadmap to 1.5°C. This roadmap lays out how these companies plan to reduce emissions from land use changes in the cattle, palm oil, and soy sectors. This roadmap is particularly critical given the statement that land use changes are estimated to contribute almost one-quarter of global CO2 emissions. In addition, since these companies play an important role in the global food system, initiatives such as this roadmap will be an essential element for navigating the carbon reduction path for the agricultural sector during a time when facing the severe risks posed by food security globally. While this roadmap is a meaningful step forward, there is still much work to be done to keep the agri-commodities sector, and therefore our planet, on a 1.5°C pathway.
CDP & ISSB Alignment:
During COP27, the Carbon Disclosure Project (CDP) announced that it will incorporate the standards from the International Sustainability Standards Board (ISSB) into its questionnaires. This will serve to improve the consistency of climate-related information for different stakeholders and reduce the disclosure burden and reporting costs for organizations through harmonizing the requirements. The UK government has already revealed its intention to align its climate reporting obligations with the upcoming standard, so it’s likely only a matter of time before other jurisdictions follow.
Net Zero Guidelines Launch:
COP27 witnessed the launch of the new International Organization for Standardization (ISO) Net Zero Guidelines. Now organizations will be equipped with more guidance on how to manage climate change. These guidelines will provide support for organizations to set and attain their net zero targets and decrease the risk of ‘greenwashing.’ The main purpose of these guidelines will be to provide a common definition of Net Zero to offer a global foundation for harmonizing, understanding, and planning for net zero at various levels.
What does COP27 mean for those of us in the commercial business sector?
COP27 continued to urge corporations and commercial businesses to set a clear roadmap to achieve net zero and show that they’re willing and able to reduce their own emissions over time.
Defining and implementing a clear net zero strategy is a competitive advantage for businesses, as it shows a commitment to sustainable growth. As more consumers and other stakeholders demand greater transparency and accountability for meeting sustainability objectives, companies that have not established a net zero or carbon reduction strategy will likely struggle to secure investment and potentially jeopardize their relationships with their suppliers, clients, and even employees.
Thankfully, it is not too late for companies to begin or ramp up their efforts. Here are just a few actions companies can take to avoid the consequences of falling behind:
• Define a measurable carbon reduction plan, covering scope 1 (direct), scope 2 (energy use), and scope 3 (supply chain) emissions.
• Define a sustainable corporate strategy aligned with the UN sustainable development goals (SDGs)
• Increase their use of renewable and lower carbon fuels to limit greenhouse gas (GHG) emissions in their operations
• Invest in low-carbon technologies
• Purchase high-quality carbon offsets to compensate for unavoidable emissions.
On a decarbonization journey of our own [our sustainability reports], World Kinect has the expertise and a wide array of solutions to suit the sustainability needs of any size business. If you would like to know more about how your business could align with the principles of COP27, let us know. We can help.
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