Playing to win in the most important game in town

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14 November, 2016


Insights from the CEO



Peter Bakker

While it may sometimes feel like the ground is moving beneath our feet, there’s one fundamental shift underway that is cause for hope rather than alarm – the transition to a low carbon economy. 

The adoption of the Paris Agreement and its record fast entry into force are setting the new rules of the game for the global economy. With countries gathering in Morocco for the next round of international climate negotiations which are expected to catalyse further action, we know what the goal is – speeding up our journey to a low carbon economy. “What was once unthinkable is now unstoppable,” said UN Secretary General Ban Ki-Moon after COP21. Unstoppable.

For businesses, Paris has redrawn the playing field: we must now do business in a “2 degrees Celsius world.” That means we need a net zero emissions society – that means storing as much carbon as we emit — by the second half of the century, if not sooner.

Business leaders will learn the new rules fast, will quickly figure out the dimensions of the pitch, and devise new strategies and game plans. Laggards won’t acknowledge that the game has changed at all. And they will lose.

For those businesses that choose not to recognize the constraints and opportunities of a low carbon economy, the digital revolution provides plenty of cautionary tales. There’s a graveyard full of companies that were reluctant or just slow to adapt to the new digital reality. Which carbon-dependent companies will suffer the same fates in a post-Paris Agreement world?

On the flip-side, many companies will help drive the transition to a low carbon future, and will flourish. While political leaders have signaled the change, business needs to take the lead towards the energy transition.

Weathering uncertain times by embracing the new rules of the game

While much of the global economy sputters in fits and starts, the renewable energy industry is booming. Low carbon energy sources are increasingly reliable and cost competitive with traditional fossil fuel resources. In 2013, for the very first time, more renewable energy capacity was brought online than all fossil fuel resources combined. Employment in global clean energy rose 5-percent in 2015 alone, andsolar is soon poised to surpass oil as the largest employer in the whole of the energy sector. According to the Financial Times, about 500,000 solar panels were installed every day last year. as a record-shattering surge in green electricity saw renewables overtake coal as the world’s largest source of installed power capacity.

It’s not just renewable energy companies leading the transition. Across all industries, smart CEOs are positioning their businesses to thrive in a 2 degree future. Over 150 global businesses—from Audi to Monsanto to Nestlé to Walmart— have signed onto the low carbon technology partnerships initiative (LCTPi), agreeing that the time has come to take decisive action to meet the urgency of the climate challenge, and committing to work collaboratively to deliver business solutions to clear the biggest hurdles to a low carbon economy.

Plenty of companies that aren’t leading the charge are at least recognizing the risks of business as usual. This year, over 600 of the world’s largest listed corporationsreported that they are now factoring the Paris Agreement into how they do business. The managers atop these companies want to learn how to compete on the new playing field.

Of course, there’s plenty that political leaders can do to help business draw up a new playbook. Business leaders are calling for strong, consistent policies and regulations. Yes, even regulations. Industry would rather operate under strong, predictable regulations than a scattershot of moving targets. Harmonizing these rules across sectors and states would ensure that the game is being played the same all over.

Governments can and should also encourage and support innovation, unlocking private investment in the clean tech and efficiency solutions that will propel us to carbon neutrality. This doesn’t just change the energy system, it will save and improve the lives of billions. Look for inspiration to a collaboration between the Solar Electric Light Fund and Partners in Health, which is electrifying rural health clinics in Rwanda, Lesotho, and Haiti. We need more programs like this, all over the developing world.

Of all the tools available to policy-makers, the simplest and most fundamental for business is putting a price on carbon. A carbon price immediately levels the playing field, and gives businesses a clear economic signal for how they should power their factories, produce their goods, and deliver their services. Again, businesses want the clarity that a price on carbon provides. Two years ago, over 1,000 companies and investors—including Unilever, E.On, and even oil companies like BP—signed onto the World Bank’s “Put a Price on Carbon” statement.

With the sturdy foundation of a price on carbon laid, and clear, stable policies in place, no business can claim that they don’t know the rules of the game. But, of course, climate change itself is no game. Climate impacts are worsening every year and without proper action, wealth will be destroyed, not just for investors but for whole communities and economies. Lives will be lost, especially among the poorest.

There may be a whole lot of geopolitical uncertainty in the world, but as the Paris Agreement is set to go into force, we know for sure that the age of fossil fuels is ending, and that the low carbon economic playing field of the future has been lined and is ready for climate-friendly businesses to collaborate and thrive.

This post is part of a series produced by The Huffington Post, in conjunction with the U.N.’s 22nd Conference of the Parties(COP22) in Morocco (Nov. 7-18), aka the climate-change conference. The series will put a spotlight on climate-change issues and the conference itself. To view the entire series, visit here.

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