Following COP26, Mike Hayes and Russell Smyth of KPMG share some perspectives on what it means for business on the island of Ireland.
Note: This piece was originally published in Business & Finance magazine, vol. 59, no. 1, available to read, with compliments, here.
Reflections on COP26
“Are we in a better place post-COP?”, asks KPMG‘s Global Head of Renewables Mike Hayes. “Absolutely yes. It may not have been as successful as it could have been, with the developed world not agreeing on the $100 billion funding for the developing world, and the disappointment in relation to India and China’s timelines, but the reality is that the progress far outweighs the setbacks.”
Russell Smyth, who leads KPMG’s Sustainable Futures team, echoes this. “It depends on what lens you view it through. If your expectation was for a two-week meeting to solve the climate crisis, you were setting yourself up for disappointment. That 138 countries representing 88% of global greenhouse gas emissions have recognised the urgency of the climate change issue and have set decarbonisation targets is a very significant achievement.
“There is now a genuine acknowledgement that we are facing a 2030 problem, not a 2050 issue,” says Hayes. “Unless we make substantial progress in the next nine years, 2050 targets will unreachable”.
Impacts on the business community
Also, this is the first COP to feature a very large contingent from the business community. Business has a very important role to play. After all, 85% of global greenhouse gas emissions come from that source. There’s also a growing belief that businesses are moving faster than governments – investors will ultimately force climate polices. “Capital is talking. Investors are saying that companies will have to put climate policies in place, or they will be squeezed for capital”, says Hayes.
Reviewing the various pledges and commitments made at COP26, Hayes says the real challenge in many instances will be related to data. “We need to find a way to gather, measure and account for carbon data, he says. This is the relatively new concept of carbon accounting. It’s way too inconsistent right now. The establishment of the International Sustainability Standards Board will also help. We need verifiable, consistent carbon data to compare sustainability claims.”
Events at COP26 and elsewhere will ultimately impact on every Irish business with mandatory ESG reporting on the horizon, according to Smyth. “The Corporate Sustainability Reporting Directive is the single most impactful climate related regulation for Irish corporates,” he says. “It will cover more than 1,000 companies in Ireland now that its scope has been expanded fourfold. The mandatory ESG reporting as well as mandatory assurance it introduces means firms will need to have their claims verified by an independent auditor.”
Businesses have a stark choice, Smyth believes. “They can view it as a regulatory burden and do the minimum or see it as one of the most profound changes in history and seize the opportunities it offers. Investors will not be interested in companies who take the first option.
If any of these matters are relevant to your business, contact us at KPMG Sustainable Futures.