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Climate change and business: risk or opportunity?

A worldwide challenge

Climate change is a challenge for the international community and, therefore, also for businesses. agreement According to the latest data published by the Intergovernmental Panel on Climate Change (IPCC), the global temperature has risen by more than Degree compared to pre-industrial levels, and sea levels have risen by 0.2 meters since the beginning of the century. Climate change not only leads to an increase in temperature, but also has other consequences, such as heat waves, droughts, typical health effects or floods, among other extreme events.

The international community's goal is to prevent the temperature increase from exceeding 1.5 or 2 Degrees with respect to pre-industrial levels. However, the IPCC's data indicate that the commitments and objectives assumed so far would only limit global warming to about 2.7 Degrees.

Climate change poses a risk to the international community, including the private sector. In the Global Risks Report, prepared annually by the World Economic Forum, climate change and associated phenomena repeatedly appear as the hazards most likely to occur and potentially have the greatest impact on our economic system.

The role of the private sector in climate change adaptation and mitigation

Businesses work primarily in two directions in relation to climate change. Firstly, we speak of "mitigation" to refer to the reduction of greenhouse gas (GHG) emissions. The ultimate goal in mitigation is for companies to become "neutral" in emissions, so that their contribution to the climate is not relevant. Secondly, we call "adaptation" the work that companies undertake to reduce their vulnerability to climate change and control the associated risks.

In relation to mitigation, the fundamental tool is called "carbon footprint". This is a calculation of GHG emissions for both direct and indirect emissions (including electricity and steam imports). Finally, it also seeks to include the "scope 3" footprint, which takes into account emissions throughout the organization's life cycle, and therefore includes suppliers and customers.

In this context, climate change can also bring a number of opportunities for companies to improve the efficiency of their energy consumption and processes, as well as to offer market opportunities for their products and services.

Working to understand and reduce their footprint is a priority for companies that are committed to climate change. In this sense, the most relevant example are the companies that have committed to achieve neutrality or net-zero emissions. development In this way, companies offset their emissions through the development of projects outside or within their organizations, which, in addition, collaborate in achieving the Sustainable Development Goals (SDGs). One of the tools that have emerged on the road to neutrality are the carbon markets, with the intention of achieving the reduction targets at the lowest cost, and where companies contribute financially with other companies that reduce through the purchase of reduction certificates.

What to expect from Glasgow?

Through the lecture of the Parties to the United Nations Climate Change Convention framework (COP), countries meet annually to advance the development of the rules and regulations and their commitments related to climate change. The 2021 edition will take place in Glasgow, Scotland, where it could not be held in 2020 due to the global health crisis. Therefore, many issues are on the table and the decisions taken will have repercussions on companies, among the most important of which is the so-called "increased ambition", countries are expected to take on stricter commitments to limit emissions.

Other issues to be addressed at COP26 will be market-based instruments, the setting of targets at subject for adaptation, as well as work on compensation to countries that will be most affected by climate change and development of new support tools to help countries in the challenge climate.

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Kepa Solaun

CEO of Factor Ideas for change, visiting professor of the School of Sciences of the University of Navarra

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