Governments need to align climate ambitions with the business sector. And vice versa. Because clear, long-term and shared public and private ambitions are a vital catalyst for accelerating climate change action, according to a new report.

Wanted: Shared and bold climate ambitions between governments and businesses. The business sector plays a vital part in meeting global political commitments to limit climate change. Likewise, political regulation plays a vital part in driving the green transformation of the business sector. This interdependency between governments and businesses represents a great untapped opportunity when it comes to fighting climate change in an urgent manner.

This is the clear message from the new report “The Ambition Loop”, written by UN Global Compact, We Mean Business Coalition and the World Resource Institute.

The report looks at how the business sector and governments can work together on developing new policies and aligned actions that fast track the transformation to a more climate friendly growth trajectory. According to the report, governments and business should engage in a positive “ambition loop” where frontrunning businesses showing leadership on climate change open the door to a more bold policy environment, that again can accelerate further business climate action. See figure 1 and textbox.

Figure 1. “Ambition loops” support bolder climate action from business and governments.
Text box:
The report recommends governments and business to align climate interest and create ambition loops within a two years time frame in order to:
  • Advance bold domestic policies,
  • Strengthen Nationally Determined Contributions, and
  • Develop long-term, deep decarbonization strategies that create the clarity and confidence needed for significant investments from the private sector.

By engaging in this shared loop, businesses and governments could draw several benefits – politicians could get the private investments, innovation power and economic commitment needed to fulfil global emissions targets, and the business sector could get the long term policy clarity and regulatory certainty to secure their future growth. Thus, the shared ambition loop could enable them to “push each other to accelerate the pace and scale of innovation and investments in low-carbon solutions”, the report writes.

This message resonates with the very clear statement read out in Katowice when the new Paris Rulebook was adopted at the latest COP24 by UN chief secretary António Guterres: “from now on my five priorities will be ambition, ambition, ambition, ambition and ambition.”

Businesses are Moving Fast…

Already in 2016, 56 of the Fortune 100 companies reported saving a combined US$2.5 billion from emission-reduction projects – with a typical payback period between one and 10 years.

This is just one number telling the story that more and more companies are making clear and bold climate commitments and regarding climate action as a potential driver for growth. Today, nearly 2500 businesses and investors have made public commitments to climate action. And these are not small fish of business, but big players such as Ikea, Toyota, Unilever, Maersk, and BlackRock.

These companies are realising the business potentials of catalysing climate action and are thus already helping markets and economies towards a more carbon neutral future.

This business momentum is currently opening the door to much more ambitious policy action – and according to the new “Ambition Loop” report, governments can and should benefit from this by introducing further regulations and policies driving a rapid transformation to a low carbon economy.

“…smart policies to accelerate climate action can unlock more than US$26 trillion in economic opportunities and generate 65 million new jobs.”

“Business needs three things from the political community: clarity, confidence, and perhaps most of all, courage. The more of these that the global business community can see, the greater and more transformational will be the business response,” says outgoing Unilever CEO and former Chairman of the World Business Council for Sustainable Development (WBCSD), Paul Polman.

Adding to his argument are estimates showing that smart policies to accelerate climate action can unlock more than US$26 trillion in economic opportunities and generate 65 million new jobs.

During COP24 we thus also witnessed a number of companies, alliances and business interest groups urging the policy makers to follow suit and get up to  speed in terms of new climate change regulations and policies – for instance, the WBCSD released a report with key policy recommendations for COP24 negotiators on behalf of nearly 200 global businesses, calling on policymakers to accelerate the implementation of climate solutions now.

…But Governments are Still Lagging Behind

There is no doubt that the agreement of the Paris Rulebook at the COP24 is an important step in confirming the political commitment to limit climate change, and thus sets an important global course for the business sector.

But despite the new rulebook there is still a long way to go in terms of formulating the policies that can help realize the global commitments.

“There remains, however, a great deal of work to be done to translate these goals into reality, and time is short.”

This was for instance addressed by Michelle Patron, Director of Sustainability Policy at Microsoft: “The Paris rulebook, agreed to in Poland, standardizes how countries report, update, and strengthen their climate targets and establishes transparent reporting structures to motivate countries to achieve these goals. There remains, however, a great deal of work to be done to translate these goals into reality, and time is short.”

Following the argumentation of the “Ambition Loop” report, there is a great potential for governments to look closely at how they can incorporate the business sector as an important voice when setting these targets and formulating the climate action ambitions.

This is not a standard today. In 2018, just seven out of a sample of 32 countries included the business sector in the implementation of the so-called Nationally Determined Contributions (NDCs). The NDCs are the heart of the Paris Agreement and embody efforts by each country to reduce national emissions and adapt to the impacts of climate change. Colombia, Indonesia, Japan, and Mexico stand out “among those making efforts to engage multiple stakeholders and sectors in development and implementation plans for their NDCs,” the report writes.

And governments need to start doing so right now, because as of today, it is less than a handful of countries that are currently on track when it comes to meeting the two- degree commitment agreed upon in the 2015 Paris Agreement.