The Next Economy
Corporations Are Ready to Act:
Will Regulators Step Up at COP26?

The 26th United Nations Climate Change Conference (COP26 — Oct 31-Nov 12, 2021) will bring together governments and regulators to update their plans for reducing global greenhouse gas (GHG) emissions in order to get runaway climate change under control. And while all eyes are on the outcome of COP26, the good news is that a growing number of companies have already begun to do their part.

What’s holding back progress?

While the gaining momentum of companies committing to net-zero carbon or even carbon negativity is reason for hope; the truth is that there is no net zero without addressing Scope 3, or value chain emissions — which make up 90 percent of corporate GHG contributions.

As it stands today, there are internationally accepted methods to quantify, measure and even set targets to reduce Scope 3 emissions; but this is voluntary and proves to be challenging at scale. Consumer goods companies or retailers can have over 100,000 suppliers — it’s no wonder that this makes their Scope 3 emissions infinitely harder to monitor and manage than emissions under their direct control.

Without global regulation on how companies must report on or account for their progress, companies that are enabling emissions reductions with their suppliers or customers have limited guidance to determine whether they are reasonably, and credibly, accounting for the positive impacts they are realizing.

With a lot of grey areas, everyone writing their own rules, and no central authorities to enforce this, how can we know which companies are making meaningful efforts to reduce their footprint?

We can’t.

My call to action for COP26

Voluntary commitments have been critical: Almost 1,000 companies have already adopted 1.5°C-aligned, science-based targets — but they now need to be supported with equally ambitious policies and incentives.

We need governments to harness this momentum and work to provide clarity for companies that are ready to accelerate their climate action. Regulators must push forward ambitious policies that will incentivise action at scale, and ensure that the leaders of today are recognised for stepping up!

In the absence of global regulation, none of these challenges can be addressed by a single actor — we need leaders from every constituency (regulators, civil society, companies) to come together to define best practice, especially in sectors where there is only voluntary action and commitments (for now).

Lack of regulation is no excuse for inaction

The next-best solution, then, is for companies and civil society to come together proactively to collectively define best practice while working towards achieving their science-based targets. This is exactly what The Value Change Initiative, co-founded by SustainCERT and The Gold Standard, has set out to achieve.

What started as a working group in 2018 has since amassed the support of more than 60 companies — including PepsiCo, Danone and Rabobank — working alongside civil society actors such as World Wildlife Fund (WWF) and World Resources Institute (WRI), and 130 technical experts.

As a growing collective, our ambition is to create an even landscape when accounting for Scope 3 projects and interventions, so companies can “compare apples with apples” — and ensure that claims about carbon reductions achieved in value chains can be trusted; are not overstated or double counted; and are credibly assigned to footprints, targets and other partners in the value chain.

How to net zero is the challenge

Right now, we are all clear on why we need to act and what needs to be done, but what is missing from conversations at COP26 is an agreement on the how — on applicability and implementation.

Given the urgency, the “how” challenges are increasingly important to solve; and however messy it is, we need to find solutions. Recognizing the challenge, WRI’s Cynthia Cummis, who was involved in the development of the Greenhouse Gas Protocol Scope 3 standard, has said:

“When developing the Scope 3 standard, we understood the challenges. But we can’t afford for perfection to be the enemy of good. We know [carbon] accounting is going to be tough; but it shouldn’t prevent companies from taking action.”

And while modern supply chains are long, complex and often obscure, she outlined just how achievable this goal is — if we work together:

“If every company engages with their Tier 1 suppliers, across all value chains, we will be able to solve this.”

It’s up to us!

What I am hoping for from COP26, then, is clarity on how to accelerate toward net-zero emissions with clear incentives for those taking early action. However, I also recognize that we cannot let this complex landscape be an excuse for inaction.

Whatever it takes, the challenge of ‘how to net zero’ must be addressed because confusion and a lack of coherency is creating barriers to meaningful action. It also means investors are flying blind when looking for where their capital can make a difference, and this is discouraging scale and speed - something we so desperately need to remain on a 1.5 pathway.

UN Secretary-General António Guterres has called 2021 “a make-or-break year for the climate,” and he’s right. We don’t have time on our side. And if we don’t want net zero to become an empty shell, we need to finally tackle the complicated challenge that is Scope 3 emissions.

Corporate leaders are showing that lack of regulation is no excuse for inaction, but corporations alone won’t solve the crisis. It’s now time for governments to step up.