Tag: Leadership Report

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The question from Jesper Brodin—CEO of the Ingka Group, IKEA’s parent company—for Germany’s deputy climate envoy was fairly simple: “How can we support you?” Speaking in a discussion at COP28 I moderated in the first days of this year’s climate talks in Dubai, Brodin wanted to know how businesses could aid the negotiators pushing for an agreement to phase out fossil fuels.

The answer from Norbert Gorissen, Germany’s deputy special envoy for climate action, tells us a lot about the role of the private sector at COP28, and the role of business in the climate movement more broadly. Policymakers hear a range of private sector views, he said, creating a “competition of various voices” to be considered the true representative of the corporate world. “We need a better-consolidated, strong voice from the private sector on a global level,” he said. In other words, the business voice is fragmented by different viewpoints; speaking in unison would yield greater results. 

The COP28 presidency has placed the private sector at its center unlike the organizers of any previous U.N. climate talks. In doing so, it is forcing COP participants to grapple with the thorny question of just how corporations can or should fit into the annual conference. 

For some longtime COP observers, this is a well-timed innovation. To meet our emissions targets, they say, the climate talks need to move beyond negotiation halls to catalyze the real economy. And indeed, some companies come to COP having earned true green credentials, not only by decarbonizing their businesses but also by supporting government policy to push others to do the same. 

For others, the business presence—including some of the biggest emitters—represents a cheapening of the process. There are certainly some companies that come with little to show—and no intention of pushing for helpful government policy. This is a distraction from the main task at hand, some observers argue, namely brokering an agreement to wind down fossil fuels.

Keeping track of all of this remains a difficult task. And, no matter what happens in the final days of COP28, additional work remains to be done to figure out the best way to incorporate the private sector into U.N.-led climate conversations.

Read more: The COP28 Outcomes Business Leaders Are Watching For

From their beginnings nearly 30 years ago, U.N. climate conferences were meant to center around countries. It is the United Nations, after all. And, while some business representation has existed from early on, corporate officials were largely meant to stay on the margins. But the presence of companies at the conferences has grown rapidly in the eight years since the adoption of the Paris Agreement. The landmark deal set a voluntary framework by which governments are meant to create increasingly ambitious climate policy, but in many large economies success depends to a significant degree on activating the private sector. And so the officials running the last several climate negotiations have increasingly incorporated businesses into the run-of-show—and big companies have eagerly embraced the invitation.

It should come as no surprise that organizers of this year’s conference in Dubai doubled down. The city has become a global business and financial hub by catering to the private sector. Sheikh Rashid bin Saeed Al Maktoum, the Emirati founding father credited with launching Dubai on its breakneck development trajectory, summed up his philosophy with a quippy ode to business: “What’s good for the merchants is good for Dubai.” Meanwhile, the COP presidency held by oil CEO Sultan Al Jaber has described his approach as a “business mindset” from the time he was appointed.

The result has been a slew of initiatives, partnerships, and deals launched during the conference. The U.A.E., for example, launched a $30 billion climate fund with top financial services companies to invest in clean technology, with a commitment to set aside some of that funding to flow to the Global South. And an alliance of oil and gas firms committed to end routine flaring and come close to eliminating methane emissions by the end of the decade.

And then there are the behind-the-scenes discussions: having private sector players at COP alongside government and civil society allows for the stakeholders to sort through challenges that would be difficult in a virtual context. “We’ve been seeing for a while now more and more businesses involved at COP,” says Nat Keohane, president of the Center for Climate and Energy Solutions, an environmental policy think tank. “What I’ve seen here is that those conversations are really oriented toward implementing solutions.”

Supporters of Al Jaber’s approach say he has used his convening power and long-running stature among companies and financiers to create the necessary climate for these deals and tough conversations. Opponents say that both voluntary commitments and dealmaking, however necessary, don’t need to be done on the ground at COP—that it’s a distraction from the urgent need to get the policies right. “The time has long since passed when the world can be satisfied with voluntary pledges that are self monitored, with bright shiny objects designed to distract the world from the main task at hand,” Al Gore told me on Dec. 5.

Some companies are keen to engage in the policy conversation. The We Mean Business Coalition organized a letter calling for the phaseout of fossil fuels ahead of the conference with more than 200 signatories, including large companies like IKEA and AstraZenca. At the same time, there are more than 2,400 delegates at the conference affiliated with the fossil fuel industry. As Gorissen said, it can be hard to discern who really represents the broader business community.

Ultimately, most executives here say they have little stake in the result of the negotiations that come out of the conference. This is perhaps unsurprising. The language is for the most part non-binding and directed at countries. And most companies, even those working hard to decarbonize their own operations, generally stay away from climate policy debates unless they have an immediate effect on their bottom line. A study published last month looking at 300 large companies by the watchdog group Influence Map found that 58% of those studied are at risk of “net zero greenwash” because they don’t lobby in alignment with the net zero target that they say they are pursuing. 

The primary focus, executives say, is to meet counterparts, do deals, and show their commitment to the climate issue. That last point has drawn particular criticism from many here who say that using COP to prove green credentials is an opportunity that should only be open to companies who have proven their climate chops, perhaps by meeting criteria set out last year by a U.N. working group convened to study the topic. 

This debate is tricky. How do you demand seriousness without requiring perfection? And is COP even the best place to engage in those conversations? The debate won’t be settled in the next few days. Indeed, we should only expect it to grow as climate change becomes increasingly relevant for companies.

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The U.N. climate conference known as COP28 officially kicked off this afternoon in Dubai with more corporate executives and big players in the financial sector present than in any such meeting before. Much of their attention on the ground will focus on the private sector announcements made and deals struck, but there’s a reason for private sector folks to pay attention to the seemingly wonky official negotiations taking place between countries in Dubai’s Expo City convention center.

For many businesses, the conversations can seem overly procedural and disconnected from the day-to-day reality of cutting a firm’s emissions. And yet these negotiations can move the market over time, and it’s worth paying attention to the signal that emerges from Dubai.

To understand how such influence can spread from COP negotiation halls, look no further than the negotiations that took place in Paris in 2015. Countries agreed to come up with plans to limit average global warming to well-below 2°C over pre-industrial temperatures. The commitment was non-binding for countries and had even less of an immediate impact for companies.

And yet the Paris Agreement has become a key benchmark for climate-concerned investors and companies. CEOs refer to “Paris alignment” to explain their decarbonization progress. There are now funding systems that act as investment vehicles designed specifically to support companies working towards the Paris targets. And some, if not enough, deals are reached or rejected because of these priorities. Laurence Tubiana, the head of the European Climate Foundation and a key framer of the deal, described this to me as “a transformation of the mindset.” “The Paris Agreement [became] the norm, the reference for everybody to know where to go,” she told me in 2020.

What is the signal that might emerge from Dubai? As I’ve written here before, perhaps the biggest area of debate centers on the future of fossil fuels. Negotiators are trying to find common ground on how the world should view oil, gas, and coal. Getting through the negotiations remains a tall order, but any collective agreement that is serious about phasing out fossil fuels will signal to investors and companies that policymakers remain—at least in principle—committed to addressing climate change. That reality should at the very least make backers of fossil fuel expansion pause to take stock. On the flip side, failure to reach a deal on fossil fuels would signal that countries have lost their fortitude, and the speed of the energy transition may be slower than hoped.

Fossil fuels are just the start. Delegates are trying to find the best ways to commit public money to advancing private clean energy projects in emerging markets. Outcomes that advance this so-called blended finance approach could create new opportunities for investors interested in funding clean energy deployment.

Those two changes alone will shape the allocation of billions of dollars in capital, and spread across the economy, and they’re just the most obvious ones.

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Earlier this year, I spent time in Texas reporting on a growing push from business leaders to pivot the state’s energy industry to capture growing investment in clean energy. Among the state’s many selling points was its existing energy infrastructure, which promoters argue can be repurposed for clean technology.

It’s a compelling pitch, but these same executives were often caught off guard by a follow-up question: what about the communities where the infrastructure is located that don’t want it anymore? One person was upset that I asked the question. Most sort of shrugged, admitting that convincing communities was a challenge and acknowledged that they were unclear on how to address it. 

Across the country, as money begins to flow from the Inflation Reduction Act, many project developers are now urgently facing this hurdle: to build they’ll need to win over local communities. In the public dialogue, many supporters of clean energy have dismissed opposition to infrastructure projects as NIMBYism, short for “not in my backyard.” The term is derisive and refers to local people who have a negative knee-jerk reaction to any project near their community. There is certainly some truth to the NIMBYism allegation. 

But to ignore all community concerns as NIMBYism would be a mistake. First, research has shown that community opposition is often grounded in important, real-world concerns, including and especially in low-income communities of color where companies have historically built industrial facilities that have contributed to health ailments, among other impacts. There’s a business case, too. Engaging communities makes projects more likely to succeed in the short term and makes them more sustainable investments in the long run.

“Education of the community is essential,” said Jigar Shah, director of the U.S. Department of Energy’s Loan Programs Office, at a September round table alongside clean energy executives. “And you’re going have to do that intelligently, smartly, to try to get the best amount of buy-in.”

To learn more about the evolving conversation on community engagement, I attended a September forum in Huntsville, Ala., where a mix of environmental justice activists and civil society groups gathered to talk through what community engagement standards should look like. Organized by the Aspen Institute and the Center for Rural Enterprise and Environmental Justice (CREEJ), the conversation nominally focused on carbon dioxide removal—though the discussion could be applied to cover community engagement broadly.

Climate scientists broadly agree that we need carbon dioxide removal technology to get anywhere close to meeting global climate targets. But the technology can, on the surface, sound precisely like the sort of sci-fi industrial project you don’t want in your backyard: the most widely discussed approach involves sucking up carbon using industrial facilities and then storing it underground.

Many on the ground are skeptical. Because of existing infrastructure and favorable geology, many companies are trying to deploy this technology in places that have historically been home to the oil-and-gas industry. After decades of fossil fuel projects that have harmed human health, trust is often low. 

In the past, fossil fuel firms might have just pushed past these concerns, promising jobs and using their political clout to achieve their objectives. But that’s no longer viable. Beyond the ethical issues with such an approach, a changing political climate has made that more difficult. Environmental justice groups have access to more resources to sue. And the Biden Administration has made community engagement a consideration for federal funding. 

Still, exactly what new standards of engagement should look like remains to be seen—and it’s a highly contentious question. Project developers don’t want to slow their investments and community members fear their voices will, once again, go unheard. A June gathering on the topic held in Wisconsin turned heated and generated controversy as attendees said they felt the Biden Administration officials were pushing the technology on them rather than truly engaging. 

The forum in Huntsville lacked similar fireworks as attendees widely agreed on the need for a new way of doing business—with carbon dioxide removal and clean tech more broadly. “Community engagement should not just be a box to check off,” says CREEJ founder Catherine Coleman Flowers, who spearheaded the event. “It should be crucial from design to implementation.”

Donnel Baird, CEO and founder of clean technology company BlocPower, called for communities to take an ownership stake in projects. “We’re simply not going to be able to deploy clean energy at scale to the mass market unless we have a plan for ensuring that folks have at least a psychological stake, if not a literal ownership stake,” he told me after the event.

And attendees broadly agreed that engagement would need to address core issues and not just gesture at jobs. “If you go to an environmental justice organization, or activists who are concerned about toxins and pollutants from this industrial facility, you can’t go to them and promise them economic development as a trade off,” Khalil Shahyd, managing director of environmental and equity strategies at the Natural Resources Defense Council, told me after.   

Creating a new paradigm for community engagement on clean technology would serve everybody. A 2022 study of reasons why proposed clean-energy projects don’t get built found that a lack of engagement with the local community occurred in nearly 30% of project failures. “Incorporating all stakeholder perspectives from the outset of a siting process will probably save time and money,” wrote the report authors. “Better to deal with perceptions of possible risks and potential benefits before opponents have made up their minds, and banded together, to block the project.”

Some companies, particularly upstarts, are keen to show that they get it. “There’s an inherent fatigue with just coming in and saying that we’re going to educate you about our tech or jobs,” said Vikrum Aiyer, the head of global public policy at Heirloom, a carbon dioxide removal company. “It might be necessary, but it’s certainly not sufficient.” 

But what is? The true test remains to come–not just for Heirloom and the carbon removal business but for a wide range of new clean technologies.