Nicola Stopps’ reflections on COP27
COP27 was billed as the world’s last chance to prevent climate change of more than 1.5°C above historic levels, but progress since last year’s summit in Glasgow has slowed. Recent analysis has shown we are on course for between 2.4°C and 2.8°C1 because new plans by countries have been too weak and not reflected the pace and scale required.
We remain positive at Simply Sustainable and will continue to work in collaboration with all our business clients who strive for long lasting sustainability/ESG impact. Despite the global conference receiving criticism from a wide array of key stakeholders who believe that very little has been achieved, some important steps have been made which I believe will be instrumental in achieving 1.5°C.
Loss and Damage
As a strong advocate of the Just Transition, it was reassuring that delegates from nearly 200 counties at the climate summit have agreed to set up a “loss and damage” fund, meant to help vulnerable countries cope with climate disasters. The complete COP27 agreement, of which the fund is a part, also reaffirmed the goal of keeping global warming to 1.5°C above pre-industrial levels – a key demand from a number of countries.
Negotiators agreed to set up a structure by the next summit in 2023, with contributors and recipients still to be determined by a committee of 24 countries. It does not ascribe liability to any payments. African and other developing world leaders were jubilant, nonetheless, about the plans to establish the fund, which Pakistan’s climate minister Sherry Rehman described as “an investment in climate justice”.2 However, we are looking forward to understanding more about how this fund will work in detail.
While the agreement represents a breakthrough in what has been a contentious negotiation process, it did not strengthen language around cutting planet-warming greenhouse gas emissions. The final text also made no mention of phasing out fossil-fuels, including oil and gas.
European Sustainability Reporting Mandate – Corporate Sustainability Reporting Directive (CSRD)
One of the most pleasing outcomes of COP27 was the ratification of CSRD.
The CSRD – is an EU Directive that amends the scope and the reporting requirements of the Non-Financial Reporting Directive. While the NFRD only provided guidelines for ESG reporting, the CSRD will introduce mandatory reporting standards. With its new requirements, the CSRD aims to ensure that businesses report reliable and comparable sustainability information so that investors can re-orient investments towards more sustainable technologies and industries
With the CSRD, there is no ambiguity. Sustainability information, which includes topics within ESG and is defined across 13 standards and must be front and centre of the annual report. It will need to be treated with the same degree of rigour and scrutiny as financial information.
In a nutshell, it will have a significant impact for businesses, either based in the EU or that have subsidiaries within the region as they will have to provide robust ESG and sustainability data to ensure entry to the market.
Some key considerations for businesses are as follows:
- If you operate in Europe, you will need to collate and submit key ESG data
- Sustainability information will sit alongside financial information
- The amount of data that needs to be collected will greatly increase. In addition, it is likely that teams will need also to expand to support the full reporting process
- Sustainability information will now have to be audited, meaning that data will need to be evidenced in a clear and transparent manner.
The mandate aims to increase trust and credibility in ESG reporting and bring greater transparency to any sustainability claim that is publicly expressed by a company. At Simply Sustainable we have been working alongside business on reporting for many years, please get in touch if you would like to discuss the impacts of CSRD on your organisation.
Transition Plan Taskforce (TPT) Gold Standard
Whilst not anything new for those of us that work in sustainability (in fact, this is business as usual for a lot of the clients we work with) the publication of guidance and recommendations for companies and financial institutions in the UK on how to develop credible and robust climate transition plans is a positive step closer towards a net-zero economy.
In essence, a transition plan3 should translate ambitious strategic climate objectives into concrete steps to be taken in the short- and medium-term, setting out how a company or financial institution plans to contribute to and prepare for a rapid global transition towards a low-carbon/net zero economy.
The TPT recommends that any emissions reduction target should consider Scope 1, 2, and 3 emissions and should prioritise decarbonisation through direct abatement over purchasing carbon credits. The TPTs’ recommendations are based on three key principles (ambition, action and accountability) and five key pillars:
- Foundation – which includes objectives and priorities
- Implementation Strategy – which includes business planning and operations, policies
- Engagement Strategy – which includes engagement with the value chain, as well as with industry and government
- Metrics & Targets – see carbon offsets commentary below
- Governance – which includes board oversight and reporting, skills, competencies and training, and incentives and remuneration
The TPT recommends4 that a good practice transition plan should cover:
- high-level ambitions to mitigate, manage and respond to the changing climate and to leverage opportunities of the transition to a climate resilient economy. This includes a net zero commitment
- short, medium and long-term actions the organisation plans to take to achieve its strategic ambition, alongside details on how those steps will be financed
- governance and accountability mechanisms that support delivery of the plan and robust periodic reporting; and
- measures to address material risks and leverage opportunities
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