Reflections on COP28 did it matter to business?

It is fair to say that the COP28 summit in Dubai produced mixed outcomes in terms of limiting the advance of global warming and moving the world closer to net zero. A Financial Times editorial headline probably had it about right when it described the outcome as “better than feared but less than needed”.

The recognition in the final summit communique – that there was a need for the global energy system to transition away from fossil fuels – was an important symbolic step. Some may say that this is a statement of the obvious, and should not have required 30 years of COPs to articulate. But let’s not forget that a number of COPs, such as those held in Copenhagen and Rome, failed to deliver international consensus and ended in failure. So, the fact that the negotiators managed to cross the finish line this time with some tangible agreements should be acknowledged.

From the perspective of both the wider public and climate activists, it is easy to be cynical about COP. Very little that is agreed is binding. Even though there was agreement to transition away from fossil fuels and accelerate action during the next decade, there was no firm timeline in terms of how that will happen.

From a business perspective, very little of what is agreed at COP will have an immediate impact on companies. Of more direct influence are the net zero policies implemented by national governments, the changing attitudes of investors, consumers and employees, and the emerging frameworks of corporate reporting and corporate governance that have gathered pace this year.

Most recently, it is measures like the Inflation Reduction Act in the US, and the adoption of EU and IFSB corporate reporting standards that are really turning the dial for business.

However, COP still exerts an enormous attraction for business. For one thing, look at how many prominent businesspeople took the time to either attend the conference or be involved in its organisation. This year, even the CEO of ExxonMobil was there.

Some might say that this is reflective of corporate greenwashing efforts. Others may suspect that businesspeople are involved in shadowy lobbying activities aimed at blocking meaningful progress. The fact that several thousand delegates at the conference were affiliated with the fossil fuel industry gave succour to these concerns.

However, it is legitimate that the business community is a significant part of the COP debate. Ultimately, business is a key part of the solution to climate change. Net zero will not be achieved without its active involvement.

A more valid criticism is that the bosses of major oil companies should not be seen as representatives of business as a whole. They are certainly not representative of the IoD’s membership, which covers all sectors of the economy and is centred around medium-sized enterprises.

Hence, we would argue that the organisers of COP should give greater thought to how they can achieve more of a balanced business representation at the summit. The voice of SMEs needs to be heard as loudly as that of big business. Regrettably, COP is in danger of turning into the green equivalent of Davos, with access only available to businesses with the deepest pockets or prominent brands.

Aside from business leaders wanting to fly their flags, COP28 is important to business in a more intangible way.

When it comes to addressing the issue of decarbonisation, the most important business requirement is to be able to plan for the future. Business needs to have confidence that, if it makes the major investments and operational changes that are required to decarbonise, there is a reasonable chance that commercial returns will be generated. A clear expectation of a decarbonised future needs to be established.

COP helps that process by setting the tone from the top. It signals to business decision-makers that there are basic assumptions around which there is an overwhelming global consensus. It builds a global narrative around the expectation that, sooner or later fossil fuels will no longer play a significant part in the global energy mix and that heavily carbon-dependent business models will no longer be viable. Ultimately, this narrative will affect business behaviour.

Of course, it is not only COP that sets the tone from the top. National governments are also part of this process, and they can easily send mixed messages which are unhelpful to business planning.

A current example is the UK government. As the UK’s Climate Change Committee has recognised, the UK took some positive steps towards its net zero goals in 2023 – like the government’s recent deal with Tata to electrify its steel processes and the Zero Emission Vehicle mandate published in September. But the decision to push back plans to decarbonise vehicles and buildings, and the granting of new fossil fuel exploration licences, creates uncertainty around the direction of travel.

A positive aspect of COP28 and the last few summits has been the announcement of numerous business and voluntary initiatives at fringe events. Many of these are incrementally valuable to business, and they demonstrate the strength of business motivation in addressing climate change.

One example (amongst many) at COP28 was the launch of the Project Perseus Demonstrator, which is an open-source approach to automating energy data capture from smart meters. More generally, Project Perseus (which is coordinated by Bankers for Net Zero and IceBreaker One and supported by the IoD) is addressing an aspect of business sustainability that is important to IoD members. Namely, how do we roll out sustainability reporting in an effective but proportionate way beyond the largest companies?

According to IoD survey data, only 22% of IoD members’ organisations measure their carbon footprint. And yet SMEs generate around half of greenhouse gas emissions from businesses. Hence, it is essential that we develop at speed a workable approach to carbon accounting for SMEs.

Another interesting COP development, which arose in the context of the discussions around climate finance, was a recognition that tax measures could play an important role in the net zero journey. The IoD has argued for some time that tax incentives could provide SMEs with clear business case to invest in green technology and energy efficiency. For example, companies achieving net zero could be allowed to benefit from a lower rate of corporation tax. According to our member surveys this could make a real difference to the practical viability of SME decarbonisation measures.

Where does all of this leave business? On the one hand, most realistic scientific assessments now recognise that the COP process is not keeping up with the accelerating risks of climate change. But despite this, COP28 did send a clear signal to business that most of the world is profoundly committed to moving forward with decarbonisation and the transition away from fossil fuels. Even the most intransigent fossil fuel nations have now recognised that this is the case.

Hence, business can have more confidence in planning for a carbon-free future, and this will increasingly exert an impact on business decision-making. This may not be enough for some, but ultimately COP28 did matter for business.

About the author

image of Dr Roger Barker

Dr. Roger Barker

Director of Policy and Corporate Governance, IoD

Dr. Roger Barker is Director of Policy and Governance at the Institute of Directors, and a member of the Management Board. Dr. Barker is the author of numerous books and articles on corporate governance and board effectiveness, including the recent volume: ‘The Law and Governance of Decentralised Business Models: Between Hierarchies and Markets’ (Routledge, 2020). He is a former member of the European Economic and Social Committee and the founder of a successful corporate governance advisory company. A former investment banker, Dr. Barker spent almost 15 years in a variety of equity research and senior management roles at UBS and Bank Vontobel, both in the UK and Switzerland. He has a doctorate from Oxford University and taught politics at Merton College, Oxford (2005-2008).

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