The message from COP27 in Egypt is loud and clear. To change course, avoid a climate disaster and ensure a just transition, governments, financial institutions and businesses must increase collaboration at all levels. Areas of collaboration and the role of technology were discussed in detail at Bloomberg Green COP27, an event for organizations to meet outside the negotiating rooms and delve into pragmatic strategies for cross-sector climate action.
Involving the private sector
Is it still possible to keep warming at 1.5 degrees Celsius? was a key question posed by Bloomberg’s Editor-in-Chief John Micklethwait, to John Kerry, Special Presidential Envoy for Climate from the US State Department. “I believe it is,” replied Kerry, “but the only way to do it, is to massively bring the private sector to the table.”
One way to bring the private sector on board is through carbon credits that allow companies to emit greenhouse gases up to a certain limit. Through a system of trading credits, private companies are doubly incentivized to reduce greenhouse emissions. First, they must spend money on extra credits if their emissions exceed the cap. Second, they can make money by reducing their emissions and selling their excess allowances.
This topic took centerstage at COP27. Whereas carbon offsetting involves projects that are not related to a company’s products - such as planting trees - carbon insetting involves projects that are related to production. Carbon insets can actually help address scope 3 emissions because they ensure that businesses take direct responsibility for the emissions in their own supply chain.
The other way to involve the private sector is to help them meet regulatory compliance by reporting on emissions. Kerry praised companies that are taking the lead to reduce scope 3 emissions, the most difficult to achieve. “People who are driving this are good citizens. There is no requirement to get to Net Zero by 2050. There is a movement to get there, and business leaders have adopted it because ESG is in the boardrooms of companies all around the world,” he said.
Compliance also helps companies address the topic of ‘greenwashing’ which was raised again and again at the event. Kerry said greenwashing can be avoided if companies use technology to track and monitor their emissions. Tracking and monitoring data provides companies with proof points for progress. “If we want to achieve 1.5, we need to use the money from investments to reduce emissions, we need de-risking mechanisms to ensure a bankable deal, and then we can start deploying the money for change. Every part of that is measurable,” said Kerry.
Deploying data
Monitoring and measuring require technology. With the vast majority of business transactions around the world touching some SAP system, there is no better company to help others on their data-centric sustainability journey. Sebastian Steinhaeuser, Chief Strategy Officer, SAP, was on hand to explain how software enables companies and governments to capture and monitor data to demonstrate compliance and use it to make better decisions.
“There are three main challenges around climate data,” said Steinhaeuser.
The first is to record it accurately. Currently a lot of data is collected manually on spreadsheets. Automating and standardizing data collection makes it more reliable. Having the data in the system makes it easier to share across the entire supply chain. The second big challenge is regulatory.
“A lot of companies are super nervous about regulatory compliance,” said Steinhaeuser. “Automated, standardized monitoring and reporting addresses the issue. And the last challenge is to act faster.”
Steinhaeuser urged every company to develop a strategy with clear ambitions and targets to guide their climate journey. The fact that most companies are already running on SAP makes it easier to share data across the entire value chain, he said.
SAP’s Ariba business network allows companies to share procurement and logistics data. Carbon data is still in an early stage. “Most companies may already have data on their carbon emissions, but they don’t have comprehensive product footprint data,” said Steinhaeuser, citing the automotive industry as an example. “Automobiles consist of thousands of parts, requiring a massive supply chain. We are developing standardized ways suppliers can share data, helping the entire industry to track and trace their emissions.”
Changing the marketplace
When asked by Mickelthwaite if politics would disrupt the path to net zero in the US, John Kerry replied that he believes in the marketplace and the market is changing. “Ford Motor Company and General Motors are spending billions of dollars to retool their plants and their business plan to have 50% electric vehicles by 2030 and 100% by 2035,” he said. “Capital markets are more powerful than politics, but the precautionary principle of governance is necessary to create a legitimate course of action. We have the technologies today to measure and mange this transition.”
General Motors (GM), one of the game-changers cited by Kerry, was another co-sponsor of Bloomberg Green COP27. During their session, the team from GM discussed the partnerships with investors and relationships with governments that are required to make changes for a better future.
“We have made our commitments and were acting on them,” said Shilpan Amin, Senior Vice President and President of GM International. “We’ve invested $750 million and are working with the public sector to expand charging infrastructure across many territories. We’re driving the coalition to scale up the suppliers and makers. The technology is there, the regulatory environment is there, and the infrastructure for change is there.”
Shilpan’s concluding statement was that we need to invest in the future now and not wait for it to be upon us. Achieving 1.5 is possible with clear strategies, regulation, cross-sector partnerships, and the use of data to keep all parties on track.
Watch the Bloomberg Green sessions below:
Event Highlights: Bloomberg Green Summit | Day 1 | Bloomberg Live
Bloomberg Green at COP27 | Unlocking the Power of a Data-Centric Climate Strategy - YouTube with Sebastian Steinhaeuser
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