COP28: Five key takeaways for businesses

By Felix Hill, ClimatePartner UK

The 28th Conference of the Parties to the UNFCCC, hosted in 2023 by the UAE, caused controversy before it even began. Environmental groups voiced their concern at the decision to hold the annual summit in a leading petrostate, as well as at the appointment of Adnoc CEO Sultan Al Jaber as President of the proceedings.

With that context in mind, the “UAE Consensus”, an international agreement to transition away from fossil fuels, was a significant milestone. Challenges though remain in both raising the level of climate action ambition and underpinning pledges with tangible policies.

Below are some of the most important outcomes from COP28, what they mean for businesses, and some tangible steps companies can take to demonstrate climate leadership.

1. COP28 marked the beginning of the end of fossil fuels

With all nations agreeing to transition away from fossil fuels in energy systems to achieve net zero by 2050, the global shift towards renewables was further reinforced by the pledge to treble zero-carbon energy capacity by 2030. The International Energy Agency recently stated that this pledge, combined with doubling energy efficiency and slashing methane emissions by 2030, would deliver 80% of the emission cuts required to meet the Paris Agreement goal of limiting global warming to 1.5 °C above pre-industrial levels.

Businesses have a key role to play here. By purchasing renewable energy, companies directly support in scaling the pivotal emissions reductions necessary on a global level, while simultaneously neutralising their scope 2 emissions. This is also an area in which businesses could be doing more, as so far only 10% of CDP-disclosing companies have set renewable energy consumption targets.

2. The voluntary carbon market will play a central role in funding mitigation solutions

After a turbulent year, the voluntary carbon market received significant political backing in the form a high-level roundtable featuring U.S. Special Presidential Envoy for Climate John Kerry and ministers from Singapore, the UK, Indonesia, and Ghana. There was also a new integrity framework proposed by several EU members, though questions remain over how it will work alongside similar recent mechanisms from the ICVCM and the VCMI.

There remain unresolved issues with Article 6 of the Paris Agreement, relating to how the voluntary and compliance markets interact. These issues will continue unaddressed until COP29, but businesses can directly fund and scale these pivotal climate solutions now. Whether this entails supporting jurisdictional-level, large-scale forest protection via the REDD+ mechanism, or helping to scale pivotal removal technologies such as biochar or enhanced rock weathering, companies should look to contribute to these mitigation projects with serious financial commitments while integrity and market governance improve.

3. Methane emissions must be tackled immediately

As a greenhouse gas with a global warming potential 28 times higher than carbon dioxide, methane emissions need immediate attention. The Global Methane Pledge signed at COP26 to cut emissions by 30% by 2030 was a crucial step in keeping the 1.5 °C goal alive. The delivery of this pledge alone has the potential to reduce warming by at least 0.2 °C by 2050, but so far the necessary detail and underpinning policies to achieve this goal are lacking. In particular, China is still notably absent from any targets and deadlines for emissions cuts.

Fortunately, the private sector made some progress on methane at COP28. Fifty major oil and gas companies committed to eliminating methane emissions by 2050, while six of the largest global dairy companies have signed a pact with Environmental Defence Fund to implement a methane action plan.

Companies from relevant sectors must build upon this, prioritising the elimination of methane in their value chains. Focusing on agricultural raw materials is key. If avoidance is not possible, it is time to invest aggressively in reduction initiatives such as alternative feedstocks to reduce emissions, in addition to funding beyond value chain methane mitigation in the form of bio-based projects.

4. Climate finance for adaptation and “loss and damage” fell short

COP28 began with a landmark agreement to operationalise the “loss and damage” fund, facilitating funding from the wealthier parts of the world towards less-developed countries to mitigate climate change and adapt to already-felt impacts. In spite of overcoming a negotiations impasse regarding the fund’s proposed hosting at the World Bank, funding remains insufficient. Mitigation and adaption are inextricably linked; progress on mitigation leads to less funding required for adaptation. COP28 has once again demonstrated that nations are yet to fully acknowledge the interdependence of the two.

While climate change adaptation and financing may seem beyond the realm of businesses, companies can play a crucial role. For those with global supply chains in vulnerable states, pivotal steps can be taken to build resilience. This means funding the transition to resilient crops and regenerative agriculture to protect yields, reduce emissions, and safeguard biodiversity. Companies should also extend their impact by financing activities beyond the value chain that not only mitigate climate change, but also provide significant social and environmental co-benefits. One such climate project restores mangroves in Pakistan, providing secure, well-paid employment while also protecting communities from sea-level rise.

5. Food systems received high-level acknowledgement

Food systems are estimated to be responsible for 21% to 37% of global greenhouse gas emissions but have long been neglected in global environmental policy. COP28 finally delivered recognition of the importance of food, agriculture, and water, with the Emirates Declaration committing 150 nations to integrate food systems into climate change mitigation and adaptation plans. However, progress was still scant on bilateral policy agreements to begin the necessary transformation of food systems.

There is technical guidance available to help companies decarbonise food systems and transition to nature-positive business models. The SBTI’s FLAG (forest, land, and agriculture) guidance presents businesses with a net zero framework to decarbonise food system emissions on a trajectory compatible with the 1.5 °C goal, while also considering the huge potential to expand carbon sinks. Relating to biodiversity, the framework from the Taskforce for Nature-related Financial Disclosures assists companies to assess their nature dependencies and to work towards achieving the goals of the 2022 Kunming-Montreal framework to restore 30% of degraded ecosystems by 2030.

Slowly but surely

No COP ever delivers enough. But the fact that COP28, hosted by a petrostate amid global economic turbulence, delivered the first explicit mention of fossil fuels in a final agreement shows that progress is being made.

The world will reach net zero, the only question is how quickly. There is an opportunity for companies to contribute to this transition, to speed up the process, and to do their part in fighting climate change.

Stay up to date in corporate climate action by subscribing to our monthly newsletter.