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How to manage social and environmental risk for oil, gas and mining 2013

03/04/2013 - 04/04/2013, London

Embed CSR into your core business to secure a sustainable social & environmental license to operate and achieve shared value

Climate summit: Hot, dry and desperate in Doha

As representatives from almost 200 nations meet at the Doha climate summit, Jonathan Shopley argues that, despite the apparent doom and gloom, smart businesses can gain from being climate leaders

Can Doha deliver where Durban didn't?

When the Qatari sands have run out following the Doha meeting, we should not expect much in the way of meaningful gains for the climate nor for business. The actions of regulators and policy-makers to reduce global greenhouse gas emissions are fragmented, confused, ineffective, and weighed down by past mistakes.

The chances of governments taking effective action are bleak, so business needs to continue to lead the way – and champion the message that the path to a low carbon economy lies in strategic market investment, not simply in reducing emissions within national boundaries.

We should not, however, lose heart. Progress is being made, and important lessons are being learnt and applied. Yet, everything points to the fact that until 2020 at earliest, business will be picking up the slack in the system. Do that job well, though, and business has the opportunity to influence the structure and efficacy of any global agreement that may replace the Kyoto protocol.

Poor protocol progress

The agreement in Kyoto was designed to cut greenhouse gas emissions of developed countries to 5% less than 1990 levels by the end of 2012, and to spur investment in low carbon development in developing economies. But as Doha approaches the gathering nations are nowhere near these desired outcomes.

Having set out to resolve the impending end of the Kyoto protocol in Durban in December 2011, they instead kicked the can down the road to 2020, with lots of work to do to before 2015 in order to define a successor agreement. Some of that work starts with the 190+ country negotiators in Doha, trying to finalise the extension of the protocol, agree a work-plan to develop its successor agreement and secure funding for the Green Climate Fund.

These issues will need to be negotiated under circumstances very different to those when the United Nations Framework Convention on Climate Change first began its work in 1994. Then it was the world of “common but differentiated responsibilities” as wealthy developed economies sought to engage the developing economies in a global solution. Market based capitalism was winning out.

Now, the world’s most developed economies, specifically the US and EU, are battling the impacts of recession, high rates of unemployment, and colossal fiscal deficits. Developing economies including China, India, Brazil, Nigeria and South Africa have their problems, but rapid growth in both population and consumption is not one of them. In contrast to the 1990s, financial crises have made many nations deeply suspicious of markets, let alone market-based solutions to climate change.

There will be reason for optimism if Doha can maintain momentum towards a global deal. Yet with so many past issues to fix, changing circumstances to adjust to and conflicting agendas to accommodate, we should not expect COP18 to deliver much for business or the climate.

Private sector responsibilities

The legacy from Doha already looks weak, but business should not mis-read the current situation as they may have the key to driving government action.

Any modest GHG reductions reported by nations are more the result of economic slow-down, not significant progress on decarbonising our economy. However, the drivers for action on climate risks are strengthening as physical evidence is changing the perceptions of a wider proportion of civic society. That will bolster political will to act … eventually.

The fact that the Kyoto protocol and the EU emissions trading scheme are suffering from design faults hasn’t stopped California and Quebec, and countries including Brazil, China, India, Korea, Mexico, and Vietnam, from embracing market-based approaches. They are doing a better job too, as they can design their systems anew using lessons learned from the pioneers.

The fact that the UN will not have a replacement agreement in place before 2020 at the earliest doesn’t mean that climate change isn’t an issue of concern to business right now. Business wants and needs governments to remove policy uncertainty, address past mistakes, and embrace market based approaches if the full power of the private sector is to be unleashed.

Markets provide a means for business to fund projects that deliver low carbon development, by replacing fossil fuels with renewables and restocking critical carbon sinks. Business needs to remind policy-makers that internal reductions and energy efficiency are important, but alone are not going to have the required level of impact.

Addressing climate risk

The private sector must stay the course despite confusion and disappointment around the progress being made on international policy and agreements and what may look like the “collapse” of carbon markets. Companies, many of which already see GHG emissions as a strategic issue and therefore act ahead of compliance, must continue to step in where governments have failed to act.

Leaving governments to muddle on is dangerous and will leave business exposed to climate risks, unfair competition, and rising costs of abatement. That means setting and reaching targets that future proof the business. Climate change may slip on the political agenda but it isn’t going away and taking an early position makes business sense.

So, if that is how businesses should view the Doha talks, how should they act through these uncertain times? Certainly, this is not a time to wait and do nothing.

The leading companies have raised their ambitions to reassure their customers and investors that they can be part of the solution not the problem. They need to continue to engage staff on issues that are increasingly important to them in their daily lives; to de-risk supply chains; and to future proof their business strategies to a future when climate policies will have bite.

I applaud and commend their proactivity, because without it, we really could get bogged down in the oil-rich desert sands of Qatar.

Jonathan Shopley is managing director of The CarbonNeutral Company.

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