This week’s kickoff of the long-anticipated COP26, the United Nations’ climate summit which brings together leaders from around the world to address climate change, has the buzz amongst the ESG world humming at maximum volume. As has been noted time and again, this global summit is a critical touchpoint for advancing the goals of the Paris Climate Agreement. While there has been a lot of emphasis, and rightfully so, placed on corporate and government commitments and pledges to achieve certain decarbonization goals, there is one piece of the discussion that is not featured as heavily in mainstream coverage around COP26 — the crucial importance of alliances, partnerships, and alignment in reaching those goals.
Whether alliances between companies, global heads of state, or public private partnerships, coordination of all kinds, at all levels, cannot be overlooked. No one country, or company, can solve the global challenges posed by a warming climate alone, so finding areas to strategically partner to unleash both public and private sector ingenuity will be crucial to meet the commitments made during this climate summit.
Why is this so important?
In our recently released Net Zero Readiness Index 2021, which compares the progress of 32 countries in their preparedness and ability to achieve Net Zero emissions by 2050, we found a clear weak point in nations’ decarbonization technology delivery capability. 80% of countries in the report currently lack proper delivery capabilities. This includes renewable energy development and deployment, investment in public transportation and electric vehicle charging infrastructure, industry-specific technology markets, and efficient building retrofitting. But one thing is clear from the data; in countries that rank the highest in delivery capability — Norway, Denmark, and the United Kingdom — there is strong alignment and partnership amongst public and private sectors to invest in the decarbonization technology of tomorrow.
This alignment is critical to help channel private sector finance into the most impactful decarbonization technologies and sectors, provide clear market signals for future returns on investments, and coordinate regulatory and policy changes to unleash private sector innovation. Notably, here in the U.S., we ranked 14th in overall Net-Zero readiness. Although the nation has one of the largest clean tech markets in the world, the challenge of aligning federal, state, and private sector efforts around Net Zero strategies has hindered the nation’s decarbonization efforts.
At KPMG, we are actively working to do our part to foster the collaboration needed to solve these complex issues. That is why as part of our 3-year, $1.5 billion investment to accelerate our ESG solutions offerings, we are building on collaboration with external organizations including UNESCO, Enactus, and the IFRS Foundation, which is driving consolidated efforts to create a global reporting baseline, and fostering alliances with a range of companies to develop the tools and solutions that will help provide critical insights necessary to help companies and governments further decarbonize. The issues facing us are global, and we are committed to expanding this work, not only in developed countries, but also in developing and emerging markets.
Finally, a big piece of the collaboration puzzle centers around aligning on clear standards for climate-related financial disclosures and other material ESG reporting. Corporate transparency on emissions and other ESG metrics has rapidly increased over the past few years, but establishing a clear set of standards and metrics across industries is a critical piece of ensuring the actionable data availability necessary to make greener investment and lending decisions. Fostering reporting standards on topics material to specific industries and their core stakeholders to effectively report on what is driving management decisions may vary by business, but will hopefully avoid more disclosure without action, or greenwashing. Ensuring alignment between companies and government officials will be a critical piece in fostering global accountability and helping consumers, investors, and other core stakeholders make informed decisions.
What to look for
We know corporate leaders understand this challenge and want to work to address it. 78% of CEOs surveyed in our CEO Outlook believe world leaders at COP26 will need to inject urgency to the climate change agenda and 74% believe corporations have the resources to help government find the solutions to pressing global challenges such as climate change. And we have seen speeches from many heads of state sharing this commitment and desire to act. Now is the time to turn rhetoric into reality and leverage this moment as the beginning of increased coordination and activation.
For more insights on the role the private sector has to play surrounding COP26 and where we can go moving forward, check out KPMG’s dedicated website here.