Annual climate summits are a flurry of new corporate commitments, and Glasgow was no exception. However, what set this year apart was the level of skepticism from participants, activists and even companies about whether these pledges would result in sufficient and measurable action. The world is expected to reach a 1.5 degrees C rise by the early 2030s, according to the latest Intergovernmental Panel on Climate Change report. Whether we limit warming to this level and prevent the most severe climate impacts depends on actions taken this decade.

Business can be a force for good, innovating and scaling solutions to climate change. Or it can perpetuate outdated systems that profit from practices that threaten our collective future. In a speech given at the climate summit, Ugandan youth activist Vanessa Nakate urged corporate leaders to, “Show us your trustworthiness. Show us your honesty. I am here to say: Prove us wrong.”

So, what did the private sector promise at this year’s conference? These are three key topics that stood out for us at COP26.

1. Net-zero Transition

In recent years, the concept of net-zero has become a popular way for businesses to demonstrate their commitment to climate action. Over 30% of the 2,000 largest publicly traded companies in the world (by revenue) have promised to achieve net-zero by mid-century. However, not all net-zero pledges are equal. Lack of standardization has enabled the concept of “net-zero” to be interpreted in varying ways, including:

  • Sources of emissions included in the boundary of the target,
  • Level of emissions reduction and speed at which emissions are reduced, and
  • Strategies used to meet the targets.

Launched in October this year, the Science Based Targets initiative’s (SBTi) new standard aims to tackle this issue by providing a science-based definition of net-zero; World Resources Institute is one of the founding partner organizations of SBTi.

One net-zero announcement that made headlines at COP26 came from the Glasgow Financial Alliance for Net Zero (GFANZ). The group is comprised of 450 firms across 45 countries managing 40% of global financial assets — a 25-fold growth in signatories since launching in April 2021. The terms of the agreement require that members commit to using science-based guidelines to reach net-zero emissions by 2050, covering operations, investing, and lending activities; this includes 2030 interim targets, and a commitment to transparent, annual reporting and accounting.

However, there could be a gap between aspiration and execution. In a Bloomberg Green interview, our colleague and WRI’s Director of Private Sector Climate Mitigation, Cynthia Cummis, noted GFANZ commitments are voluntary and will be hard to police.

Additional net-zero headlines at COP26 included:

  • UN Global Compact and the SBTi announced 1,045 companies representing over $23 trillion in market capitalization (larger than U.S. GDP) have joined the Business Ambition 1.5 degrees C campaign. Half of these companies have committed to reaching net-zero using SBTi’s framework by 2050.
  • The Net Zero Asset Managers initiative announced 92 new signatories for a total of 220 investors managing $57 trillion in assets.
  • More than 35 companies signed a legally non-binding declaration to accelerate the transition to 100% zero-emission cars and vans.

For society as a whole to reach net-zero, most companies will need to decarbonize by a minimum of 90-95% across their value chains, according to SBTi. This level of reduction highlights the importance of using a common framework grounded in science to guide the corporate net-zero transition. Otherwise, the private sector risks not sufficiently meeting their contribution to these societal targets and failing to earn the trust so passionately called for by Vanessa Nakate.

2. Commodity-Driven Deforestation

Despite global lockdowns in 2020, forest loss in the tropics rose by 12% compared to 2019 and continues on an upward trend. Of the 12.2 million hectares lost in 2020, an area the size of the Netherlands (4.2 million hectares) was cleared in primary tropical rainforest, known for hosting immense biodiversity and crucial global carbon sinks. Such clearing is often in breach of the rights of indigenous and local communities who have stewarded their forests over countless generations. Those living in voluntary isolation are some of the most vulnerable since deforestation can cause displacement, forced contact with outsiders, and exposure to illnesses for which they have little or no immunity among other issues.

Recent WRI analysis finds that ending forest loss by 2030, within the initial 141 signatory countries of the Glasgow Declaration, would prevent 32.8 million hectares of deforestation, an area almost the size of Malaysia. It would also offer 18.9 gigatons of carbon dioxide equivalent (GtCO2e) in avoided emissions — equal to around a quarter of global greenhouse gas emissions from transportation from 2009-2018.

Once again, much of this success will depend on private sector action. Agricultural commodities (cattle, oil palm, soy, cocoa, rubber, coffee and plantation wood fiber) account for 40% of global deforestation and were the focus of several corporate announcements at COP26.

On November 6, the Consumer Goods Forum, along with 20 of the world's leading retailers and manufacturers, launched the Forest Positive Coalition of Action to “drive and accelerate efforts to remove deforestation from not only [members’] own commodity supply chains but across their suppliers’ entire supply base.”

Other deforestation and forest-related corporate announcements included:

  • Over 30 financial institutions managing over $8.7 trillion in assets and belonging to the United Nations Framework Convention on Climate Change Race to Zero campaign, pledged to “use best efforts” to eliminate commodity-driven deforestation risks in their investment and lending portfolios by 2025. Companies must meet four minimum criteria to participate.
  • 10 global companies with a combined annual revenue of $500 billion published a statement of purpose, promising to lay out “a shared roadmap for enhanced supply chain action” consistent with a 1.5 degrees C pathway by COP27.
  • A total of $19.2 billion was pledged to halt and restore forest loss — $7.2 billion of this funding came from private investment.

Based on how most of these agreements are written, it will be difficult to enforce accountability. To make good on their promises, the private sector should prioritize the following, according to WRI experts:

  1. Develop clear implementation plans, specify measurable performance indicators, and set specific milestones of achievement on the path to 2030 goals.
  2. Openly and regularly monitor, report and verify progress.
  3. Act transparently — the boundaries and owners of land use permits or licenses should not be secret and companies should trace and disclose the origins of the commodities they purchase.

The resources, research and expertise that companies need to meet their zero-deforestation commitments are readily available, such as Global Forest Watch Pro, an online management application to manage and monitor deforestation risk across supply chains. As companies assess their pledges and determine next steps, “best efforts” to stop forest loss won’t suffice.

3. Coal and Clean Power

The production and use of energy is currently the largest source of greenhouse gas emissions, responsible for 73% of all global emissions. At COP26, 46 countries signed the Global Coal to Clean Power Transition statement, promising to “accelerate a transition away from unabated coal power generation” and “cease issuance of new permits for new unabated coal-fired power generation projects.”

The private sector was represented in the agreement by 20 corporate signatories. Although the world’s top coal using countries were not amongst the signatories and the number of corporate signatories was lower than we would like to have seen, COP26 President Alok Sharma stated that “the end of coal is in sight” on the same day the agreement was announced. For those words to become a reality, the world’s top emitters and the private sector must do more and now to advance the clean energy transition.

Additional pledges included:

  • Energy companies engaged in the UN Race to Zero committed to reaching 750 gigawatts of installed renewable energy capacity by 2030.
  • 61 investors managing $10 trillion in assets committed to phasing out “most” thermal coal assets by 2030 for industrialized countries and globally by 2040.
  • The First Movers Coalition, a public-private partnership comprised of more than 30 companies with a market cap of over $8 trillion, launched to make emerging clean energy technologies accessible and scalable.

To avoid the most severe impacts of climate change, renewable energy must generate between 55% and 90% of global energy supply — a significant increase from its current rate of 27%. The good news is that much of the technology to reach a clean energy future is both cost-effective and readily available in most parts of the world. Still, $131 trillion in investment will be needed before 2050 to adequately scale.

Investment (by sector) needed to unlock the Energy Transition

This gap will need to be largely financed by the private sector since it’s unlikely that this amount of money will, or can be raised, through public funds. But for companies to do this at the rate required, governments must remove the barriers to and incentivize investment in clean energy through strategic policies. This is the premise of the Clean Energy Investment Accelerator, which brings together the public and private sectors to scale clean energy solutions in emerging markets — including Mexico, Vietnam the Philippines and Indonesia.

What’s Next

Many more corporate commitments were made at COP26 around aviation, shipping, food, electric vehicles and other issue areas. Still, across the board, many of the details on the road to implementation remain unclear.

The good news is that a variety of science-based and data-driven tools exist that can help companies take the first steps, track their results, and make a good start on their climate promises. There are reasons for hope. But companies will have to leave behind their traditional ways of doing business, engage all their stakeholders to move in the same direction, and operate using sustainable & equitable business models to adequately address climate change. This means rising to the challenge set by Vanessa Nakate and “prove us wrong.”

EDITOR’S NOTE: Mention of announcements in this article doesn’t imply specific endorsement.