What does the COP28 deal mean for my business?

What does the COP28 deal mean for my business? The summit has sparked debate, but the deal has been hailed as the “beginning of the end for fossil fuels”.

It was a hugely divisive few weeks, dominated by climate urgency and disagreements over the influence of the fossil fuel industry. But here we are: a deal which specifically mentions a shift away from all fossil fuels for the first time. 

Now comes the hard part, and at the end of that process is you and your company. 

So, how does the COP28 deal transition to the corporate governance level? What changes might the deal bring about that will affect you and your business?

Let’s dive in.

• It calls on countries to “transition away” from all fossil fuels. 
• It recognises that the world urgently needs to reduce emissions in order to keep temperature rises below 1.5 degrees relative to pre-industrial levels. 
• The agreement was backed by nearly 200 countries at COP28, just days after many of them threatened to walk out from the talks due to disagreements over wording. 
• Critics and climate scientists have responded, saying the deal is too vague and sets goals that are too small. 
• Island nations (with most of their land at or near sea level) have been most vocal in criticism.

If you’re a director or executive wondering how this might impact your company, check out these points below. They’re especially relevant if you have a heavy role in ESG or regulatory compliance.

Despite the heated language and landmark deal, we are only at the beginning. 

The real issue is likely to be how every country’s representatives will arrive back to their national governments, each with their own interpretation of the same text… and don’t forget; the text is already receiving criticism for its vague nature and omissions. 

So, when you’re asking what this means for your business, the answer lies in how the deal will go from COP representatives, to governing parties, to lawmakers, to regulators, and then to your office. It’s a long trail – awash with opportunities to diverge.

It depends on a combination of your country’s political culture and appetite for change. 

Contrast the EU and the US, for example. Most EU countries are broadly behind in efforts to tackle climate change. Even opposing parties in many states agree on the need to “transition away” from fossil fuels. 

In the US, things are far more polarised. Getting an international climate agreement through a bitterly divided Congress is a fight that will take on a life of its own. On the other side of that fight, regulations for companies might look very different than elsewhere. 

Your job is to keep an eye on these proceedings and ensure that this keeps informing your corporate strategy.

The key for corporate leaders is to watch how your country transposes the COP28 deal into national policy. 

The focus will be on things like renewable energy (which the deal says should be tripled in capacity by 2030) and winding down the production and use of fossil fuels. Rules will likely change as governments follow through on their commitment to stronger carbon-cutting plans. 

How will these affect you? Are there elements of your corporate strategy or supply chains that depend on fossil fuels? Will your stakeholders and consumers expect you to increase your dependence on renewables in the coming years? 

As we’ve mentioned, this picture may look different for different nations, so it’s important to know where you stand. If your country is part of a larger trade bloc like the EU, the bloc’s laws are important too.

That’s a difficult question. 

ESG (environment, social and governance) investing aligns closely with many of the aims at COP summits – particularly the principles attached to the “E” pillar. 

The problem is that good investing follows potential returns, and stakeholder mood is what shapes this promise. 

Lawmakers and consumers are these stakeholders – and their response (if any) to the COP28 deal is what you need to watch to see if ESG investing is going to shift in any way. 

ESG investing carries a lot of politics and conflicting priorities these days, but it’s still a trillion-dollar industry that’s worth every inch of attention and expertise you have at your disposal. 

Ultimately, the COP28 deal is likely to add more layers to an already complex collection of principles. That’s not a bad thing; it’s just reality. The key is to ensure you have the right expertise at your governance level to respond to it.