The Paris Agreement

In this article, Anant JAIN (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) talks the Paris Agreement.

Introduction

The Paris Agreement is a global agreement that intends to keep global average temperatures below 2 degrees Celsius above pre-industrial levels by the end of the 21^st century, with efforts to keep it below 1.5 degrees.

The Paris Agreement was drafted during the Conference of the Parties (COP 21) of the United Nations Framework Convention on Climate Change (UNFCCC21) and signed on December 12, 2015. The agreement was ratified on April 22, 2016, which was recognized as Earth Day by the United Nations, and was signed by all 196 UNFCCC members. In June 2017, President Donald Trump announced that the United States would withdraw from the Paris Agreement, claiming that it was not in the country’s best interests to do so.

Greenhouse gas emissions are considered as the primary cause of global warming.
To accomplish the agreement’s objectives, scientists have agreed that global greenhouse gas emissions must be reduced. As a result, the 20/20/20 targets were established: a 20% reduction in carbon dioxide (CO₂) emissions, a 20% increase in renewable energy market share, and a 20% increase in energy efficiency through current technology such as insulation. The signatories are obligated to put efforts through Nationally Determined Contributions (NDCs), and to continue to do so in the future. This includes the duty to report on national emissions and decarbonization initiatives on a regular basis.

To keep global warming to a maximum of two degrees Celsius by 2100, scientists agree that the world will need to become carbon neutral by 2050. The International Panel on Climate Change (IPCC) issued a study in October 2018 warning that in order to meet the lower 1.5-degree objective, emissions must be reduced by 40-60% from 2010 levels by 2030, with net zero by 2050. To meet the less ambitious 2-degree objective, emissions must be reduced by 25%. Failure to do either will result in irreversible climate change beginning around 2030, according to the paper. According to the IPCC, if current levels of (in)activity continue, the 2-degree target will most likely be met by 2030, with global warming of 3 degrees by the end of the century becoming increasingly likely. The IPCC also warned in September 2019 that unless the world takes action now, sea levels will increase by at least one meter by 2100.

According to studies, CO₂ produced by burning fossil fuels for power, heating, cooling, and transportation is the primary cause of global warming. Carbon dioxide levels in the atmosphere in 2017 were last seen on Earth three million years ago, according to research from the Potsdam Institute for Climate Impact. Before humans originated, the average surface temperature was 2-3 degrees Celsius higher than pre-industrial levels, and the average sea level was up to 25 meters higher than it is today during the Pliocene Era.

The Working Process

The Paris Agreement’s implementation necessitates economic and societal transformations based on the best available knowledge. The Paris Agreement is structured on a five-year cycle in which countries take more ambitious climate action each year. Countries must submit their climate action plans, known as Nationally Determined Contributions (NDCs) by 2020.

NDCs

Countries need to establish the steps that they will take to alleviate greenhouse gas emissions in their NDCs to align with the Paris Agreement’s agendas. Countries also outline the activities they plan to take to build resilience and adapt to the effects of rising temperatures.

Long-Term Planning

The Paris Agreement called for nations to draft and submit long-term low-carbon development strategies by 2020 in order to effectively define their efforts toward the long-term goal (LT-LEDS).

The long-term vision offered by LT-LEDS is beneficial to Nationally Determined Contributions (NDCs). They are not required, unlike NDCs. Irrespective, they place the NDCs in the context of countries’ long-term planning and development goals, giving them a vision and direction for future development.

How are countries supporting one another?

The Paris Agreement establishes a framework for assisting developing countries with financial, technical, and capacity-building support.

Finance

The Paris Agreement maintains that affluent countries should lead in providing financial support to less developed and vulnerable countries, while also encouraging voluntary contributions from other Parties for the first time. Since large financial resources are required to adjust to the negative effects of climate change and mitigate its consequences, it is imperative to adapt climate finance (financing that supports projects to contribute to climate change).

Technology

The Paris Agreement outlines a goal of fully implementing technological development and transfer in order to improve climate change resilience while also lowering greenhouse gas emissions (GHG) emissions. Through its policy and implementation arms, the mechanism is increasing technology development and transfer.

Capacity-Building

Many of the issues posed by climate change are beyond the capabilities of many developing countries. As a result, the Paris Agreement places a strong emphasis on developing nations’ climate-related capacity-building efforts and calls on all wealthy countries to increase their assistance for such efforts.

How are we tracking progress?

Countries adopted a more transparent framework with the Paris Agreement known as the Enhanced Transparency Framework (or ETF) to report information. Starting in 2024, countries will be required to report honestly on their activities and progress in climate change mitigation, adaptation, and support offered or received under the ETF. It also establishes worldwide protocols for the examination of reports provided.

The data from the ETF will be incorporated into the Global Stocktake, which will assess how far we’ve progressed toward our long-term climate goals. This will lead to recommendations for countries to establish more ambitious targets in the next phase.

What have we achieved so far?

Even though massive improvements in climate change action are required to reach the Paris Agreement’s goals, low-carbon solutions and new markets have already emerged in the years after it went into effect. A growing number of governments, regions, cities, and corporations are setting carbon neutrality goals. Zero-carbon solutions are becoming more competitive across a variety of economic sectors that account for 25% of total emissions. This trend is especially obvious in the electricity and transportation sectors, and it has opened up a slew of new business opportunities for those who get in early.

By 2030, zero-carbon solutions may be competitive in industries that account for more than 70% of world emissions.

Useful resources

United Nations The Paris Agreement

United Nations What Is Climate Change?

United Nations How the Paris Agreement will help tackle the climate crisis (with Aidan Gallagher)- Within Our Grasp (video)

United Nations What is the ‘Paris Agreement’, and how does it work? (video)

About the author

The article was written in May 2022 by Anant JAIN (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

The World 10 Most Sustainable Companies in 2021

In this article, Anant JAIN (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) talks about the World 10 Most Sustainable Companies in 2021.

Introduction

The Corporate Knights’ yearly list is a ranking of the 100 most sustainable companies. It is based on the analysis of companies with revenues over $1 billion (8,080 companies in 2021). This year marks the 17th year of the list.

This list is usually revealed during the World Economic Forum in Davos. The Davos Agenda is a ground-breaking gathering of world leaders to shape the values, policies, and alliances required in this difficult new environment. The World Economic Forum has been a trusted venue for leaders from business, government, international organizations, civil society, and academia to assemble at the start of each year to discuss crucial issues.

In 2021, the breakdown of the most sustainable firms by geographical areas is as follows:

46 in Europe
33 in North America
18 in Asia
2 in South America
1 in Africa

The top 10 most sustainable corporations of 2021 are as follows:

1. Schneider Electric SE, France
2. Orsted A/S, Denmark
3. Banco do Brazil SA, Brazil
4. Neste Oyj, Finland
5. Stantec Inc, Canada
6. McCormick & Company Inc, United States
7. Kering SA, France
8. Metso Outotec, Finland
9. American Water Works Company Inc, United States
10. Canadian National Railway Co, Canada

We detail below the characteristic of each company in the dimension of sustainability.

1. Schneider Electric SE

Industry: Electrical Equipment
Location: France
Year Founded: 1836

Schneider Electric has been named the world’s most environmentally friendly firm. This European energy and automation multinational corporation was praised for its quick and consistent response to ESG – environmental, social, and governance – issues, moving up from 29th place in 2020.

Schneider Electric is helping to reduce CO2 emissions and the rise of the Earth’s temperature by focusing on innovative and renewable alternatives. Its efforts are assisting in the prevention of global warming and the production of ecologically friendly goods that improve energy access.

The core of Schneider Electric’s strategy, according to Chair and CEO Jean-Pascal Tricoire, is to build a sustainable business and organization. Schneider has long been committed to environmental issues, and it continues to raise the bar for itself, its customers, and its partners.

2. Ørsted A/S

Industry: Electricity Generation
Location: Denmark
Year Founded: 2006

After vowing to combat climate change with renewable energy, Ørsted was voted the world’s second most sustainable company. Despite dropping to second position in 2020, the Danish power company is still the world’s most sustainable energy provider, a title it has held for three years.

The corporation, which is also renowned as one of the top renewable energy generators, has switched its operations from fossil fuels to renewable energy and has set a goal of becoming carbon neutral by 2025.

Ørsted CEO Mads Nipper said the company’s strong placement in the Global 100 report underlines both its commitment to driving a successful and sustainable business and its resolve to become a catalyst for green energy change. He also stated that in order to be effective in the fight against climate change – and to stay in business – all businesses must adopt a sustainable business model.

3. Banco do Brazil SA

Industry: Financial Services
Location: Brazil
Year Founded: 1808

Banco do Brazil, Brazil’s, and Latin America’s largest bank by assets, is also one of the most sustainable companies. The 212-year-old bank aspires to be inclusive and contribute to digitally improving society by providing internet access and supporting education by fostering innovation and motivating entrepreneurs.

In 2020, the government-owned corporation was ranked ninth, but it has quickly risen through the ranks this year.

4. Neste Oyj

Industry: Oil and Gas Industry
Location: Finland
Year Founded: 1948

Neste is a global pioneer in sustainability, with products such as renewable diesel, sustainable aviation fuel, chemical recycling to reduce plastic waste, and raw material refining innovation. The Finnish company dropped from third to fourth place in a year, but it has been on the Corporate Knights Global 100 Index for the 15th year in a row, far longer than any other global energy company.

The company’s mission of making the world a better place for our children, according to Peter Vanacker, President and CEO of Neste, drives them to strive for greater heights every day. Many companies are constantly improving their sustainability programs, making it more difficult to make the list each year. More businesses are actively implementing sustainability into their operations, which is encouraging.

5. Stantec Inc.

Industry: Engineering, Architectural Design
Location: Canada
Year Founded: 1954

Stantec is not only one of the most ecologically responsible companies in the world, but it is also a leader in North America. Clean earnings and clean investment, which are goods and services with a demonstrated environmental and social impact, accounted for half of the company’s overall score.

Gord Johnston, President and CEO of Stantec, remarked that its remarkable track record on sustainability is the result of its people’s deep commitment and good leadership throughout the company’s global operations. Its teams are striving to improve sustainability in its own operations and aiding clients in developing and achieving sustainability goals.

6. McCormick & Company Inc.

Industry: Processed & Packaged goods
Location: U.S.A.
Year Founded: 1889

McCormick & Company is not just the world’s sixth most sustainable company, but it is also the leader in the food market. Since the index’s debut five years ago, the packaged and processed foods industry in the United States has advanced 16 points to its highest position.

According to Lawrence E Kurzius, Chairman, President of McCormick & Company, it has never been more important to work together for the future of flavor and to limit its impact on the environment. The company is dedicated to producing clean revenue, providing renewable energy projects, and making the transition to 100% circular packaging.

7. Kering SA

Industry: Luxury
Location: France
Year Founded: 1963

Gucci, Saint Laurent, Bottega Veneta, Ulysse Nardin, and Pomellato’s parent business are the only luxury brands to make the top 10 sustainable companies list.

When measured against 24 quantitative key performance indicators (KPIs), including resource management, people management, financial management, clean revenue and investment, and supplier performance, Kering maintained its strong position. In order to build the future of luxury, sustainability is promoted at every level of governance, from the Board of Directors to the operational managers.

Kering’s vow to protect the environment on which it relies, according to the CEO Dr. M Sanjayan, is a big step forward for the fashion business, and it offers a massive doorway for the luxury sector to influence the people and help rethink fashion and luxury goods.

8. Metso Outotec

Industry: Industrial Machinery
Location: Finland
Year Founded: 2020

Metso Outotec is ranked 8th on the Global 100 Index, a global leader in sustainable technology and services for the recycling, aggregates, and mineral processing industries. In order to have a good impact on the globe as a sustainable leader, the Finland-based firm has set a number of lofty goals, including reducing global warming to 1.5 degrees Celsius.

Piia Karhu, Senior Vice President Business Development at Metso Outotec, remarked that their customers in the aggregates and metals and minerals industries are focused on producing sustainable goods and services. They collaborate with their customers, partners, and communities to advance sustainable innovation.

9. American Water Works Company

Industry: Utilities, Water and Wastewater
Location: U.S.A.
Year Founded: 1886

Because of its leadership and transparency, American Water is one of the top ten sustainable firms. The largest publicly listed water and wastewater utility firm in the world, founded in 1886 and employing over 6,800 people, is based in the United States.

Despite serving 15 million people in 46 states, the company saves 12.5 billion liters of water each year through efficiency measures. It has also promised to reducing greenhouse gas emissions by 40% by 2025.

10. Canadian National Railway Company

Industry: Rail Transport
Location: Canada
Year Founded: 1919

The lone railway company on the list for 2021 was the Canadian National Railway. The railway conglomerate adheres to a global standard for sustainability activities, adhering to the UN Global Compact principles and the Sustainable Development Goals of the United Nations (SDGs).