Climate Action: the impact of COP29 on business
What goals will the government press businesses to meet?
COP29, short for the 29th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, represents the annual meeting where global leaders convene to accelerate action on climate change.
The COP conferences aim to unite government representatives, businesses, and civil society to fulfill the goals of the legally binding Paris Climate Agreement.
This agreement seeks to limit global warming to well below 2 degrees Celsius above pre-industrial levels, with efforts aimed at restricting it to 1.5 degrees Celsius.
A key focus of COP29 is the updating of National Climate Action Plans and Nationally Determined Contributions (NDCs), which each nation is expected to adopt for COP30.
New UN research indicates that the current NDCs will lead to a temperature rise of 2.4 to 2.6 degrees Celsius, making COP29 crucial for enhancing ambition and action. This conference will particularly emphasise financing for climate mitigation (reducing emissions) and adaptation (lessening the impacts of climate change).
A vital outcome sought at the conference is the adoption of a New Collective Quantified Goal, which represents a commitment of climate finance from developed nations to support climate initiatives in developing countries.
The UK’s current NDC commits to a 68% reduction in economy-wide emissions below 1990 levels by 2030. However, the UK’s Climate Change Committee recommends raising this target to an 81% reduction by 2035. Although the government is not obligated to follow these recommendations, it generally does so.
This suggests that the government will likely press businesses to meet these goals, which may manifest in two ways:
a) increased reporting requirements, and
b) mandated emission reductions.
UK-listed businesses and non-listed companies with revenues exceeding £500 million are already required to produce annual Climate-related Financial Disclosures (CFD). Additionally, the Energy Savings and Opportunities Scheme (ESOS) and Streamlined Energy and Carbon Reporting (SECR) are mandated for large UK businesses, requiring them to report on Scope 1 and 2 emissions and conduct energy site audits to improve efficiency.
A more ambitious NDC is likely to facilitate the introduction of a UK Sustainability Reporting Standard (UK SRS) in early 2025, with the government aiming to become the world’s first net-zero aligned financial centre.
Mandated emission reductions may come in the form of increased taxation through the UK Emissions Trading Scheme (ETS) and the anticipated rollout of the UK Carbon Border Adjustment Mechanism (UK CBAM) in 2027, following the EU’s implementation of a similar mechanism.
CBAM is designed to ensure that lower-cost, high-emission products purchased outside the UK bear the same level of carbon taxation as comparable products produced domestically, addressing emissions embedded in imported goods and creating a level playing field for companies pursuing low-emission production.
As the world awaits the outcomes of COP29, it is clear that businesses will largely drive climate action. UK companies should prepare for new reporting requirements and take advantage of the opportunities arising from the transition to a low-carbon economy.
