How can SMEs work towards the goals of the Paris Agreement and address climate change through their own business practices?
To quote from the website of the United Nations Framework Convention on Climate Change:
“The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016. Implementation of the Paris Agreement requires economic and social transformation, based on the best available science. The Paris Agreement works on a 5-year cycle of increasingly ambitious climate action carried out by countries.”
The Paris Agreement understandably works at a macro level. Dealing at the micro level might be perceived as a challenge for SMEs, however there are opportunities to enable business owners “to do their bit” when facing the climate crisis.
What does the Paris Agreement cover?
At the outset the treaty reminds signatories of the context of sustainable development and commits them to:
- Pursuing efforts to limit the global average temperature increase to 1.5 degrees above pre-industrial levels;
- Providing resources to adapt to climate change, foster climate resilience and reduce greenhouse gas emissions; and
- Making finance flows consistent with the above.
Businesses have it within their powers to apply these principles to their everyday activities. Indeed, as a developed nation, it could be seen that we have a greater responsibility (and opportunity) to take steps to mitigate climate change.
Consider the impact of each member of the crowd of businesses taking their own business to a net zero (or lower) position!
Naturally, the Paris Agreement contemplates monitoring, reporting and adapting to take stock of progress, a cycle that is well known to business leaders.
How can SMEs work towards the Paris Agreement goals?
Businesses across the globe run on relationships and contracts. There is a huge opportunity for businesses to operate more sustainably.
If the boardroom is not already taking action, some useful starting points might be:
Engage with stakeholders
Engage with stakeholders to commit the business to reducing the carbon footprint, in line with item 1 above. By amending the constitution of the business, the values held at the top will more readily trickle into throughout the culture of the organisation.
Review contracts
Use the influence of the business to ensure contracts reflect the climate crisis, potentially releasing further gains by contract negotiators, managers and the wider stakeholder community, in furtherance of item 2 above.
You can also consider embedding green clauses and sustainability into your key contracts. For more information and guidance on marketing the sustainability of your products and services, please see our previous article here.
Plan for change
Begin to review, measure and take stock to enable effective, long term change.
The Financial Stability Board (the international body that monitors and makes recommendations about the global financial system) has said “Financial markets need clear, comprehensive, high-quality information on the impacts of climate change. This includes the risks and opportunities presented by rising temperatures, climate-related policy, and emerging technologies in our changing world. The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information.”
The TCFD’s four recommendations focus on Governance, Strategy, Risk Management and Metrics and Targets; we will cover this in a future article.
We help businesses address climate change issues through the constitution of their business, whether that be the articles of association, shareholder agreements, and/or through the contracts that they sign. Please get in touch if you’d like assistance.