The private sector

Businesses are widely seen as the non-state actors with the most influence on climate policy decisions, given their role in economic development, including direct investments, public revenue expansion and ability to innovate and create greater economic power and influence for the state. The private sector contributes significantly through the development of technology and infrastructure for renewable energy and energy efficiency, for example. Many world business leaders understand climate risk, as evidenced by the 2013 World Economic Forum, which named climate change one of the top five risks facing companies (WEF, 2013).

However, voluntary corporate action to reduce emissions has not been ambitious, absent national policy frameworks. At least 175 companies have voluntarily adopted science-based targets for carbon reduction in their sustainability strategies. Yet most companies still set targets according to what they see as feasible based on current technology and practice ‒ as opposed to what needs to be done based on the best available science (Del Pino et al., 2016).

Okereke (2015) raises important questions about this incongruity. These include:

  • whether businesses are deliberately not deploying the resources necessary for a low-carbon transition, or whether they are generally supportive of low-carbon transitions but constrained by structural forces;
  • to what extent different actors (managers, market forces, governments, stakeholders) are responsible when businesses do not do what is necessary; and
  • where greater momentum for change can be activated.

In countries with mature energy industries, such as the US, coal and oil companies lobbied vigorously and effectively for decades, either directly or by proxy, to exaggerate uncertainty and stifle regulatory response. Okereke describes the current era as one of ‘ambivalence and incongruity’: renewable energy costs are dropping, but energy companies have yet to curb carbon-intensive activities such as shale oil exploration.

However, the private sector is not monolithic, and certain industries, such as tourism and insurance, and forward-thinking companies have been outspoken in support of climate policy. Several large corporations from different industries, such as IBM, General Electric and Dupont, have self-regulated their carbon emissions for over a decade by setting internal reduction targets (Zokaei, 2013). Private sector visibility has increased in UNFCCC and other international fora in support of climate action as well. At the Bali COP in 2007, 150 major corporations called for a comprehensive, legally binding agreement on climate change (Bulkeley & Newell, 2015). Eight years later, at COP21, the private sector was more broadly represented than it had ever been in the past, with 65 major corporations committing to 100% renewable energy for their operations. The private sector is also the largest source of climate finance, with $243 billion dedicated in 2014, according to the CPI. Twenty-one governments and 95 companies have joined the Carbon Pricing Leadership Coalition, with the mission to ‘expand the evidence base for the most effective carbon pricing systems and policies’.

Clearly, many major multinational corporations are engaged in international and national climate dialogues, ostensibly to support action. The role of the private sector in climate finance for low-carbon development and resilience-building is critical, since public sector resources are inadequate to address the scale of the challenge. Policy-makers can support the investment climate for low-carbon development and mitigation through carbon pricing and a more stable regulatory environment that reduces risk for investors. At the national level, it will be increasingly important for companies that support climate policies to leverage their political clout, especially since industries that stand to lose will seek to minimise their losses by weakening or delaying regulation.