Sustainability news

Let’s put the money where the sun shines

• Uniform climate targets obscure stark differences in expectations of corporate climate action

7 December 2023 - COP 28, Dubai | We know how to do this – and the facts support this claim. Today, the energy landscape of the future is visible and real, if not yet the dates for final delivery. According to the International Energy Agency forecasts, a seismic transformation of the world economy is in sight.

Renewables, which were still doubted as a viable option for power-intensive industries just a few years ago, are now the fastest-growing energy source and are cost-competitive versus fossil fuels. Equally true is that time is running out.

As anyone watching this week’s COP28 climate summit in Dubai already knows, the current trajectory of global warming is headed for just shy of three degrees above pre-industrial levels by 2050. That’s double the target set in the Paris Agreement. Recent damage by extreme weather linked to global heating has been devastating. In the coming years, it will be worse.

In the wake of recent geo-political shocks to the energy system, many countries with mature economies responded by reaching for more fossil fuels they had pledged to eradicate. Imports of coal to the EU from India and South Africa increased five-fold in 2022. Germany adopted legislation to reactivate mothballed coal plants, at least until mid-2024. The US set a new record for domestic crude oil production of 13 million barrels per day, twice that of a decade ago.

These confusing signals have not deterred leading companies worldwide from finding myriad new opportunities for decarbonisation. Their efforts will be central to the success of COP28, as Special Representative Badr Jafar has recognised, even while the increased dependence among northern countries on imported fossil fuels sends a contrarian message to governments in fossil-exporting states.

‘Common but differentiated responsibilities’

Global ambition is imperative to achieve net zero by mid-century. Despite scepticism about the capacity of multilateral institutions to deliver, commitments by nation-states to reduce country-level emissions – their nationally determined contributions (NDCs) -- are an indisputable measure of progress from our new climate politics.

Behind those targets, the reality for businesses is more complex. Companies face increasing disparities – in know-how, cost of capital and available technology – between industrialised countries in the North and the diverse ‘emerging’ economies of Africa, Asia and Latin America. Ambitions set by mature economies reflect the capacity and confidence of prosperous, stable societies.

As with NDCs, a commitment to reach uniform global goals underpins every corporate benchmark, from the Science-Based Targets Initiative (SBTi) to GFANZ (Glasgow Financial Alliance for Net Zero). That is the right ambition, albeit the details of decarbonisation pathways in Scandinavia or Japan often can be lost in translation to the more populous and fast-growing economies of the global South.

Differences and diversity in the available energy mix – recognised by the Kyoto Protocol, under the principle of ‘common but differentiated responsibilities and respective responsibilities’ – pose a stark challenge for business. Companies must match environmental and social pledges with action and money, but public pledges often prove difficult to reconcile with operational realities.

In the global South, where the available energy mix could be – say –  95 per cent grey, companies face an uphill struggle to meet the same climate targets as their peers in the European Union.

Annually, we measure and report companies' carbon emissions where we hold a controlling interest. Our businesses operating in countries with poor renewable energy mix will be penalised with a much larger footprint due to the emission factors that they need to apply. Consequently, the carbon footprint of a South African corporate is likely to incur higher penalties than a comparable business conducting the same activity in Germany or the Netherlands.

My company, Naspers Prosus, operates a portfolio of fast-growing consumer internet businesses in over 100 countries. Many are in the regions most vulnerable to the impacts of global warming. Most are in countries whose historic contributions to global emissions are immaterial for any global comparison.

Notwithstanding this injustice, my colleagues and I understand that global climate goals must be non-negotiable. Prosus is committed to reducing corporate Scope 1 and 2 emissions to zero by 2028 and lowering corporate Scope 3 emissions from air travel by 30% by 2030. In October this year, our programmes to deliver this pathway were validated by SBTi.

> SBTi verification webcast

Culture and nuance

Systemic progress depends ultimately on access to green molecules for energy and more resilient global supply chains. Many aspects of the evolving energy mix are moving in the right direction.

The trajectory ahead is well charted. Fresh analysis from the World Resources Institute found that reaching net zero by mid-century will require annual growth in new green energy investments of 24% by 2030, compared with a current level of 14%. That looks achievable.

Momentum is building, but more local focus will bring faster results. We need to do more with the provisions for differentiated policies that are already available. Because the best remedies are nuanced, we need to incorporate country-level context in expectations on corporate climate action.

> Naspers-Prosus roundtable on Just and Fair Climate Action roundtable (5 December 2023)

What we do in this decade will shape humanity’s prospects for the next thousand years – as the UN Secretary-General and the first Global Stocktake reminds us. It’s time to put the money where the sun shines.

Prajna Khanna is Global Head of Sustainability and Vice-President at Naspers Prosus, one of the world’s largest technology investors.