The United Nation’s 26th Conference of Parties (COP26) for climate change has come at a time when the world remains in an unprecedented pandemic and an increasing number of natural disasters linked to climate change. There is growing public support for the move towards net zero and major economies are committing themselves to near-term goals. Multinational corporations and financial services firms are keen to play their part. Kroll was honored to interview Dr. Moustapha Kamal Gueye, Head of the Green Jobs Programme at the UN International Labor Organization (ILO) to discuss some of these pressing issues, including the role of consultancy firms in the move toward net zero.
Can you briefly tell Kroll what we should expect from COP26?
There are two areas of action where countries may need to commit at COP26: pledging their long-term plans for net zero and the short- to medium- term action plans, which are the nationally determined contributions (NDCs) on climate change. While this constitutes the “mitigation” agenda, the other agenda constitutes “climate change adaptation.” Here, climate finance will play a major role.
The goal of the Paris Agreement was to mobilize USD 100 billion (bn) of contribution from industrialized countries on a yearly basis. Around USD 80 bn has been mobilized this year. But there is a greater effort to mobilize financing from the private sector and financial markets and aligning finance in general with climate objectives. This means that there is a need to engage with everyone: state actors, non-state actors and the business community.
Several global surveys indicate that job losses and climate change are the public's biggest concerns at the moment, which could lead to stronger environmental and social regulations, which and may affect businesses. Do you see any change or improvement in how deeply businesses will be part of the conversation at and after COP26, more so than previous COPs?
Corporations are realizing now much more significantly than before that climate change and the actions they can take to face climate change is not just a matter of the cost of doing business. There is also change in the direction of policy and investment. There are opportunities for companies to reshape their business models and their production systems. At the same time, public finance is also gradually moving away from the fossil industries, as we have seen in the case of China. Companies today realize that they are part of society, and business cannot be run in a society which is falling apart.
To what extent will financial service firms and multinational corporations require consultancy support to meet their own environmental targets and societal commitments, as well as the increasingly stringent sustainability and ethical business regulations underpinned by standards such as the UN Principles for Responsible Investment, and agreements reached at COP26? Do you think that the nature of compliance will need to change in this context?
What is changing for businesses is that shareholders themselves are now changing the way they see returns and the way in which returns are generated by companies. When you define the objectives of a corporation, social contribution is going to be put as one of the goals of a company. Also, the direction that governments are taking to change their codes of commerce, social contribution of a company is part of what defines a business. Investment risk management in the context of climate change is also gaining more importance.
At the ILO, our research department is first looking at this at the firm level. We are looking at public regulations that impact companies in relation to climate change and the risk management compliance that governments are putting forward in terms of public policies and regulation. The second is surveying companies in terms of their own initiatives. What are companies doing to manage the risks today and into the future for their investments, for their workforce and for their business assets?
Do you believe that all countries are equally interested in creating more green jobs- jobs that are ecologically sustainable?
Opportunities for employment creation in the context of ecological transition can be found in all economies and countries. However, there are specific national contexts. In the energy sector, in renewables, energy efficiency and electric vehicles, we see a large potential for job creation in Asia and the Pacific, followed by the Americas and Europe. But we see a slight decline of employment in parts of Africa, and in the Middle East, since these are the countries that will keep relying on fossil fuel for some time to come.
What differences have you seen between multinational firms and small to medium-sized enterprises, when it comes investing in green initiatives and/or jobs? How does the challenge differ between global companies and financial services firms, and small and medium size enterprises operating in smaller economies?
At this time, multinational firms understand more than small companies what issues are at stake. For example, they know that the work is on a trajectory to move out of fossil fuels and are diversifying their assets. They understand that this is unavoidable and they have the capacity to make these changes.
However, a gap is seen in the capacity of countries, in particular small economies, to build small- and micro-size enterprises that can take advantage of the opportunities of the greening of the economy. These countries will need to find their space in supply chains and in energy distribution systems, and decentralized systems. They will need to include younger entrepreneurs willing to set up energy companies or energy saving companies. Additionally, they may need to find new ways to produce agriculture and get into the carbon market with investment in forestation and reforestation programs.
What role can the consultancy sector play to help companies adapt and become more sustainable?
Companies are facing risks that are not well-known because we are in an area of environmental change with natural risks and catastrophes. Many of these risks are difficult to manage, measure and protect against. The issue is that companies are managing their investment portfolio in a world where what is assumed to be a business asset today may become a liability tomorrow. How do you anticipate that?
I think companies need strategic planning, forecasting and syncing, beyond just managing sales and marketing. Areas where companies may need advice are issues that deal with people, environmental change, and the change in economic systems and carbon pricing.
How will consultants need to adapt to play an effective role in supporting companies and financial services firms to address their climate impacts, support green investment and transition towards sustainable business?
For consultancy, you will have to be on the top of the game. To advise, information and knowledge is critical. Networking will also be important because a lot of these standards and guidance are in process. Governments know that you have to work with industry and take into consideration their concerns. Therefore, many of these are multistakeholder processes. There is a space for consultancy companies to be part of crafting the regulatory frameworks, at least internationally, because that can also provide leverage in influencing that process. Being on the top of that knowledge and information to then advise your clients is critical. To sum up, research, networking, being part of international processes and policy-making processes are all important in my view.
Is there anything our readers should know?
Today, what companies earlier considered as external factors of the business have been internalized. Many industries would not be viable if they have to account for all these externalities. It is a question of time, but what is taken as granted and externalized in business accounts—the cost of pollution, air pollution, water degradation and carbon emissions—will all have a price. If a company has to account for all that in their business models, how profitable can you be? Thus, a number of fundamental issues need to be asked.
Disclaimer
The views of the person interviewed are his alone and not of the organization that he represents.
