Nailing net-zero by creating an accountability ecosystem

 

Amol Mehra

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Not a day goes by without a company making a new commitment to achieve net-zero emissions in the next few decades. Inspired by the Paris Agreement’s recommendation to reach net-zero by 2050, over 1300 companies have taken action through the Science Based Targets Initiative (SBTi)  with close to 690 using science-based target to guide them. While this is valuable progress from the corporate sector to address the climate crisis, unfortunately, it’s not nearly enough. To scale action commensurate with the climate crisis unfolding before us, we need to go well beyond commitments and move towards real transformation. This starts by building a robust accountability ecosystem to drive it.

An accountability ecosystem deploys a range of sanctions and incentives to encourage a particular outcome, in this case, reduction of harmful emissions that contribute to global warming. Its tools are varied: from litigation and regulatory enforcement actions for failing to meet commitments, to conditioned benefits such as procurement contracts or export-credit support.

Important work to build such a system is underway, through the support of Porticus and Oak Foundation in partnership with the Global Commons Alliance. In April, they gathered 200+ actors from over 130 organisations across 29 countries in an online workshop to prototype the key mechanisms and levers needed for accountability.

In these efforts, there are lessons to be learned from analogous areas where corporations have been encouraged, then required, to meet standards of expectation through similar accountability ecosystems.

Learning from modern slavery: even with legislation, you need enforcement

One lesson comes from the drive to combat modern slavery. For years, efforts focused on corporate reporting on modern slavery policies and commitments, including through the 2015 UK Modern Slavery Act (UKMSA), but little action in addressing modern slavery resulted.

The UKMSA sought to encourage businesses to address modern slavery from their operations and supply chains through transparency requirements for companies and public statements detailing actions undertaken. Even with a law in place a 2021 review by the Business and Human Rights Resource Center (BHRRC) assessing compliance with over 16,000 statements found significant non-compliance with ‘…no injunctions or administrative penalties have been issued to companies failing to report.’ Furthermore, the findings revealed that ‘the lack of mandatory reporting areas has led to companies publishing general statements that do not engage with the risks of modern slavery specific to their sectors and regions of operation’. BHRCC found that ultimately ‘the Act has not driven significant improvement in corporate practices to eliminate modern slavery.’

This is a critical insight. It tells us that even where we can align on a legal requirement for reporting, it does not translate into corporate action beyond generic statements and commitments. Reporting can only be meaningful when there is specificity in the actions that are legally required and it is underpinned by a strong enforcement scheme.

Learning from human rights: use procurement levers

Another lesson comes from the use of government procurement to incentivize action. Governments are the largest consumers in the global marketplace, whose buying accounts for 15-20 per cent of global gross-domestic product across just the OECD Member States. Public procurement contracts are huge – in 2016 totaling €2 trillion alone.

The human rights community has been exploring the various ways to unlock the purchasing power of governments and public institutions, with some signs of progress. In Sweden, for example, the County Councils across the country have used human rights codes of conduct and contract clauses when purchasing certain high-risk products. The contract clauses require suppliers to have certain human rights due diligence practices in place to promote compliance with human rights standards. Compliance is monitored through contractor self-assessments, office-audits, and factory audits.

There are many more such examples and opportunities, including those detailed in a toolkit by the Danish Institute for Human Rights. These models detail a powerful lever for transforming corporate practice and could be extended or replicated to drive action towards net-zero emissions.

As the flurry of net-zero commitments continues, we must ensure a robust accountability ecosystem exists so that corporate commitments actually translate into climate action. There are valuable lessons to be learned from decades of effort in related areas, like modern slavery and human rights. We need to apply these lessons now to nail net-zero emissions into corporate practice as a transformative, and not simply performative, effort.

Amol Mehra is the Director of Industry Transformation at the Laudes Foundation.

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