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Corporate support is not crucial to counter climate change

Corporate support on climate issues will not have a major impact on bringing a consensus on issues related to climate change.

France is hosting the 21st session of the Conference of Parties to the United Nations Framework Convention on Climate Change, commonly known as COP21, in December. One of the most discussed issues in the build up for COP21  has been whether corporate support will play a major role in bringing a consensus on the steps required to counter climate change. The Corporate support, although ideal, may not prove to be a decisive factor in the run up to this year’s COP21 conference in Paris. The corporates can provide monetary support, but they will be unsuccessful in pushing the climate change issue.

The primary aim of the 21st session of the Conference of the Parties to the United Nation Convention on Climate Change (COP21) is “to achieve a new international agreement on the climate, applicable to all countries, with the aim of keeping global warming below 2%.”

In order to attain a consensus for an international agreement, various incentives of the state and non-state actors would have to be kept in mind. Empirical evidence suggests that people respond to incentives. In such a case, it is a herculean task to arrive at an international consensus because individual actors’ (state or non-state) incentives are different. While some corporates might provide monetary commitment, this is far from what is actually required to solve the complex climate change issue.

There are two primary reasons for this. First, difference in objectives. Second, ineffective impact.

Difference in objectives

Climate change is a trans-border phenomenon and has varied impacts across the globe. That said, thanks to the unequal distribution of resources and development the various actors in the COP21 will deal with the issue keeping in mind their own individual preferences and objectives. For instance, the developed nations might be willing to take tough measures against the issue. But the developing countries might weigh the opportunity cost of not pursuing their growth agenda and therefore be unwilling to take the necessary measures to reduce the impact of climate-change. It is in this context that, the COP21 cites the importance of “efforts to account the needs and capacities of each country”.

Like individual states, businesses too have varied incentives, primarily profit-maximization. Normatively, their goal is to pursue their growth agenda, well within the framework of the law. In effect, most of the resources in a corporate firm are directed towards providing goods and services in a profitable manner and not towards activities that affect the profits.

In spite of this, corporate entities do provide social benefits. They generate employment which has manifold impacts on the economy, and on societies. Contributing towards climate causes is ideal, however that is not the primary responsibility of the corporates. Environmental sustainability is an important social responsibility, but since corporate objectives are not always aligned with societal objectives, the solution(s) to climate change issues cannot be arrived at merely through monetary support.

Ineffective impact

Assuaging climate change requires strong policy level changes, to ensure contributions from everyone in the society. Unless strong policies are crafted, corporate support will happen in an unstructured and adhoc manner.

In a set-up like COP21, corporate support will bring in the much-required technologies and skills to the table. These are essential but not sufficient conditions to solve a truly global challenge. Scientific research suggests that, in order to bring global warming down by 2 per cent, “immediate significant and sustained global mitigation (is required), with a probable reliance on net negative emissions in the longer term.” That is, a highly synchronised effort is required with large-scale changes to the way things are done within an economy. This aspect is well captured in the COP21 objective “to guide economic and financial stakeholders towards redirecting their investments in order to launch the transition to low-carbon economies.”

Conclusion

In such a scenario, the only stakeholder with the ability to create incentives for such changes are the policy makers. For the role of governments is to ensure public goods are delivered, and climate is after all a global public good. The role of the policy maker varies from being able to identify the policy issue to being skilful enough to advocate viable policy packages in a clear, brief and persuasive way. Hence it is extremely critical to manage these key negotiators. The policy makers on the other hand need to be cognisant of the risks and imminent dangers of rapid human-related climate change while devising policies that will help mitigate the problems.

Corporate support will only act as a catalyst in this policy driven process. The prime movers in this scenario are undoubtedly the policymakers in the governments of various nations. Support from the corporates must be viewed as a sign of the growing recognition for environmental issues. However, it will not be a major determinant of negotiations at COP21. The negotiations will require various stakeholders to come to a common agreement, which is possible in a situation where efficient policies hold primacy.

Devika Kher is a Research Associate at Takshashila Institution. Her twitter handle is @DevikaKher.

Image source: Flickr

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