What COP 28 Forgot About Our Planet's Health, and What Investors and C-Suite Executives Should Know

By Christophe Girardier, CEO of Glimpact

When a corporate executive reads a profit and loss statement, do they only examine one side? For retail investors weighing a balanced mutual fund, would they ever assess just the large-cap stocks instead of small-caps, bonds and the entire portfolio? Smart C-suite executives and thoughtful retail investors know that to make informed decisions, it’s essential to see the big picture.

The same approach holds true when looking to understand how ‘sustainable’ a practice or product truly is. The fact is, when it comes to environmental development, only examining carbon emission does not allow for the whole picture. Extreme weather events, upheaval of the daily lives of consumers and complex environmental regulations are just a few of the ways that climate change is already impacting businesses globally. But understanding true sustainability requires more than just addressing carbon emissions, leaders must understand the full picture to assess full risk and make informed decisions.

A look at the recent UN Climate Change Conference (COP28)

The UN Climate Change Conference (COP28) which concluded in mid-December unfortunately fell victim to this myopic approach. World leaders who came to Dubai for the annual two-week gathering overlooked that the looming ecological crisis is not just climatic, but systemic. With its primary focus on carbon emissions, it kicked the can down the road on other environmental factors vital for sustainability, threatening the efficacy of its recommendations on corporate longevity as well as investor security.

COP 28's primary focus on carbon emissions overlooks critical, systemic environmental factors vital for corporate longevity and investor security. While carbon emissions are a significant aspect of environmental impact, they represent only a fraction of the complex web of human effects on the planet. This approach misses other crucial elements like fine particle emissions, resource depletion, land use, ecotoxicity or even biodiversity issues.

The proposed climate action plan stemming from the event focused on such elements as “a rapid decarbonization of the energy system” and “carbon capture” to achieve the shared goal of limiting global warming to 1.5° C. This is a critical threshold, since the Intergovernmental Panel on Climate Change (IPCC) has warned that without significant action, the Earth’s average temperature is predicted to rise to unmanageable levels, bringing even more heat, drought, storms, as well as flooding and high sea levels.

More than just carbon emissions, understanding a more holistic story for investors and business leaders

But humanity’s impact on the environment isn’t restricted solely to our carbon emissions, or more accurately, greenhouse gas emissions, which also include methane, nitrous oxide, and other gases. These represent only a fraction of the complex web of human effects on the planet. This approach misses other crucial elements such as fine particle emissions, resource depletion, and ecosystem degradation. 

In 2015, leading global scientists clearly quantified nine interactive processes that regulate the health, stability, and resilience of our planet. Based on a theory developed by Swedish scientist Johan Rockström in 2009, these boundaries include climate change, biosphere integrity, stratospheric ozone depletion, atmospheric aerosol loading, ocean acidification, biochemical flows, freshwater change, land-system change, and novel (toxic) chemicals.

The latest update to this delicate matrix concludes that six of these nine boundaries have been transgressed, increasing the risk of large-scale, and irreversible, environmental changes.

Why a More Nuanced Viewpoint of Sustainability is Important for the Bottom Line:

To empower individuals and companies that want to know the full extent of their eco-impact, the European Union adopted new scientific assessment tools, the Organization Environmental Footprint (OEF) and Product Environmental Footprint (PEF) methods. Each covering The 16 categories of impact of human activity on the planet across a breadth of touchpoints, these rigorous standards can help provide a big-picture understanding of the impact of organizations, services and consumer products.

This more intricate perspective on sustainability is important for several reasons:

• More nuanced risk management: Ignoring broader environmental impacts can expose companies to unforeseen risks, including regulatory changes, resource scarcity, and reputational damage.
• Investment insights: A more comprehensive environmental assessment offers investors deeper insights into a company’s long-term sustainability and potential for growth in an increasingly eco-conscious market.
• Avoiding impact transfer: Greenhouse gas emissions are just one of 16 impact categories, and ignoring others could result in impact transfer.. For example, agricultural practices which are organic seek to reduce their carbon footprint, but in doing so, they can use more water or forest-depleting land for agriculture.
• Gaining strategic advantage: Companies that proactively expand their environmental focus beyond carbon emissions can gain a competitive edge, appealing to a broader base of eco-aware consumers and aligning with emerging global sustainability trends.

Looking Ahead: A Global Commitment to Awareness

A systemic and global approach allows companies not only to fully assess their environmental footprint through all its dimensions, but to gain more levers for concrete actions. This lets responsible corporate leaders implement strategic plans and realistic, effective trajectories to significantly reduce their overall impact.

Transitioning away from the myopic “carbon footprint paradigm” requires a radically different vision of the ecological crisis. The EU intends to impose its robust PEF/OEF approach as the only methodological framework to implement new regulations which are now coming into force for industrial players around the world. For U.S. companies who want to market their products to the EU, they must embrace these new standards rather than risk being ostracized by European consumers, or worse, having the onus of EU regulations bar them from the market entirely. As we look ahead to the coming year, smart C-suite executives that take the time to understand nuances associated with true sustainability are those that will be most prepared in this new era of global risk.

Christophe Girardier is the CEO of Glimpact. Prior to starting Gimpact, he was a member of the governance body established by the EC of the very structuring initiative "Single market for green products" which is at the origin of the design of the PEF/OEF methods, adopted by the European Union within the framework of the new regulations of the European Green Deal for the scientific definition and evaluation of the systemic footprint of products and organizations.

He is CEO and co-founder of Glimpact, a platform that helps major brands assess the systemic environmental impact of organizations and products based on PEF/OEF methods.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.