Business and climate: doubly integrated governance
The Paris Agreement has opened up a new paradigm of state involvement in the fight against climate change; this is also the case for companies: they have moved from the status of obligated to one of committed. The voluntary, forward-looking and resolutely bottom-up approach of the treaty signed at the end of COP 21 implies a very different dynamic from the retrospective, top-down and binding framework of the Kyoto Protocol in which CSR has been formatted for the past twenty years. Such an evolution presupposes an inflection of the climate strategy of companies, in terms of influence, relationship with their stakeholders and the definition, measurement and narration of a commitment trajectory that goes beyond the time horizons of corporate communication.
Scenario production, recommended by the TCFD (Task Force on Climate-related Financial Disclosures) within the framework of the Financial Stability Board, is one of the tools that best responds to this new dynamic. Supposed to break with the rear-view mirror syndrome in which the analysis of companies’ environmental and social performance was confined, this innovative exercise also promises to break the « tragedy of the horizons », i.e. the market’s inability to take into account issues whose risks are generally expected to materialize beyond its time horizon, which is known to be rather short. The exercise, however, is not self-evident and the great freedom left to companies in developing strategic scenarios at 20 or 40 years may generate as much scepticism as the implementation of CSR reporting 20 years ago, in the absence of any normative support to guide them. Tools are already multiplying, proposed by specialized consultants, general interest institutions such as ADEME or NGOs such as Science Based Metrics, but it is no doubt worth recalling the primary usefulness of an approach primarily conceived by management, following the example of the French article 173, as a two-step exercise: first of introspection and then of projection. It goes without saying that the two phases of this exercise need to be part of a resolutely « integrated » approach or risk missing its objective.
The classification of the risk analysis (transition vs. physical) recommended by TCFD should therefore not take precedence over the integrated thinking framework required to develop a strategic development trajectory for the company, equivalent to the national low-carbon strategies of the countries in which it operates and to which it must contribute. This very long-term commitment, in accordance with the Pact law, is conceived as a governance approach that is doubly integrated: on the one hand, with the forward-looking vision of the company’s economic model and, at the same time, with the alignment of collective interest expressed jointly and severally by the objective of the Paris Agreement. These two axes form the new materiality matrix of the climate scenarios – most likely supplemented in the medium term by the biodiversity and natural capital scenarios – that investors and stakeholders now expect from issuers.
by Stéphane Voisin