Now that the United Nations COP26 climate summit has ended, the hard work of transitioning businesses to net-zero emissions at greater scale and at a faster pace is beginning. The world was hoping the Glasgow conference would pave the way to limit global warming to 1.5 degrees Celsius above preindustrial levels and accelerate a shift to cleaner economies. Instead, pledges put the world on track to warm somewhere between 1.8 degrees Celsius by the end of the century if nations fulfill their long-term pledges and by 2.8 degrees Celsius if they continue their current or planned policies.

Progress was made on many fronts. A carbon-trading agreement laid out how businesses can create, value, and swap credits to drive their emissions lower in a global trading system. More than 100 countries pledged to cut methane emissions and 141 countries committed to end or reverse deforestation by 2030. More than 137 countries promised to reach net-zero emissions, while more than 40 countries vowed to “phase down” coal. The UK announced new requirements that large companies will have to disclose their climate-related risks. And various voluntary proposals for how richer nations can help developing countries transition to net zero were accepted.

Nevertheless, the summit results underscore the massive scale of the challenges ahead as much as they point a way forward. While it became clear that most stakeholders – governments, companies, and individuals - now recognize the need to take action, differences remain on how this should happen and how the costs of transitioning to net zero should be shared.

So what needs to happen next? Businesses need to remain fully engaged, keep the pressure on decarbonization, and embrace collective action to curb global warming. That means being receptive to multiple ideas and approaches suggested by a broader mix of people, including women and youth who have been underrepresented in climate decisions. Transitioning to a net-zero future will require everyone’s support.

Below, we examine each of our three main takeaways from the conference for how businesses should tackle the monumental climate-related dilemmas ahead, in turn.  

1. Remain fully engaged

COP26 was the first COP where big businesses showed up in force to be part of the solution for curbing global warming by finding meaningful and commercially viable ways to accelerate transitions to net zero. Corporations joined climate activists in pushing national governments to move more aggressively. Many were seen as, and acted as, enablers of change, rather than obstacles.

Most notably, members of the Glasgow Financial Alliance for Net Zero (GFANZ) with a combined $130 trillion in assets pledged to align their activities to transitioning to net zero and to deliver the $100 trillion investment needed to achieve net zero over the next three decades. 

The scale and significance of the announcement should not be underestimated. More than 450 financial services firms representing 40% of the financial system committed to set concrete, science-based, net zero-aligned interim targets for portfolio emissions, back them up with credible transition plans and actions, and report progress regularly. In so doing, they created a new lens through which to look at their businesses and issued a challenge to the remaining 60% of the financial services industry to go along.

2. Keep the pressure on decarbonization

But the financial services industry will not achieve net zero emissions unless businesses keep the pressure on decarbonization so that the real economy will follow suit. This includes greening in high carbon-emitting sectors like energy, mining and heavy industry. Business, governments and activists are increasingly recognizing a hard truth: ignoring or disowning the fossil fuel problem by trying to offload high carbon-emitting assets onto other actors (who will keep them running) doesn’t help.

Instead, leaders of high carbon-emitting industries need to be engaged and commit to actions to rapidly decarbonize existing systems. At the same time, the development and deployment of new, low, and no-carbon energy solutions to transform away from unabated fossil fuels should be accelerated.

A big challenge here is the commercial viability of unproven technologies. Companies need government support to invest into these technologies at pace, seeking to create the same rapid cost declines already achieved in wind and solar power. Furthermore, perfect solutions should not become the enemy of the good, especially for hard to abate sectors. Gas, for example, can play critical transition roles in substituting coal for power generation and in creating blue hydrogen, before green hydrogen becomes viable at scale. But if anti-fossil fuel campaigners make it a pariah, then no interim decarbonization options exist for heavy industrial sectors.

3. Embrace collective action and multiple approaches

Finally, businesses should not just accept, but encourage multiple stakeholders to work together to shift the whole economy on to a 1.5 degree Celsius trajectory. Climate change is a collective action problem. This came across clearly in the approach of the climate action practitioners we talked with during our research with the Climate Group. Their mindset is to take on the challenge of transitioning to a net zero emitting busines and to make the biggest impact they can, given who they are.

Taking responsibility means looking beyond a company’s own operations, which in many cases are small compared with the overall impact of their value chain or the system of which the business may be a core part. It may sound intuitive: To reduce emissions, go where the emissions are, and work on them there.

Owning the problem, up and down the value chain, has a profound impact on the management of every domain of a transition business model — and on what others expect from a company. It requires a level of collaboration, understanding, and trust over time to solve the bigger problem. This can conflict with demands for here-and-now reductions in emissions, which can encourage divestment or other responses that push the problem elsewhere.

Collective action also means being receptive to different approaches. The debate over whether climate change is real has ended. Businesses now have to turn their attention to the many different ways they can speed up the transition to net zero and be open to multiple world views and tactics.

A net-zero future

At the summit, some stakeholders focused on more rapidly deploying technologies to hit 2030 targets; others centered on convincing consumers to behave differently; or they wanted to change the industrial system so consumers are offered only sustainable choices. Some participants concentrated on getting companies to behave differently, looking beyond financial incentives, while others advocated changing the financial system so companies are financially incentivized to do what is needed.

The key to halting global warming is to recognize that all of these approaches are complementary. The world will likely need to pursue all of them to some extent.

So businesses should not ignore or dismiss new ideas or people who are angry and frustrated by the pace of change. Instead, think of better ways to engage them in order to address their concerns and benefit from their ideas. Bringing in a broader mix of people with differing perspectives who are underrepresented in climate decisions, such as women and youth, is essential to drive change because we will need everyone.

Build upon the momentum created by the summit. Do not allow progress to slow down, or worse, go into reverse. There is no time to waste.