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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
by Andrea BacherSenior Policy Manager, Environment & Energy, ICC
The COP21-related event that formed the backdrop to this publication was the first time that ICC has linked environmental and climate change policy to international arbitration. The ICC Commission on Environment and Energy looks forward to continuing to work with members and stakeholders in the future on the topic arbitration and climate change, with respect to sustainability as a whole.
The ICC Business Charter for Sustainable Development directly relates, among others, to climate change issues and international trade and investment, as well as sometimes unavoidably, to disputes arising out of such trade and investment.
The ICC Charter has existed since 1991 and has been used for over two decades by companies. ICC recently updated the Charter to reflect a more holistic approach and new global realities.
The Charter was developed by a working group consisting of members from companies, associations, chambers, and ICC national offices from 75 countries. The working group agreed that the Charter should primarily help companies of all sizes to anticipate global megatrends, market developments, risks and regulation. Through the Charter’s practical framework, it supports businesses to shape their own business sustainability strategy — to manage their economic, societal and environmental consideration in their operations. Implementing the Charter can for example help reduce risks and liabilities or generate new business opportunities.
Within the last 20 years the world has inevitably changed. For example, in the past few years we have seen increasingly new kinds of liability and risk management questions. There is no more “business as usual.” Continuously, businesses face new situations and requests such as managing novel risks on sustainability management which can impact their “licence to operate” — we have seen some recent examples in Asia and Latin America. Sustainability strategies integrated in business models can therefore help to better manage such risks, and can in the same time benefit companies to become more competitive.
This is the background to the Business Charter launched this year and its focus on governance, liability, risk management and economic growth — in addition to the traditional societal and environmental topics.
The key question is, how can one grow business in a world with increasing insecurities, limited amount of natural resources, a growing world population and other new factors? How can one manage a business in this new environment and grow sustainably?
The last two versions of the Business Charter were signed by companies to show their commitment. Around 2,000 companies had signed the business charter issued in the year of 2000.
In respect of the 2015 revised Charter, the ICC now assists in showing how the Charter can best be applied and what should be a corporate signatory's next steps beyond signing the Charter. There are for example questions on training, internal capacity building, or how to report on progress to give companies the tools and capacity to grow their business or manage risks better.
The Business Charter is aimed to assist businesses on how to grow their businesses through an integrated sustainability strategy. Accordingly, ICC has to also question the advantages and disadvantages of companies having such a charter as a voluntary open source tool, or in a more obligatory form. What are the links of the Charter to the Court of Arbitration activities?
ICC has seen an increasing demand on sustainability management as a means, among others, to better manage risk and liabilities and explore new business models.
From the policy side, the Commission on Environment and Energy which developed the Charter, consists of around 300 members from a wide range of sectors and members with different responsibilities. However, most working group members are not from the arbitration field.
In conclusion, I will link some aspects of the Charter to the on-going UNFCCC COP21 negotiations.
First, the topic of markets and carbon pricing are directly relevant for business. National or regional markets, such as the European Trading Market, are not directly negotiated, but the principle option for market mechanisms for emissions reductions is part of the COP21 negotiations. At the moment there are questions on how can a market look like and which governance system should apply.
Second, human rights and investments is a key consideration. Some stakeholders suggest including climate change-related human rights protections in the treaty. A general question in this regard is, who would be responsible for what and when? Another question on liability discussed in the so-called “loss and damage” area is who would be responsible for an impact caused by climate change, for example through a severe weather event?
Third, commerce is of course always about competitiveness; that is the key around all of this. As is also evident from the state’s INDCs which are to be implemented nationally, national regulations and forms of measuring compliance need to be applicable to global industry to protect competition. Common rules under the Paris COP21 agreement to measure, report and verify commitments will be essential for the long-term success of the agreement and are vital considerations for private sector planning and investments.
Fourth, the Green Climate Fund is one of the most innovative institutions currently in existence at the intersect of climate change and the private sector. It is the first time ever that a private sector entity has the possibility to be part of a fund as an intermediary.
Lastly, an overall question for COP21 is about the agreement’s legal nature and how this will link to the private sector and other stakeholders. Corporate and industry sectors are regularly — especially around the COP events — announcing significant new commitments for low-carbon growth. This is enormous with a growing momentum over the last 24 months. Business and other stakeholders were very much committed to making COP21 a success — both in terms of policy process and through concrete actions. They were committed to a strong COP21 outcome — which culminated in the Paris Agreement — with the belief this is of critical importance for future inclusive development and sustainable growth. One example on the importance business places on the topic is that you can see credit rating agencies integrating climate risk into their forecasts.
With COP22 fast approaching, the world outside the UNFCCC negotiations continues to move very fast. With a strong agreement and an efficient and effective implementation, more can be done by all — this is where the Business Charter of ICC is coming in and links back to sustainable business development, helping companies to shape their business strategies sustainably.