This report surveys responsible business practices addressing climate change and driving the shift to a low-carbon economy. It summarises policies, regulations and other instruments in support of a low-carbon economy in OECD countries and emerging economies, and analyses corporate responses to these drivers.

The transition to a low-carbon economy has started. At the 2009 Copenhagen Conference on Climate Change, many governments committed to reduce their greenhouse gas emissions. Even though the Copenhagen pledges are not enough to contain temperature increases under the 2ºC target, achieving them still requires that governments, companies and civil society work together and implement important changes.

The successful transition to a low-carbon economy is an overarching challenge that concerns society as a whole. As illustrated by the Copenhagen Accord pledges to reduce greenhouse gas (GHG) emissions, many governments recognise the need to act and to put their economies on a low-carbon path. Business, an important user of energy and a large source of emissions, but also a key vector of innovation and solutions, is a central actor in achieving these goals.

Awareness of the need to transition to a low-carbon economy has gained particular momentum in the last few years, especially in the run-up to the Copenhagen Conference in December 2009. The Copenhagen Accord demonstrated the resolve of countries to move forward to limit global GHG emissions. One of the key elements of the Accord is the commitment by Annex I countries to implement individually or jointly quantified economy-wide emissions reduction targets for 2020, and by a number of non Non-Annex I countries to implement mitigation actions.1 When combined with the UN Framework Convention on Climate Change, these agreements contribute to a more predictable international framework for cooperation on climate change through 2020. They also frame expectations that nations will continue to strengthen cooperation to achieve global emission reductions and prevent dangerous climate change over the longer term.

Increasingly, companies measure and disclose GHG emissions. They do so in response to the emerging body of regulatory requirements, growing awareness of the challenges and opportunities related to climate change and greater demand from financiers, investors and other stakeholders for disclosure of non-financial information. At present, however, there are no internationally-agreed standards for GHG emission reporting at company level. This leads to variations in methodologies, scope and boundaries of reported information, limits the comparability of corporate information, generates doubts on the quality and reliability of the information, and increases costs of GHG reporting for companies. This chapter reviews emerging practices in corporate accounting and reporting of GHG emissions; challenges in relation to the scope of information, measurement methodologies, reporting frameworks and verification; and identifies areas where governments can take further action to draw the full potential of GHG reporting by companies.

More and more companies around the world are establishing GHG emission reduction plans, in response to price mechanisms and other incentives, to comply with emission reduction regulations, to enhance their reputation, differentiate their products, attract investors and respond to growing societal expectations in relation to climate change. There is, however, limited information on the aggregated impact of corporate actions to reduce emissions. A proactive business attitude towards climate change involves developing plans to manage emissions and establishing the necessary mechanisms and incentives to put those plans into practice throughout the company and its operations. When designed properly, emission reduction targets are an important element of such plans. Achieving these targets requires involving all company players, from the board to management levels and employees. This chapter discusses the key elements of emission reduction plans and reviews corporate experience to date in implementing them.

The bulk of emissions is often produced outside the companies’ boundaries, through the supply chain and the use and disposal of products. To make a meaningful contribution to a low-carbon economy, companies therefore also need to act outside of their immediate boundaries and interact with others. This chapter looks at four areas in which companies reach out to others as part of their strategies to reduce emissions: 1) important multiplier effects can be gained from the spread of emission disclosure and reduction practices along the supply chain of companies; 2) because changes in consumers’ behaviour are essential for GHG reduction measures to succeed, companies increasingly include engagement with consumers in their climate strategies. Other areas of broader business engagement outside the company boundaries include 3) participation in policy-making processes and 4) contributing to the transfer of technologies and know-how.

The Guidelines for Multinational Enterprises are recommendations from governments to business on responsible business conduct. Though the Guidelines do not specifically address climate change, many of their recommendations reflect governments and societies’ expectations on what constitutes responsible business conduct in addressing climate change. The Guidelines thus have an important role to play in helping build international consensus and spread knowledge about advanced management practices in support of a low-carbon economy. This overview highlights recommendations which are relevant to business action to address climate change.