COP29 Showcases the Challenges of Balancing Energy Security and Sustainability, Forcing ESG Strategy to Adapt

COP29 Showcases the Challenges of Balancing Energy Security and Sustainability, Forcing ESG Strategy to Adapt

November 2024

By Joan Ng, Associate Director. Joan works in Sandpiper’s Singapore office and has extensive experience in finance, media, and sustainability.

More than 52,000 participants attended COP29, this year’s UN Climate Change Conference in Baku, Azerbaijan. Of these, 3.3% were lobbying for the fossil fuel industry; while this participation ratio may seem small, it represents a significant uptick from 2.5% at COP28.

Higher participation by the fossil fuel industry is being used by some critics to devalue COP and question its relevance. Yet, these criticisms miss a shifting dynamic in the public discourse, where an increased focus on energy independence and economic security vies with renewable energy and environmental responsibility.

Businesses face the same dilemma as they seek to deliver results today while balancing long-term environmental, social, and governance (ESG) commitments. In this new environment where climate risks are more frequently balanced against economic and geopolitical concerns, how should companies shape and communicate their ESG strategies? Can they – like the world leaders contributing to the dialogue shift – credibly embrace both sides of the debate? Or will attempts to please all parties end up pleasing no one?

To chart a stable course through these conflicting currents, companies need an ESG message that encompasses three basic elements: credibility, relevance, and empathy.

Credibility: Acknowledge the challenges

First, the validity of views on both sides has to be acknowledged. Failure to do this automatically hurts any organisation’s credibility, because the climate debate is more nuanced than activists and lobbyists often make it out to be.

There is not enough renewable energy capacity, particularly in the developing world, to support existing and future needs. Infrastructure takes time, money, and political capital to build, and all of these are finite resources.

Energy policy, which is a necessary component of any ESG strategy, must be substantiated in this context. What mix of renewables and fossil fuels are planned and why? What are the consequences of such a choice? Are there strategies in place to address any potential negative consequences, and are these being communicated?

For example, Vestas Wind Systems, one of the world’s largest turbine manufacturers, funded a facility in Australia to train former coal workers for a transition into the wind industry. This supported Vestas’ own talent pipeline, but also demonstrated its acknowledgement of the individuals being displaced by a shift to renewables.

Relevance: Make it real

The climate debate features a bewildering array of numbers and statistics. Our planet is estimated to be warming at the fastest pace in 10,000 years. Antarctica is losing about 148 billion tonnes of ice a year. The global sea level has risen by 20 cm over the last century.

In our day-to-day lives, hotter temperatures mean that working or playing outdoors is more uncomfortable. Rising sea levels endanger marine life and put coastal communities as risk. Extreme climate events also threaten our food supplies.

However, even these impacts can seem distant and disconnected from people’s immediate challenges, such as coping with unemployment or inflation. Among communities facing displacement from decommissioned power plants, for instance, appeals about a warming planet often fail to resonate.

What kinds of numbers can change minds? In Cirebon, Indonesia, locals supported the closure of a coal plant after seeing numbers that were immediately relevant to their lives:

• An exposure to fine particulate matter of 24 micrograms per cubic metre (µg/m3), exceeding the World Health Organization’s satisfactory level of 15 µg/m3.
• At least 441 premature deaths per year related to air pollution.
• 3,000 salt farmers, rice farmers and fishermen had their livelihoods affected by ash, waste chemicals, and warm water being discharged from the plant.

This example shows how companies can communicate their commitment through their impact on individuals, rather than solely focusing on net carbon reductions and other figures that can be hard to contextualise.

Empathy: Show you care

Numbers on their own can prove unreliable – while difficult to dispute, they are frequently superseded. Communicators seeking to hit home with their ESG strategies need to communicate the positive impact they create in tangible ways and employ effective narratives to give the numbers context.

Enel Green Power, a renewables-focused subsidiary of the Italian power company Enel, interviewed Oklahoma landowner Ron Ingle about his experience allowing the company to put wind turbines on his farm. Ingle says Enel has kept its gates shut so his cattle do not get out, built a road system in the area that ended up becoming a lifeline through some major flooding episodes, and paid him enough money to start a family trust that he will use to fund the education of his seven grandchildren.

Understanding stakeholders needs, and showcasing empathy in helping to solve them can also help to bridge the dialogue and showcase real commitments.

Adapting to the new moment

COP29 is a great opportunity for companies to evaluate their strategy and in the face of a complex audience needs around ESG.

The changing discourse on display also provides an important reminder to companies on how to manage multiple stakeholders with different objectives, balancing the demands of their day-to-day operations with the forward-looking requirements to run a sustainable business.

When reviewing your own organisations’ ESG strategy, ask where you can bolster your communications – in credibility, relevance, or empathy. You may find you need a more nuanced reaction to energy challenges, targets and goals that are more relevant to people’s lives, or a closer focus on human impacts. Or maybe all three.

Checking all these boxes will help keep your message meaningful amid an increasingly politicised and conflicted discussion around energy and ESG.

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