Towards the inclusion of equity principles in corporate climate aligned transitions.

Abstract

Abstract Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) in mitigating climate change is a key component of the Paris Agreement. Whilst some progress has been made on integrating the CBDR-RC principle into allocating the global carbon budget between nations, very little attention has been given at the corporate level. Many current corporate climate-target setting methodologies rely extensively on grandfathering principles (e.g., Sectoral Decarbonisation Approach (SDA)), thereby favouring high emitting incumbents. In this study, we explore the allocation of carbon budgets derived from the SDA approach with allocations based on different principles of equity. We illustrate our method using companies in the cement sector, which is a hard to abate sector and crucial for sustainable development in emerging countries. Our comparative exercise clearly shows a stark contrast between which companies bear the mitigation burden when employing the SDA methodology versus considering principles of equity. The findings make a compelling case for the thoughtful inclusion of equity in the net zero governance of the private sector, for a global just transition is to be realised.