What Can Businesses Do to Adapt Strategically as the UK Transforms to Become Zero Carbon?

June 27, 2019 | Insights

There has been such a volume of media coverage of climate-related issues over the past few months that it has been hard to keep up with the latest developments. The UK has seen a wave of ‘Climate Emergency’ declarations at both the city and national level. 

This coincided with the release of the Committee on Climate Change’s (CCC) Report ‘Advice on the UK’s long-term climate change targets‘, which set out a pathway for the UK to achieve carbon neutrality by mid-century. Following this, on 27th June, the UK signed into law a ‘Net Zero’ target for 2050.

Public awareness and sentiment around climate change is clearly burgeoning. Display of this range from Greta Thunberg and the school children’s protests, to more civil disobedience such as Extinction Rebellion’s (XR’s) occupation of central London and Greenpeace’s blockade at BP headquarters.

Amongst all the activity, it can be difficult to discern what this means in practice for corporations and what specifically they should do in response. The CCC’s Report, though directed specifically at the UK Government, provides important contextual direction for businesses. Here, we summarise key points made in the CCC’s report and identify three key initiatives from the sustainability strategy and communications world that support strategic, coordinated, and commercially valuable responses to the climate emergency.

Net Zero – The UK’s contribution to stopping global warming (in short) and its implications for businesses strategy

The CCC has provided a roadmap to eliminate net emissions of greenhouse gases by 2050 – significantly upping the current national mitigation trajectory, which aims for 80% by the same date. Importantly, the report demonstrates that this is achievable using known technologies.

However, the report also emphasises that this target is only achievable if clear, stable and well-designed policies to reduce emissions further are introduced across the economy rapidly. In that vein, the report makes a number of key points directed at the UK Government, but which bear significant implications for corporates. Overall, the message is clear – roadmaps are possible, and businesses will increasingly be expected to have one. We summarise the recommendations in more detail and highlight key implications for UK corporates in the table below.

Key report recommendation Recommendation details Key implications for UK corporates
Existing technological interventions are largely capable of delivering net zero These technologies include:

  • low-carbon electricity
  • efficient buildings and low-carbon heating
  • electric vehicles
  • carbon capture and storage
  • diversion of biodegradable waste from landfill
  • phase-out of fluorinated gases
  • increased afforestation
  • agricultural measures
The Report demonstrates that it is possible to develop detailed plans to transition to ‘net zero’ by 2050. Such plans can help mitigate business risk and identify opportunity. Moreover, the ability to do so in a costed, policy-relevant context allows for strong business cases around mitigation to be developed.
Government must address industrial CO2 emissions Specific areas of focus for decarbonisation of industry include:

  • heavy goods vehicles must switch to low-carbon fuel sources
  • emissions from international aviation and shipping must be addressed
  • a significant proportion of current agricultural land must shift to uses aimed at carbon sequestration
  • The shortfall in emissions reductions must be fully offset by removing CO₂ from the atmosphere and permanently sequestering it
Industry should expect government policy intervention to accelerate and encourage decarbonisation, including in transportation at the national and international level. This is likely to present risks and liabilities relating to both direct operations and supply chains. However, it is also likely to present opportunities, for example in the form of competitive advantage, avoided costs, and policy-linked incentives.
Government, industry and communities must work together to deliver decarbonisation Emissions reduction cannot be left to the energy and environment departments or to the Treasury. A joined up approach is vital, involving:

  • every level of government in the UK
  • all sectors of the economy
  • markets and consumers
The pace and scale of decarbonisation will require firms to adapt to a rapidly changing external environment and be cognisant of changing market conditions, consumer sentiment and the policy environment. At the same time, those organisations may be required to transform internal processes. This will require a well developed climate strategy.

Three Commercially Valuable Corporate Initiatives for the Climate Emergency

Streamlined Energy & Carbon Reporting (SECR)

This is a new package of regulations for reporting of energy use and carbon emissions. Launched in April 2019, SECR has replaced the Carbon Reduction Commitment (CRC) scheme, simplifying reporting requirements. Aimed at all ‘large companies’ registered in the UK, the regulations draw an additional 8,000 businesses into mandatory carbon reporting.

While this may seem at first to be an additional burden, the process of data collation and calculation of KPIs associated with reporting provides a number of key benefits. These include:

  • Identifying opportunities for energy cost reductions
  • Increased understanding of exposure to climate change and energy business risks
  • Development/ strengthening of climate leadership and green credentials in the market place.
  • Use of KPIs to highlight the link between environmental and financial performance.
  • Provision of data for suppliers, investors, insurers, etc. who are increasingly using this type of information in their assessments.

Overall, the requirement for reporting energy and carbon data in annual reports will elevate these issues to the boardroom, opening the door for wider conversations around the commercial benefits of carbon mitigation and climate change strategy.

Taskforce for Climate-related Financial Disclosure (TCFD)

Organisations seeking to further develop their assessment and management of climate-related risks and opportunities should consider undertaking a forward-looking analysis of climate risks and opportunities in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

This framework will become increasingly relevant as businesses look to identify and quantify climate risk and opportunity, and to build a robust business case for change. Moreover, the guidance enables companies to establish and develop governance mechanisms, strategies, metrics & targets and external reports through a robust framework developed and piloted under the Financial Stability Board aimed at increasing business resilience and performance in the face of climate change.

While the Task Force strongly encourages disclosure, firms are encouraged to begin undertaking assessments in line with the recommendations regardless of whether they intend to disclose. This will allow them to begin gaining the benefits of a forward-looking analysis while they embark on the learning process associated with the recommendations.

Science Based Targets (SBTs)

With Government policy seeming to coalesce around a decarbonisation pathway that aligns with the latest science, as well as very strong public support for this pathway, it is prudent and highly beneficial for companies to align with those emissions trajectories. As discussed above, it is possible for the UK to reach net zero by 2050 using only existing technologies, and detailed forecasts of reduction pathways at the company level can be made and costed.

As SBT adds stark relevance and context to currently planned initiatives, and more often than not, highlights the extent of the gap companies need to then close.

Next steps

Anthesis has extensive experience in collating, verifying and reporting climate change, energy and environmental information for corporate reports. Moreover, we have worked with a wide range of companies in the UK and beyond to develop and implement climate change mitigation strategy and maximise the impact of reporting activities.

If you have any questions about SECR, or the wider energy and carbon policy landscape and how it affects your business, or to discuss your climate change challenges please contact Fiona:

Fiona Place
Associate Director and Climate & ESG Practice Lead, UK

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