How do UK businesses walk the talk of net-zero ambition?

Posted on 1 Apr 2019 in

Business must deliver a step-change in its own ambitions and discourse if the UK is to meet a 2050 net-zero emissions target, argues Sam Unsworth

The UK set its first climate change target back in 1997 under the Kyoto Protocol. With a commitment to reduce emissions by 12.5% below 1990 levels between 2008 and 2012, the target allowed for incremental decarbonisation efforts as opposed to an economy-wide transition. Nonetheless, the UK managed to reduce its carbon intensity (tonnes of carbon emitted per unit of GDP) by an average of 3.7% a year from 2000 to 2017, successfully decoupling emissions from economic growth – and it did this by seizing the easy-win decarbonisation opportunities, primarily in power generation.

Fast-forward 22 years from Kyoto and the UK, business included, is facing an altogether more daunting prospect: on 2 May, the Government’s independent advisory body, the Committee on Climate Change (CCC), will publish new advice to government, with a push to a net-zero target anticipated.

Assuming the CCC suggests net-zero is technically possible, the political decision to enshrine this target in law is likely to follow. By when, will be the critical question, one that will have wide-reaching implications for the business community: the sooner the target date, the greater the transformation that will be required. To align Britain with a 1.5 degree warming trajectory and to set an example to other countries, it is likely that we will need to reach net-zero by 2050 at the latest. But despite the urgency, discourse in the business community is yet to reflect the net-zero paradigm, discussions all too often focusing on piecemeal achievements.

Business’s role is crucial in cutting emissions from hard-to-decarbonise sectors but it will take a paradigm shift

The UK’s current legislated target is for an 80% emissions reduction by 2050 – not so far off net-zero. However, cutting the last 20% means there is no margin for leftover emissions in the hard-to-decarbonise sectors of buildings, transport and industry without significant deployment of negative emissions technology. The cumulative impact of small and medium sized businesses in these sectors will be crucial in order to replicate the successes seen in power generation.

Reaching net-zero in the UK by mid-century will require a series of paradigm shifts to happen in unison across the energy system. This reflects the target’s alignment with the recent IPCC special report on global warming of 1.5°C, which notes that “Pathways limiting global warming to 1.5°C with no or limited overshoot would require rapid and far-reaching transitions in energy, land, urban and infrastructure (including transport and buildings), and industrial systems (high confidence). These systems transitions are unprecedented in terms of scale.”

The past year has seen a notable change in discourse, with net-zero and 1.5 degrees supplanting 2 degrees as the mainstream climate community’s rallying cry. Businesses must now wrestle with what these large-scale, systemic shifts may mean for their future operations and strategy.

Talking net-zero with business is not always easy – and social trends will be critical too

There are many business-driven decarbonisation initiatives already in action. The global RE100 initiative has helped to drive 155 companies to create demand for 188 TWh of renewable power per year, and is confident that its members, influential businesses, will reach 100% renewables by 2030. Innovative business-led mechanisms have been developed to deliver this decarbonisation. For instance, direct power purchase agreements accounted for 16% of renewable electricity sourcing among RE100 members in 2017.

The RE100 example highlights that business can drive low-carbon transitions independent of policies and regulation. However, it remains to be seen if the collective will of RE100’s members will be enough to deliver its ambition. Nor is it yet clear if the Task Force on Climate-related Financial Disclosures (TCFD) will begin to drive decarbonisation activities among its members or if it will focus purely on disclosure. Even if these forums lead to incremental increases in ambition, reaching net-zero is likely to require a speed of transition not yet seen in business-led initiatives.

It was evident from the timely Business Green Leaders briefing on net-zero transport last week just how difficult it can be to keep the conversation focused on what net-zero means for target-setting and doing business in specific sectors. Quite rightly, lessons learned from best practice in decarbonisation are a critical starting point in net-zero discourse. But the challenge is to contextualise best practice as one step in the journey towards net-zero. This could help move the focus away from activities that may deliver incremental emissions reductions but are unlikely to be compatible with a net-zero economy: hybrid natural gas-electric heating solutions are one example. A case could be made for such discussion constituting greenwash in a truly net-zero discourse.

Better still would be to share best practice from organisations that have successfully aligned their business model and operations with net-zero, not just their climate goals and targets. Of the currently limited stock of examples, Denmark’s Ørsted is a power generation company that recently announced it is on track to meet its target of more than 95% renewable energy by 2023. Such forward-thinking companies need to be identified and replicated.

The technological shifts needed for net-zero will likely require a groundswell in popular support and acceptance of new technologies and ways of living. But societal shifts unlock new commercial opportunities too and net-zero could drive growth for new industries and products. These could be positioned in business strategies and marketing as being in line with societal trends – and even as solutions to social concerns (for example, framing the case for electric vehicles as reducing the risk to children’s health from local air pollution, rather than emphasising the climate case). This could unlock the consumer-driven ‘S-curve’ technology deployment trends that are likely to be required for net-zero.

Business should engage with government as the discourse shifts towards net-zero

Late last year the likes of Unilever and Coca-Cola voiced their support for a net-zero target. The business community will now need to communicate its preference to government on how net-zero is targeted and legislated through UK policy.

The Grantham Research Institute’s analysis of 10 years of climate legislation in the UK notes that the Climate Change Act of 2008 strikes a balance between climate policy based on government planning and intervention policy focused on markets and individual choice. Plans for net-zero will need to consider this balance. Questions need to be asked about whether the UK economy is capable of making this transition by 2050 without clear policy, regulatory and financial support. This could help to identify areas where current policies are insufficient and where, therefore, a ‘nudge’ from government may be required.

Difficult long-term policy decisions that impact business will need to be made, such as whether to back a hydrogen or fully electrified heat network to reach net-zero in the buildings sector. Here businesses can actively engage with government on the barriers preventing them from mobilising finance towards net-zero-aligned technologies and on their preferences for overcoming these barriers.

Demonstrating private sector consensus within a sector can strengthen the message to government. By way of example, last week’s Leaders Briefing audience and panel showed apparent consensus on the need to bring forward the petrol and diesel vehicle ban from 2040 to 2030. Similar requests to date have come from the public sector – and have been unsuccessful. Adding the voice of business could help translate such sentiment into decision-making in Whitehall and is exactly the type of message that business should be conveying coherently to government.

Next stop: net-zero by 2050?

For years, forward-thinking policymakers and business have targeted deep sectoral emissions cuts. What seems to have changed in the last year is the sense of urgency that comes with discussion of a net-zero target, and apparent collective will to deliver. A recent report by the Kleinman Center for Energy Policy argued that a net-zero target is more precise, easier to evaluate, politically more likely to be attained, and ultimately more motivating than lesser targets. If the business community can shift its discourse to align with the new net-zero goal and actively engage with net-zero policymaking, it can begin to provide solutions to this global challenge.

Picture the scene: it is 2050 and we did it. The UK becomes the first industrialised country to reach net-zero emissions. But let’s remember: in 2018 the UK consumed 42.2 million tonnes of oil equivalent (Mtoe) of natural gas and 63.9 Mt of oil. Meanwhile, global emissions of carbon dioxide rose by 1.7% to a historic high of 33.1 gigatonnes. Now for the hard work to begin.

This commentary was first published by Business Green. The views in this commentary are those of the author and not necessarily those of the Grantham Research Institute.