As the UK prepares to preside over the COP26 UN climate summit in Glasgow this autumn, the race towards net zero and a 1.5 degree world is more pressing than ever.
The UK will be looking to bring together 197 parties to take coordinated action and, in some ways, the country is in a better position to negotiate since the delay to the 2020 summit.
Since the beginning of the pandemic, the UK has been taking action both on a government and business level. 30 of the UK’s FTSE100 companies have pledged to eliminate carbon emissions by 2050, in line with the UN’s Race to Zero campaign. Meanwhile in the sixth Carbon Budget, the UK has set an ambitious target that will have major implications for both state and business.
Has the pandemic itself played a part in accelerating the UK’s race towards net zero? What has changed since the Paris Agreement was negotiated in 2015? And will it be enough to put the country on the frontfoot at COP26?
The direct impact of Covid-19
In the first weeks of the UK lockdown in 2020, average fuel sales were at 39% of their typical level. Globally, at intervals through the pandemic, aviation was similarly affected, along with heavy industry. However the 2020 UN Emissions Gap Report reveals that although carbon emissions were reduced by billions of tonnes, the fall in emissions translates to a reduction in global warming by only 0.01°C.
As far as net zero is concerned, this hardly registers. As Bill Gates argues in How to Avoid a Climate Disaster, it’s an indication that net zero won’t only won’t only be a matter of driving less and flying less.
But the UN report also identified that shipping and aviation account for 5 percent of global CO2 emissions, so it’s significant that the UK has now included shipping and aviation in the sixth Carbon Budget, which pledges to cut emissions by 78% by 2035.
The green recovery
This step up in ambition comes alongside a number of other moves from the UK government. The National Grid reported that the country was powered for 5,147 hours without coal in 2020, partly due to a pandemic-induced fall in demand. In turn, this may have contributed to the UK’s confidence in bringing the end to coal power forward by one year to 2024.
The 2020 reduction in coal power was inversely mirrored by a surge in wind generation, which contributed a record breaking 59.9% of the UK’s energy mix on the 26th August. It’s the first gleam of the Green Industrial Revolution to come. As the UK government outlines in their Energy White Paper, by 2030 it intends to create enough offshore wind farms to target 40GW and power every home in the UK.
This project alone will support up to 60,000 jobs, a small part of the Prime Minister’s Ten Point Plan to use £12bn to create and support up to 250,000 highly-skilled green jobs – and to be a catalyst for three times as much private sector investment by 2030.
Just as the end of coal power has been brought forward, the ban of new petrol and diesel cars appears likely to arrive sooner than initially expected, from 2040 to 2030. UK consultation on the matter also sketches out how the sale of hybrids, too, would come to a forced end in 2035.
Since the ambitious aims laid out in the sixth Carbon Budget, however, these are likely only a first wave of announced measures, with more to come. The good news is that businesses can be prepared for them.<link to blog 03 How new UK climate regulations will affect the private sector>. As businesses look ahead to post pandemic recovery, the green recovery will be right alongside it.
Stakeholders are taking primacy
In the UK, steps to a green recovery have been keeping pace with wider transformations throughout the pandemic. As a new normal emerges, ‘the way things have always been’ is not necessarily indicative of the way things will be.
Blackrock CEO Larry Fink wrote in his letter to shareholders that the early stages of the pandemic ran parallel with a tilt in investment towards sustainability-focused companies. Globally, investors in mutual funds and ETFs invested more than $360 billion in sustainable assets in 2020, over twice that in 2019.
There had already been a shift away from shareholder to stakeholder primacy. This move was strengthened by the Business Roundtable in August 2019, when a group of 180 CEOs from leading US companies redefined the purpose of a corporation.
This is now becoming widespread. A survey of senior HR leaders by Mercer showed that 53% are building ESG goals into their wider transformation agenda. Meanwhile, 73% are tying ESG goals to their purpose, and keeping that purpose in their employees consciousness,
This is perhaps triggered by the heightened awareness that ESG, performance and profitability are linked. Melissa James, Managing Director and Vice Chairman of Global Capital Markets at Morgan Stanley, says “There’s the perception that companies with favorable ESG characteristics will outperform, especially in an environment with a more heightened focus on tail risk.”
New models to access ideas and expertise
Alongside this awareness, there’s a new normal that may contribute as well. Now that many companies are adopting hybrid models and pivoting to digital communications, there is a greater ease of sharing innovation and ideas.
A Citrix survey identified that not only are companies collaborating effectively and innovating using technology, 73% of employees and 72% of HR directors believe hierarchies within organisations will be broken down by technology too. In a world seeking new carbon removal and carbon reducing technologies, anything that accelerates the pace of innovation will be welcome.
HM Treasury’s interim Net Zero Review speaks of how the UK has already cut emissions by 43% since 1990, while the economy has grown by 80%. Businesses now need to reduce the same amount of emissions again in half the time. This is a serious challenge for the UK, but with the right expert input, profitability and sustainability can go hand in hand.
As we approach COP26 and businesses prepare for the next 10 years of regulations, risk and opportunity, accessing the right expertise will be imperative. The recent U.S. heatwave hints at how the future of work is at risk in a world of increasing emissions, but the recent shift in the workforce will also be crucial to enabling a green recovery.
Since the start of the pandemic, there is now a greater availability of specialist expertise, partly due to the rise of freelance expert marketplaces. From our perspective, at Green Bee, we’ve seen how this model can make leading sustainability insight more accessible to those who don’t want to or can’t pay the fees of consultancy giants.