Businesses are realising that action on climate is ultimately becoming critical to their success. Those making authentic changes to act responsibly towards all aspects of ESG issues are reaping the rewards of increased revenue through differentiation within markets and encouraging innovation through climate leadership.
What does it mean to be carbon neutral?
By definition carbon neutrality refers to having a balance between emitting carbon and absorbing carbon from the atmosphere in carbon sinks – a carbon sink refers to a system that absorbs more carbon than it emits. The main natural sinks are soil, forests and oceans. It is estimated that annually natural sinks are able to remove between 9.5 and 11 Gt of CO2, however, as of 2019 anthropogenic (human) emissions of CO2superseded 38.0 Gt, a figure which dropped in 2020 in what can be seen as an anomaly due to the Covid-19 pandemic.
Why it is important to go carbon neutral?
Businesses are realising that action on climate is ultimately becoming critical to their success. Those making authentic changes to act responsibly towards all aspects of ESG issues are reaping the rewards of increased revenue through differentiation within markets and encouraging innovation through climate leadership; reduction in costs is seen through behavioural changes on high emissions activities, such as business travel and energy usage; greater stakeholder engagement is achieved through staff retention and pleasing stakeholders through effective climate related disclosure and management of climate risks and opportunities; finally, those who are actively engaging with the changing climate landscape reduce their own risks as they are less likely to fall victim to future taxation/ litigation on carbon consumption.
The UK and road to net zero 2050.
The UK is the first major economy committed to entirely ending its contribution to climate change. As of March 2021, 30 of the UK’sFTSE 100 – representing a market capital of £650 billion had committed to theUnited Nation’s Race to Zero campaign, representing the largest ever global alliance committed to the achievement of net-zero carbon emissions by 2050.Although these are positive steps towards achieving the target there are some areas in which the government could try shirking responsibility:
International Offsets – As international offsetting is allowed to be a mechanism of carbon reduction in the UK’s path to net-zero, this means that high emission industries like aviation and shipping can theoretically continue as usual. It can possibly be viewed as a slight lapse in moral judgement not to place legislation around the amount of carbon which can be reduced through offsetting in these high pollution sectors.
5-year review – The government have committed to review their net-zero target within 5 years to ensure that other countries are following suit. This is an interesting ploy as being the first movers the UK are likely to capitalise on the economic opportunity posed by the new low carbon sectors. The UK should use this 5-year review to strengthen its net-zero aim.
Action Plan – To effectively achieve net-zero the government is going to have to take seemingly drastic measures. It is already clear that bans/phaseouts of polluting activities, fossil fuel subsidy reforms, tax reforms, new product and fuel standards and mandatory ESG and climate risk disclosure are mechanisms by which the UK is ensuring businesses strive to net-zero.
How your business can contribute to Net zero.
In reality, a country is unable to reach net-zero without transforming its economy and industries. For the UK to reach net-zero by 2050, businesses and companies across all levels of the economy need to take immediate action to reach as close to zero emissions as possible through the means of ditching fossil fuels and switching to clean tech and renewables.
To effectively transition, it is important that boardrooms are creating more than just targets, but transition plans to reach net zero.This requires a wholesale transformation, one reaching every aspect of a company’s business and operating model. It Is important that companies are ensuring a culture of accountability at the top, realigning their growth strategy with net-zero, adapting their operating model and supply chain to support a just transition. Companies that invest in innovation, provide the necessary financing and prioritise transparency and engagement will see success come from the move to net-zero. Success will be found when the CEO, chief innovation officer, chief risk officer and other top corporate leaders join the sustainability chief, alongside investment in the right skills.