What challenges do businesses face in the transition to zero carbon?
Everyone knows that we are facing a climate change emergency, and that the transition to zero carbon will be an important business priority over the next ten to 20 years. The UK government has set a target to reach net zero greenhouse gas emissions by 2050, which is expected to result in increasing legislation, as well as incentives, to ensure businesses play their part.
But moving to a position of carbon neutrality is a significant undertaking, with many challenges facing businesses of all types. The desire to reduce carbon emissions is strong and continues to grow, as new generations enter the workforce and demand change. However, many businesses lack the knowledge and expertise required to implement effective carbon-reduction strategies and are focused on their core business.
Every area of a business is impacted by carbon-reduction efforts, so responsibility needs to be taken at board level to set the strategic direction and priorities. But the timescales involved in carbon reduction are much longer than usual business planning cycles. That makes it even more difficult for businesses to plan and implement actions, since those actions may not achieve their aims for another decade or longer. For many businesses there may be some significant costs involved too, which must be weighed against commercial priorities.
Understanding the challenges
At ENGIE, our ambition is to be a world leader in the zero carbon transition. We are already helping many businesses to plan and implement effective carbon-reduction measures that will ultimately eliminate their carbon footprints. But to do more – and to help more businesses – we need to understand the challenges and barriers they are facing.
To help us learn more about those challenges, we hosted a round table event for public and private sector organisations from a whole range of industries. By bringing together these diverse organisations and inviting them to discuss the problems they are facing on the road to zero-carbon, we hoped to pinpoint some of the key challenges so that together we can begin to develop practical solutions.
Need for best practice guidance
It’s clear from the discussions at this event that there is no lack of desire to achieve zero-carbon among all types of organisation. Attendees demonstrated real passion about the responsibility we have collectively to tackle the problems of climate change and to create a healthier planet for future generations.
But the sheer scale of the undertaking was one of the biggest obstacles identified by attendees. Deciding where to start when facing so many challenges is a daunting prospect. Who should take responsibility? What are the most important actions to take first? How do you measure progress? Attendees felt there was a lack of guidance from Government and trade associations on the most effective measures to take, the most important issues to tackle – and how to prioritise different options.
By making decisions on carbon reduction within their own organisations in isolation, businesses feared they may be putting themselves at a disadvantage to competitors who were taking different or no actions. There was a feeling that best practice guidelines would help to level the playing field and ensure that all businesses in the same sector were working towards the same ends, in the same way.
How to measure carbon reductions
There was a lack of clarity among businesses about how to measure their carbon footprints. They felt a consistent basis for carbon measurement was required, so that all businesses were working from the same baseline.
Greenhouse gas emissions are classified into three scopes:
- Scope one – direct emissions. These can come from fuel combustion, your owned vehicle fleet and fugitive emissions.
- Scope two – energy indirect emissions. These originate from electricity, heat, steam and cooling purchased for your own use.
- Scope three – any other indirect emissions. These include emissions associated with purchased goods and vehicles, product use, waste disposal, transportation, distribution and employee business travel.
The newly introduced Streamlined Energy & Carbon Reporting (SECR) legislation requires all large companies to report on scope one and two emissions, which means these will be available to view in annual reports. However, measuring carbon emissions from these different sources is a complex process, requiring specialist expertise. Measuring scope three emissions is particularly problematic, since it involves assessing the carbon emissions of businesses in the supply chain. This is especially complex for large manufacturing or food and drink businesses with many suppliers.
Nevertheless, there are recognised, standard ways of measuring your carbon footprint – and its reduction. The internationally applicable PAS 2060 specification sets out requirements for achieving and demonstrating carbon neutrality. The PAS 2060 methodology offers a way to establish baselines, against which future emissions reductions can be measured. Following the requirements of PAS 2060 allows a business to demonstrate its environmental credentials in a transparent way. Businesses keen to decarbonise their supply chains can look to partner with suppliers that achieve the PAS 2060 standard.
Overcoming cost barriers
Cost is another significant barrier to achieving the necessary carbon reductions for many businesses. The cost of renewable generation technology, more energy-efficient equipment and other carbon-free assets is often prohibitive. Green finance has a big part to play, and government financial incentives are likely to be required to kickstart some of the big changes that are needed. In addition, some companies like ENGIE can also provide investment in assets for customers to implement carbon reduction strategies.
In November 2019, the European Investment Bank announced that it would gradually increase the share of its financing dedicated to climate action and environmental sustainability to reach 50% by 2025. By the end of 2020, all its financing activities will be aligned with the principles and goals of the Paris agreement. So, there is evidence that major funding bodies are changing their policies to make more money available for green initiatives.
As well as operational changes and investments in new technology, behavioural change is an important factor in the move to carbon neutrality. Most workplaces are already experiencing a shift towards more environmentally friendly practices, from improvements in recycling to reductions in plastic use. These changes are often driven by employees who want the companies they work for to play their part in protecting the environment. Younger people in particular entering the workplace are driving the shift towards greener, cleaner practices.
A call for collective action
The coming years are likely to see new legislation to help the UK along its path to carbon neutrality. New government policies may provide much needed guidance to businesses on where they should prioritise their investments and efforts when it comes to carbon reduction. However, this needs to come sooner rather than later if the UK is to achieve its targets.
There is a need for action at a local level too. Responsibility for air quality has already been devolved to local authorities, many of which have established clean air zones in their cities. Many councils across the UK have also declared climate emergencies, along with a raft of initiatives to improve their own carbon footprints and that of businesses in their regions. This local approach to tackling issues could help to unite businesses behind common goals and provide much-needed direction for businesses when setting their carbon-reduction priorities.
It seems that such collective action could be one of the solutions to the impasse faced by many businesses when working out where to target their efforts. If trade bodies, sector representatives or local authorities can get together to agree combined actions, it would ensure every business in the same sector was working towards the same objectives and priorities. That way, no business would be put at a competitive disadvantage as a result of its carbon-reduction activities.
The challenges of climate change are so significant, that collective action seems to be the most effective and practical way forward. That was certainly the feeling expressed by attendees at our round table event. It should be a priority now for businesses and sector groups to work with carbon-reduction specialists to identify the optimum carbon-reduction measures and priorities for their specific industries.