Why firms can no longer risk inaction on net zero

Many companies feel overwhelmed by the challenge of cutting their emissions but doing nothing could be the most perilous strategy of all
Net zero business risk

With humanity’s impact on the warming of the planet now deemed unequivocal by the UN, the pressure is on every business to cut its carbon footprint. However, the problem can seem so overwhelming that it leads to the opposite result – no action at all.

It’s a paradox. While customers increasingly pressure firms to blaze a sustainable, carbon-cutting trail, progress is too often confounded by a range of obstacles: fears over poor investment decisions, perceived concerns of a lack of knowledge, or worries about engaging someone without the genuine expertise demanded.

There are always risks when change is needed. But when it comes to climate change, it’s rapidly become unviable to do nothing.

Making the net zero transition step by step

For many businesses, particularly smaller firms, it can sometimes seem that only transformational and radical change will do. But think of it like running: if you’re new to the exercise, it’s best to stick with 5km jogs than attempting a marathon.

Nicolas Lefevre-Marton is a managing director, sustainability solutions at Engie Impact, which helps public and private organisations – including its sister energy firm Engie – to plan and implement sustainable strategies.

“Net zero is not a switch,” he says. “There are milestones and steps. The most rewarding and easiest thing to do is to get a grip of your data and start to understand emissions – where they come from and how they can change – rather than drowning in the concept.”

Lefevre-Marton acknowledges that even with the affordability of renewable energy falling and the likes of electric vehicles becoming cheaper, cost is one of the biggest risks for companies in achieving net zero.

“There’s the economic risk, but there’s also the regulatory risk. If you don’t preempt these actions then it’s possible you get caught out as the regulations can move faster [than expected], and if you’re not ready to act, that’s an issue,” he says.

Preparedness therefore seems crucial. Even with improved knowledge, enacting change can be challenging.

“Mobilising organisations at the scale net zero demands has not been done before,” he says.

Grasping the opportunity

With energy production representing close to 75% of global greenhouse gas emissions, it’s intuitive that large energy firms, in particular, are prioritising the problem. But for smaller businesses and organisations, comprehending the issue and identifying the actions required can be a demanding task.

Mike Robinson is chief executive of the Royal Scottish Geographical Society (RSGS), which launched a Climate Solutions course two years ago to help distil the vast quantities of information available on climate change into manageable chunks and to help firms develop action plans.

Net zero is not a switch – there are milestones and steps

“We’re trying to reassure businesses that some things they can do are clear-cut,” he says. “While some businesses might feel they want to wait, a lot of what we’re trying to do is say that ‘this is the direction of travel’, so it’s not about whether to do it, but when.”

The RSGS thinks there is a lot of opportunity in acting now, he says. “While there might be risks if you are a really early adopter of a new technology, there are plenty of things most organisations can do now to make a difference.”

Robinson thinks many organisations that have taken steps to reduce their emissions seldom publish their efforts, believing their work will be criticised as insufficient. However, Climate Solutions has “accidentally created a safe space where people can ask daft questions and feel confident, which has been an important thing”, he says.

Breaking down barriers

Helping organisations to bridge the knowledge gap is one of the key aims of West Yorkshire’s Manufacturing Task Force, established by Mayor Tracy Brabin, the former Labour MP for Batley and Spen.

Fiona Conor, managing director at Trust Electric Heating, is chair of the task force’s net zero group. It’s working to help businesses understand how to measure and cut their emissions, identify how to get funding to help implement changes, and provide firms with comprehensive but manageable amounts of information.

Conor acknowledges that because small companies do not have the regulatory imperative to report their carbon reduction plans like their larger counterparts, progress could be slow. She has a marketing background, she says, so sees it as an opportunity for firms to publish details of what they want to do, where they want to go and how they want to do it.

“But not all small businesses will believe there is a benefit unless there’s lots of pressure to report it or demand from their customers,” she says.

There’s a major issue for some firms, Conor acknowledges: if they spend money improving the energy efficiency of their buildings, their business rates will rise, which can feel like they’re being penalised for trying to do the right thing.

While a business rates relief for green improvements to buildings is due to begin in April next year, many think the government can do more to encourage the transition to net zero, although this doesn’t mean companies can entirely abdicate their responsibility to parliament.

First Wealth adopted a net zero commitment by 2030 as part of its B Corp certification, a scheme that certifies companies that prioritise sustainable and ethical practices.

Anthony Villis is the firm’s managing director. He says the company was initially weak in terms of understanding its environmental impact when securing B Corp status, but that measuring its carbon footprint in terms of scope one and scope two emissions was “fairly straightforward to get your head around”. Scope one covers direct emissions, while scope two means the emissions that come from things like electricity and heating bills.

More challenging are scope three emissions, which are in a firm’s supply chain. First Wealth invests in roughly 10,000 companies through a range of funds. Quantifying that carbon footprint is virtually impossible, but the quality of reporting around emissions is improving, meaning that wealth managers like Villis may soon be able to identify ‘greener’ funds via verifiable data.

Galvanising support

While that will be a slow process, Villis is pleased with what his firm’s already done and hopes to encourage others to follow suit.

“We all have a role to play and everyone has a responsibility to do something, whether as a family or a company,” he says. “It’s about how businesses want to run: is it all about the bottom line and profit for shareholders or, like us, do you see an opportunity to grow a business that does good things too?”

For business owners and managers daunted by the prospect of tackling their carbon footprint, engaging employees on the topic is a widely promoted strategy.

Villis says his firm has a shadow board with various subcommittees, including one focused on the firm’s environmental efforts. Robinson, meanwhile, thinks the “single most important thing managers can do is to give permission for their people to make changes”.

Lefevre-Marton adds: “Having a mission is hugely empowering for teams to work on, and there are few greater things that they can get hold of than decarbonising the world.”