Harnessing business in the race to net zero

By Rob Doepel, UK&I Energy & Resources Leader, EY

Following the release of the UK Government’s highly anticipated Ten Point Plan for a Green Industrial Revolution, it’s worth reminding ourselves of where we are and why.

250 years ago, Britons invented much of the technology that led to the Industrial Revolution. That revolution started an unimaginable wave of prosperity for many, one that has continued to the present day.

But the fossil-fuel burning technologies that powered the industrial revolution are also the ones that have resulted in the build-up of carbon in our atmosphere. Against the backdrop of a global pandemic, the world is looking for a new direction.

An opportunity for green growth

UK leadership has signalled that it's time for change, to deliver a revolution based on clean energy, transport, nature and innovative technologies. This revolution can generate a new wave of prosperity, decarbonize our economy, create the technologies and jobs for the future and allow us to meet our target of getting to net zero by 2050.

Businesses who catch this new wave have an opportunity not just to create new jobs, but also to build skills and products that we can export to the rest of the world as it goes through its own green revolution.

Sustainability is a source of long-term value

Conversations with our clients tell us that British business is ready to transform. Previously, EY’s clients told us that they saw decarbonisation and sustainability solely as a cost that would reduce their financial returns. However, now it’s seen as an opportunity. Businesses are realising that sustainability is a major driver of long-term value: customers are willing to pay more for a greener product, employees are keen to work for a business that cares about sustainability and there are cash savings to be had from making operations more efficient and less carbon intensive.

As of today, 99 of the FTSE 100 are reporting on their carbon emissions and 45 are committed to getting to net zero, up from 15 last year. Furthermore, companies and their directors are getting together to promote greener growth in forums such as the EY-convened Embankment Project for Inclusive Capitalism (EPIC) or Chapter Zero.

Change is happening

Our clients are backing these pledges up with actions. An Energy client has announced its plans to move away from fossil fuels entirely and to be a zero-carbon energy company by 2050. In the consumer goods sector, EY is currently helping a major multinational decarbonise its supply chain. These are two representative examples of a cross-sector megatrend that we believe will grow exponentially over the next few years.

While there are still businesses that have not yet engaged with climate change and sustainability, their number is shrinking rapidly under pressure from investors, employees, customers, regulators and the simple economic logic that sustainable growth creates long-term value.

The impact of COVID-19

In 2008, the financial crisis crushed the momentum that had been building globally to decarbonise the economy. This time round, COVID-19 has had the opposite effect.

Companies are telling us that a key part of their COVID-19 recovery plans will be to make a long-term switch to a more sustainable business model.

Furthermore, soon to be released primary research undertaken by EY has shown customer awareness of sustainability and environmental issues has been accelerated by COVID-19. Our research also uncovered that, as many of us continue to spend time working from home, we are more aware of the benefits of supporting local communities.

It’s clear that a movement is taking place. Businesses are ready to change, and the public is increasingly showing commitment. Bold policy leadership, such as the measures outlined this week, backed by government funding, will enable a new wave of prosperity, accelerating the UK’s pathway to net zero by 2050.

As a result, organisations must continue to review their long-term strategies and future goals to focus on the role they will play in the green recovery, ensuring their operations are more resilient and able to create an enduring impact. Time is of the essence and we must all act now.

To find out more detail on any of the points contained in the latest government announcement, please feel free to contact me or any of our EY UK Energy & Resources team.

Disclaimer:

This represents the views of the individual and not EY. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice.