Decarbonisation Opportunities Missed by UK Businesses

A recent analysis of CDP disclosures by Bain & Co. has shown that only a third of UK business emissions currently cover net zero targets. This is despite evidence suggesting that leaders in decarbonisation have greater access to opportunities and greater success.

In Bain’s analysis, almost two-thirds of UK business emissions are covered by net-zero targets. There is great concern that UK companies are not prepared for the transition, and over 87% of SMEs are not knowledgeable about their carbon impact.

There has been an increase in the number of companies which have set themselves emission reduction targets. However, 28% of UK-based businesses that have filed disclosures with the CDP, have not yet reported their Scope 1 and Scope 2 emissions, and 48% have not yet reported their Scope 3 emissions. Only 26% of these businesses have active targets in place for the reduction of Scope 1 and 2 emissions. The percentage drops to 15% for Scope 3 emission targets.

It is also not clear what percentage of companies with targets will be able to achieve them on time. A quarter have already missed the targets they had set for 2021. 20% are not on track to meet their Scope 1 and 2 targets through 2030 and approximately 30% are behind when it comes to Scope 3 emission targets.

There is some good news, however. UK companies are progressing faster when compared to their counterparts in Europe and North America.

The analysis suggests that companies which have kept up with their emission commitments are more financially successful than their counterparts. Decarbonisation has allowed them to access more valuable opportunities, which have not been available to those companies lagging behind. Companies that were on track with a 1.5°C pathway had accessed 1.3 times as many financial opportunities.

The UK has already introduced a mandatory requirement for transition planning and has confirmed that it will follow the International Sustainability Standards Board’s inaugural framework. The companies lagging behind might soon have no choice in tackling the issue.

This will be a positive outcome for such companies and for the environment as explained by Katherine Kajzer-Hughes, a co-author of the research report: “Effective decarbonisation strategies are a win-win – good for the planet and good for the organisations which enact them. Businesses which link decarbonisation to value creation, have targets underpinned by robust transition plans, and embed delivery into their operating model can generate significant upside.”

Dr Jacqueline Faridani

Dr Jacqueline Faridani heads up Prospect Law’s fast growing ESG practice. She is an advisor in financial risk management with 20 years of experience in a variety of risk management, compliance and product control roles at Canadian, German, French and Russian banks and life insurance companies, as well as for the Canadian financial regulator (OSFI).

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

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