Net or not?

Think Tank

4 min read

Net zero sounds wonderful: by 2030 (or 2050, depending on your organisation), all the carbon will be neatly put aside, never to be touched again. That seems tidy, neat, and clean — the appeal is undeniable. But, following the CBI’s net zero conference, I’m left to wonder whether reality will be as simple as it seems.

The new frontier for fairness?

In our 2021 inquiry, we found three key areas of play in the drive towards a fairer future: climate and the environment, opportunity and education, and technology and innovation. Panel after panel, discussion at the CBI conference about how we will achieve net zero continued to return to these three topics.

At first glance, net zero is about addressing climate change. But it’s clear that progress towards it relies on two other areas: education and innovation. No progress can be achieved without addressing the skills gap between our education system and the burgeoning green economy, or without investing in the development and implementation of green technologies. In this way, net zero not only provides a clear pathway for the climate transition, but also for the future of education and innovation.

There is a clear concern from business that not enough is being done by government to implement educational policies that will provide the next generation of the UK workforce with the skills and knowledge needed to address the climate crisis. Indeed, some panellists felt this was the primary barrier to progress across all sectors, with Rhian-Mari Thomas, CEO of the Green Finance Institute, stating that the finance needed for the green transition does exist — the UK workforce just doesn’t have the skills to access to it, despite now having GFANZ to support the process. Ed Miliband, in his capacity as shadow Secretary of State for Climate Change and Net Zero, later agreed that skills are “probably one of the biggest barriers to the energy transition happening,” but called for businesses to collaborate with government on this.

The question around skills intersects with that of innovation. Faye Bowser, Head of Energy & Performance Services GB&I at Siemens, discussed their work with local authorities on improving digital skills, with the aim of making the UK a “centre of competence” for technology in order to drive the innovation we’ll need for the transition. Similarly, she called for collaboration between the private and public sector, and universities, to help achieve this goal.

Following from this government’s ongoing commitment to hefty investment into the tech start-up industry, perhaps this angle may offer the UK an edge in the race to zero. It certainly seems like one is needed; with a general sense of doom about UK’s role as a centre for green finance, and green industry, pervading discussions between representatives from these more traditional sectors. The intersection of the climate crisis with Brexit, it seems, has created concern from UK business that they are much less attractive prospects for green investment than their EU counterparts.

…or feeble folly?

This brings us to consider the potential downfalls of net zero’s shiny promise. As is evident from the concerns we’ve heard about whether the UK is a competitive environment for green investment, there continues to be capitalistic rivalry between businesses, and even different nations, in the race to zero. When we interviewed Susan Hooper, co-founding Director of Chapter Zero, following COP26 she was already calling for an end to this mindset. It’s difficult to see how we will address a global crisis without a truly united global front. For this reason, I remain sceptical of the discussion held around carbon markets. Opinions were largely positive, yet recognised that carbon credits and trading is now viewed as a business-as-usual compliance activity for governments, and a pre-compliance activity for companies. It’s far from the ground-breaking solution for free-market environmentalism it may have been hailed as at its conception at the 1997 Kyoto Protocol, and it’s hard to tally a world where you can pay off your carbon sins with a truly green future.

Further, the debate around the global fairness of these markets, and of just transition in general, is only set to heat up (no pun intended) as we head towards an African COP27 this November. Looking forward to what to expect in Sharm El-Sheikh, Mary Robinson, former President of Ireland, forecast a shift in financing from mitigation towards adaptation which will help developing countries facing climate crises already, and a demand for answers and pledges on loss and damage from these countries.

The final question left on my mind after two days of panels was around regulation and reporting frameworks. Aside from the framing of carbon markets as a pre-/compliance activity, and despite the focus on government/business collaboration that dominated the skills conversation, there was very little discussion around legislation, let alone voluntary frameworks.

There has been a lot of talk in the ESG community about the establishment of the ISSB, the IFRS’s new sustainability standards board, which was announced at COP26 and are currently running a consultation period for their draft climate standards. Yet the acronym was only uttered once throughout the conference — and even then, in a question from the audience rather than any panellist, asking whether reporting initiatives are important to the transition. Tim Lord, Head of Climate Change at Phoenix Group, answered that the importance of reporting is that it makes climate “a board issue” — but warned of the dangers of getting “bogged down” in calculating metrics and data points. It seems there is a missing connection between the potentially “agonising” (in Tim’s words) work of impact measurement, and the greater purpose of what we want to achieve — what this means to our companies, nations, and world at a strategic, high level.

There is no denying that progress is being made — there is greater access to finance, greater understanding, and greater commitment to the green transition than ever before. Net zero has become a byword for committing to this transition, and that’s an important role. Now, as Alok Sharma, COP26 President, said, “we’re going to have to show that the commitments we made are leading to action”. Clear transition plans, complete with not just lofty goals but also methodologies for impact measurements and frameworks for reporting, are needed to progress further than the all too familiar, but all too easy, promise: “We’ll achieve net zero (…by 2050)!”

What you need to know, when you need to know it

Register for our newsletter to get a monthly compilation of our latest chair interviews, governance research, and upcoming webinars and events, along with weekly round-ups of the top news that matter to board members.