A new report has revealed that two-thirds of UK corporate carbon emissions are not currently covered by decarbonisation targets, also finding that even among companies that have set targets, 21% are expected to miss them.
The results, published last week in CDP and Bain & Co’s UK Climate Report, reveal that almost two-third (64%) of Scope 1 and 2 emissions by UK companies are not covered by a target, rising to 69% for Scope 3 emissions emitted across the supply chain.
Furthermore, among UK companies who are setting targets, 21% are currently expected to miss their 2030 targets for Scope 1 and 2 emissions, while 31% are set to miss Scope 3 targets.
According to the authors, the full number of companies off-track in relation to the UK’s net zero plan is likely to be “far higher” once all businesses not disclosing through CDP’s disclosure platform, not setting targets, or both, are taken into account.
Dexter Galvin, chief commercial and partnerships officer at CDP, said: “It is concerning that the majority of UK companies have yet to set and deliver on targets in line with the annual emissions reductions needed to align with a 1.5° pathway, especially given the various disclosure regulations already, or set to be, implemented across the globe that will have significant impacts on UK companies.”
The news comes in the wake of the UK Government stating its net zero strategy is currently set to miss the key interim 2030 goal of cutting emissions by 60% compared with 1990 levels.
Regulating the process
With the current lack of progress, companies are at risk of falling behind incoming regulation. For example, in the UK, listed companies and financial institutions will be mandated to disclose their transition plans following the announcement at COP26. This wave of regulation is likely to be global, as the US SEC has proposed climate disclosure regulation, and the EU’s CSRD will also require disclosure of climate transition plans.
The UK government recently announced the Sustainability Disclosure Standards (SDS), which will require businesses to publicly disclose their climate impact, including Scope 3 emissions. The SDS will be based on the ISSB framework, but will only deviate from it when necessary to address UK-specific matters.
Cause for optimism
The UK Climate Report found that there is some cause for optimism. The number of UK businesses disclosing emissions reduction targets through CDP increased by around 130% between 2020 and 2022, with average annual increases of 52% a year over the period.
UK businesses are also decarbonising faster than their counterparts in Europe and North America. On average, UK companies have cut emissions by 8% since they began reporting through CDP, compared with just 4% for both their North American and European counterparts.
The UK hospitality sector has cut emissions by an average of 12%, compared to just 7% in Europe and 6% in North America. Meanwhile, the UK’s fashion sector has cut emissions by 12%, compared with 7% and 5% for North America and Europe respectively.
The business case for decarbonisation
Companies that take decarbonisation seriously, called “Effective Decarbonisers” by the report, are creating more value for themselves and their shareholders by identifying more valuable opportunities from decarbonisation strategies. For example, the Bain-CDP analysis found that these opportunities have a projected lifetime financial impact that is 1.6 times greater on average than opportunities that do not focus on decarbonisation.
A key to the success of Effective Decarbonisers is their use of internal incentives. More than half (52%) offer financial incentives, while 29% offer non-monetary incentives. This proactive approach has helped them embed decarbonisation into their businesses.
“Effective decarbonisation strategies are a win-win – good for the planet and good for the organisations which enact them,” said Katherine Kajzer-Hughes, a partner in Bain & Company’s Sustainability practice who leads the firm’s ESG work with UK industrial companies. “Businesses that link decarbonisation to value creation, have targets underpinned by robust transition plans, and embed delivery into their operating model can generate significant upside.”
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