As the urgency for sustainable practices continues to grow, businesses are increasingly under pressure to be transparent about their emission reductions. However, the question remains: will this pressure extend beyond just disclosing information to also include concrete actions to reduce emissions?
The UK has set a legally binding goal to reach net zero emissions by 2050, along with two additional interim targets to run a net zero power system and reduce emissions by 78% by 2035.
To steer the economy in the right direction, the government has implemented various environmental regulations in the form of the Climate Change Act. Along with the tent pole and interim targets, the act sets out a path to get there and established the Committee on Climate Change (CCC) to ensure that emissions targets are evidence-based and independently assessed.
However, it remains unclear whether these measures are currently affecting businesses or if their impact will only be felt in the future.
The emission reduction imperative
The Intergovernmental Panel on Climate Change (IPCC) recently released it’s ‘Synthesis’ report, a culmination of the data aggregated by leading environmental scientists over the last few years with a comprehensive review of the climate crisis. The report had one clear message: act now, or it will be too late.
Being ‘too late’ implies the more serious impacts of climate change, including extreme weather events, droughts, flooding, and the social and economic implications that come with it.
The only solution is a rapid reduction of greenhouse gas emissions in line with the 1.5 °C pathway set.
Current business mandates
In 2005, the EU launched the world’s first international emissions trading system (ETS) covering electricity and heat generators, energy-intensive industry sectors, and the aviation industry operating within the EU.
The scheme caps the amount of emissions companies can produce annually. Those who fall below the cap can sell their excess capacity to companies who have exceeded it, putting a financial incentive on reducing emissions. To help gradually phase down emissions, the cap is reduced year on year.
In response to Brexit, a UK Emissions Trading Scheme (UK ETS) replaced the UK’s participation in the EU ETS on 1 January 2021. This new scheme affects the same sectors.
For businesses not in scope for the UK ETS, there are several regulations that cover important environmental issues, such as waste and pollution reduction, energy performance, packaging standards, and water usage, however, none explicitly call for emission reductions.
Elsewhere in the world, the US’ Securities and Exchange Commission (SEC) has proposed rules that could mandate that companies not only report their emissions and material risks, but set out their plans to deal with climate-related issues.
Although there are few mandates for companies to reduce their carbon emissions, there is a growing trend towards greater transparency and accountability regarding sustainability practices. Many businesses are now required to disclose information regarding their sustainability performance, including their emission footprint throughout their entire value chain
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Will UK businesses be mandated to reduce emissions?
The UK business sector is estimated to produce around 19.1% of UK emissions as of 2021, meaning there is a significant opportunity for organisations to drive emission reductions in support of the country’s net zero goal.
There have been no suggestions of a mandate for emission reductions for business. Announced at the end of March, the government unveiled its new “Powering up Britain” net zero plan in response to the High Court’s ruling that the existing plans were not sufficient to show how the UK would meet its goal to reduce its greenhouse gas emissions to net zero by 2050.
The document included references to a significant investment in carbon capture usage and storage (CCUS) technology, as well as in low-carbon energy sources such as wind, solar, hydro, and nuclear power. The plan also recognised the importance of improving home efficiencies and investing in a stronger electric vehicle (EV) infrastructure to facilitate the transition towards cleaner transportation.
While the plan places a strong emphasis on individual and household action, there is little recognition of the role or requirement that businesses can play in achieving net zero emissions, only mentioning that the government will look to create a “stable environment for businesses to invest and grow in the transition to EVs”.
It appears that there will be no mandatory regulations requiring UK businesses to reduce their emissions or potentially face financial penalties at the moment. However, the proposed plans by the US Securities and Exchange Commission (SEC) to impose such regulations may serve as a wake-up call to other countries, signalling the importance of taking action to mitigate climate change. By setting an example and demonstrating a commitment to reducing emissions, the US could encourage other nations to follow suit and implement similar measures to address this urgent global issue.
While it may not be mandatory, there are a number of economic benefits, alongside environmental ones, that can come from reducing company emissions that are well worth the investment and there are a number of carbon accounting services that can help you get there.
