Top ESG Tips for Businesses

At COP26 the UK set out the climate stall with the slogan: “Coal, cars, cash and trees” – ditching  fossil fuels as energy sources, electric vehicle adoption, finance for global projects, reforestation.

What top 3 things can businesses do?

The UK government will press ahead with its Net Zero strategy and businesses can expect increasing pressure, with a mixture of incentives and regulations.

It’s time to step up and get ready, building on actions already taken, and develop coherent, long-term strategies for climate mitigation.

Action 1: Measure and plan

Gather accurate and comprehensive data on aspects of energy and water use, and other climate impacts both directly (Scope 1) and indirectly (Scopes 2 & 3). This information will be the building block for an effective carbon roadmap. It’s no easy task but is absolutely necessary now. Companies will be looking at or revisiting LED lighting, water efficient technologies, heating efficiencies, insulation and better waste management, among other measures.

Action 2: Electrify your vehicle fleet

No new fossil-fuel cars will be sold after 2030, with all new HGVs following by 2040. Time to get ahead of the carbon game and switch company fleets to electric, while encouraging employees to switch wherever possible. Total cost of ownership of an electric vehicle is cheaper than petrol or diesel models now. On-site smart charging solutions are essential.

Action 3: Install your own renewable electricity or heating

Solar PV (electricity) and solar thermal (heating/hot water) are ideal ways to cut carbon footprint and reduce operating costs. Heat pumps (air or ground-source) will be a big part of the renewable energy mix for heat and water.

Other effective solutions for reducing company carbon footprint would include cycle to work schemes to encourage employees to buy an e-bike or ordinary model and joining a good carbon offset scheme.

We can expect ongoing cycles of new legislation and business regulations that will push the UK to reach net zero emissions by 2050. Ahead of the Glasgow summit, thousands of businesses supported the UN’s Race to Zero campaign, pledging to eliminate carbon emissions by 2050.

COP26 Refresh

COP26 had four main goals:

1. Secure global net zero by mid-century and keep 1.5 degrees within reach
2. Adapt to protect communities and natural habitats
3. Mobilise finance
4. Work together to deliver.

The target was to finalise the Paris Rulebook -the detailed rules that make the Paris Agreement operational – and accelerate action to tackle the climate crisis through collaboration between governments, businesses and civil society.

The UK set out the climate stall with the slogan: “Coal, cars, cash and trees” – ditching  fossil fuels as energy sources, electric vehicle adoption, finance for global projects, reforestation.

Main decision points

There is an unprecedented inclusion of a commitment on fossil fuels. The Glasgow Climate Pact is the first climate deal to explicitly plan to reduce coal, the worst fossil fuel for greenhouse gases. But instead of “phase out”, the negotiators compromised on “phasing down” coal usage, after strong opposition from India and China.

Both countries argued that as developing nations, they could not end reliance on coal for energy in the short term.

The deal also presses for more urgent emission cuts and promises more money for developing countries to help them adapt to climate impacts.

Developing nations expected more progress on “loss and damage” – richer countries should compensate poorer nations for climate change effects where they can’t adapt. But nothing concrete was said about a timetable for ending oil and gas use for energy.

And there is deep disappointment that with the current global roadmap, there is no chance of limiting global warming to 1.5C. Countries continue to argue over what needs to be done and will reconvene fully next year for COP27 in Sharm El-Sheikh, Egypt from 7-18 November.

New regulations

For business, day 3 of COP26 was significant. The first two days had seen global leaders meeting to set the scene and as they left the climate stage in Glasgow, Chancellor Rishi Sunak announced plans for pushing large UK firms and financial institutions to step up the pace on climate change targets. By 2023, they will have to give detailed public plans for transformation to a low-carbon future in line with the 2050 net-zero target.

He underlined the recent publication of the “Roadmap to Sustainable Investing”, which confirmed that transition plans will be mandated for large firms in high-emitting sectors. We await the timelines for this.

The Chancellor also confirmed that the government has developed a science-based verification scheme for the plans to prevent greenwashing, drawn up in collaboration with industry representatives, academics, regulators and civil society groups.

He also pledged that all returns from the UK’s contributions to Climate Investment Funds (CIFs) will be used for the issuance of further green bonds. The potential for further issuance, solely from returns from the CIFs, will be £22-51bn.

He said the UK was leading the world in becoming the first net zero aligned global financial centre and these changes would mean, “Better and more consistent climate data; sovereign green bonds; mandatory sustainability disclosures; proper climate risk surveillance; and proper global reporting standards.”

$130 trillion green capital

On the same day, the Glasgow Financial Alliance for Net Zero (GFANZ), chaired by former Bank of England Governor Mark Carney announced that more than $130 trillion (£95trn) of private capital is now committed to transforming the economy for net zero. If all the funds are allocated for green projects, this would be a game-changing move.

GFANZ members are required to transition their portfolios in line with the Paris Agreement and are being pushed to work towards 1.5C rather than 2C temperature pathways. The alliance accounts for 40% of the world’s total financial assets, up from $90trn at the start of October. These assets are managed by 450 firms across 45 nations, from all parts of the financial industry.

All that’s needed now are the projects to invest in …

And the Bezos Earth Fund, Ikea Foundation and Rockefeller Foundation have forged a major new alliance with central investment banks, aiming to mobilise $100 billion for renewable energy, other low-carbon technologies and green jobs – the Global Energy Alliance for People and Planet.

Creating markets

The first two days of COP26 had seen big commitments on cleantech, renewable energy, reforestation and methane. As the PM said, losing 5-1 down to Climate Change FC, we’ve pulled back one or two goals. Final whistle not yet blown…

Forty nations led by the UK and including China, India and the US, will impose standards, incentives and rules, to create markets for new technologies, which should give investors the confidence that markets for innovative technologies would be available, while reducing the price of clean tech globally.

The “Glasgow Breakthroughs” set out five goals for tackling emissions in tough sectors, including commitments to ensure zero emission vehicles, clean electricity, climate-resilient and sustainable agriculture, and affordable low carbon hydrogen are the ‘new normal’ by 2030 in these sectors, by ensuring these systems and technologies are the most affordable and widely adopted on the market.

Significantly, there is a commitment to ensuring that “zero emission steel is the preferred choice in global markets, with efficient use and near-zero emission steel production established and growing and every region by 2030”.

An independent body of experts from the International Energy Agency (IEA), International Renewable Energy Agency (IRENA) and UN High-Level Climate Action Champions has been set up to oversee participating nations in the clean tech initiative, focusing on more than 50% of global annual emissions.

Forest action

Deforestation was front of mind in Glasgow on day 2 after the scene was set by the PM and David Attenborough on the opening day. By the end of the first week, 134 nations had committed to ending land degradation and deforestation by 2030 – the declaration now covers 91% of forests globally, and emphasises that reforestation should be a goal in this timeframe if possible.

More than $12bn in donor support was pledged by 12 countries to halt and reverse deforestation across the globe, while also protecting human rights. It commits nations to provide huge sums of public finance all geared towards the protection and restoration of forests.

The funding includes a UK contribution of £1.5bn over the next five years. This includes £350m for tropical rainforests in Indonesia, £200m from the LEAF Coalition and £300m for reforestation in the Amazonian region.

A coalition of 20 consumer goods businesses, including Unilever, Mars and Nestle, has unveiled a portfolio of forest restoration schemes they will support in the next two years, as part of a commitment to become “forest-positive” by 2030. The commitment is convened by the Consumer Goods Forum.

Asset managers representing $87trn in assets have pledged to stop financing to stop financing agri-food firms linked to deforestation by 2025. The 33 firms will be completing a forest risk assessment by 2022 as a first step.

India was in the spotlight at COP26 as PM Narendra Modi announced the country’s target to reach net zero by 2070 – very sobering and understandably greeted with some surprise and concern. But he also committed India to getting half of its energy from renewable resources by 2030 and demanded developed countries make $1tn available as climate finance. There’s a positive view that India will be pushed and/or will accelerate the process. We can only hope.

Methane reduction

The Global Methane Pledge on day 2 of the climate conference aims to limit methane emissions by 30% compared with 2020 levels. More than 100 countries signed up to the initiative, first proposed by the US and the EU in September. Methane is responsible for a third of current warming from human activities. Individual methane molecules have a more powerful warming effect on the atmosphere than single CO2 molecules.

£3bn UK pledge 

The PM had used the opening ceremony of world leaders at COP26 to kickstart a UK-based Clean Green Initiative (CGI), that will aim to scale up private investment in low-carbon and sustainable infrastructure globally.

The UK will deliver more than £3bn in climate financing over the next five years to support developing countries. This will include a new £200m Climate Innovation Facility.

Zero carbon innovation

US President Joe Biden announced a First Movers’ Coalition of 25 major companies to commercialise zero carbon innovations in steel, concrete and other heavy industries, while a new €1bn fund for industrial innovation on climate change was announced by EU President Ursula von der Leyen in partnership with billionaire Bill Gates. It follows the announcement last week that the US and the EU have negotiated the world’s first arrangement to support greener steel and aluminium trade by 2024.

Corporate Determined Contributions

On Finance Day at COP26, the World Business Council for Sustainable Development (WBCSD) launched the ”Business Manifesto for Climate Recovery”, and called for Corporate Determined Contributions (CDCs) that would show private sector progress.

It would be a mechanism for delivering emissions reductions aligned with the Paris Agreement, similar to that currently used by countries – Nationally Determined Contributions (NDCs).

Peter Bakker, President of the WBCSD said: “The time to act for a net-zero, nature positive and equitable transform is now,” Hot on the heels of the release of our new strategy, the Manifesto provides an added focus on the actions needed now with the biggest impacts to halt temperature rises and support climate recovery. Businesses are ready to deliver pragmatic and impactful solutions and be held accountable for their progress.”

Green Grids Initiative

Separately, the governments of India and the UK have launched a Green Grids Initiative that will convene national governments, policymakers, businesses, researchers and citizens’ groups in efforts to accelerate the construction of new renewable energy infrastructure. The specific focus will be international energy trading, to help overcome the intermittency of solar generation by connecting nations in different time zones.

Energy Day

Energy Day at COP26 saw 190 parties, including China, Poland, and institutional financial organisations, commit to the end of coal as a global power through the Global Coal to Clean Power Transition Statement.

More than $20bn has been committed at COP26 to global coal phase-out of coal globally, including $10bn of philanthropy-led financing to support developing countries in deploying clean power under the Global Energy Alliance People & Plant and an $8.5bn South Africa Just Energy Transition Partnership.

More good news as it was announced that almost two-thirds of FTSE100 companies have signed up to the UN’s Race to Zero campaign, to accelerate the adoption of credible net-zero targets. The firms have a total market capital of £1trn and a combined annual turnover of £700bn.

Carbon rebound

As a contrast, the Global Carbon Project, which brings together leading climate scientists, predicts that carbon emissions in 2021 are set to rebound close to pre-Covid levels. rising nearly 5% this year, and they urge governments to focus on a “green recovery”.

The International Energy Agency said that if the pledges made by political leaders during COP26 come to fruition it could limit global temperature rise to 1.8°C, a figure lower than the 2°C prediction made earlier in the week.

The UK government launched an International Just Transition Declaration, which commits nations and organisations to ensuring that the move away from coal and high-carbon industries creates new green jobs and opportunities for society, especially in emerging economies. So far, 12 nations have signed the Declaration, including the UK and EU Commission.

In context, the UN’s new Adaptation Gap report concludes that a fivefold to tenfold increase is needed in total levels of climate adaptation finance by 2030. It states that the costs of adaptation look set to reach the higher end of $140-$300bn each year by 2030, potentially rising to $500bn by 2050. This is for developing countries alone.

Sustainable education

On Public and Youth Empowerment day, Education Minister Nadhim Zahawi announced plans for decarbonising UK schools and improving climate-related education for under-18s, testing new technologies that can replace fossil fuel boilers in schools, as part of the £1.425bn Public Sector Decarbonisation Fund. Science curriculum changes are planned, along with focus on FE teachers focusing on sustainability in their specialisms.

Also, Australia, Indonesia, Japan and Nigeria have joined a collaborative initiative led by the UK and the International Energy Agency to greatly improve energy efficiency of appliances such as lighting, refrigerators and air conditioners.

Sustainable food

45 nations have agreed to reform policies to support a sustainable food system. Several of these nations have made changes to national policy frameworks:

• Brazil is planning to scale its ABC+ low carbon farming programme to 72 million hectares, claiming this could mitigate one billion tonnes of emissions by 2030
• Germany’s will draw up plans to lower emissions from land use by 25 million tonnes by 2030
• The UK’s will aim to engage 75% of farmers in low-carbon practices by 2030

As part of the 100+ business pledges to net positivity, 5 big supermarkets have teamed up with WWF to halve the value chain nature and climate impacts of products by 2030.

All of the UK’s major supermarkets, as well as the likes of Danone, Nestle, Nando’s, KFC UK&I and McDonald’s UK&I, have signed a new joint commitment to eliminate soy that is responsible for deforestation or land degradation from their animal feed and product supply chains.

The new UK Soy Manifesto has 27 companies across the food sector. The group accounts for almost 60% of all soy purchases made by UK businesses each year, mainly through animal feed supply chains.

Week 2 kicked off with a focus on the key climate pillars of Adaptation and Loss & Damage as reports highlighted the strength of the fossil-fuel lobby at the climate talks, with concerns that the oil producers were putting great pressure on the organisers to dilute the calls for a swift end to use of carbon fuels for energy.

Gender, Science and Innovation Day at COP26 saw the announcements of state collaborations to make low-carbon materials and industrial technologies affordable, and to improve climate resilience in developing nations.

Mission Innovation

The Mission Innovation initiative is backed by 23 governments, including the UK, Australia, the EU, China and India and has priority focus areas and workstreams on decarbonising cities and industrial processes, scaling renewable fuels and deploying carbon capture technologies at scale.

And an Industrial Deep Decarbonisation Initiative (IDDI) has committed participating nations to disclose the embodied carbon in major public construction projects by 2025 at the latest, to provide a baseline for developing a 2030 reduction target for embodied carbon.

The UK and Italy, as partners in the COP26 Presidency, are setting up a research partnership to address key challenges to realising a low-carbon and climate-resilient future. The UK government has announced a standalone £7m fund for space innovation, with a focus on climate and environmental management.

And an Adaptation Research Alliance (ARA) of 90 governments, research institutions, community groups and academics has been set up to improve resilience of communities most affected by climate change.

Green healthcare

A total of 47 countries representing more than a third of the world’s healthcare emissions have committed to transforming systems to make them climate-resilient and low-carbon. Participants include Malawi, Spain, Morocco and the US.

The UK has earmarked £165m for initiatives to support women in the Asia-Pacific region participate in activities including green finance and climate adaptation scheme delivery.

Transport Day

Transport day at COP26 saw delegates digesting the fairly ambitious draft agreement. This “cover decision” published by the COP presidency was carved up in some degree by the end of the climate talks in Glasgow. Coal phase out was a key part of the draft, which focuses on adaptation.

With fossil-fuel action in mind, the government announced £210m of funding to support Rolls Royce plans to develop a fleet of small modular reactors (SMRs) in the UK, predicting the technology could play a significant part in the transition to net zero emissions.  Funding is matched by £250m from the private sector.

At the same time, Climate Action Tracker reports that 2.4C of warming is likely by the end of the century, based on current commitments from nations. In contrast, the International Energy Authority predicts a rise of 1.8C based on early analysis of new pledges at COP26. The pre-talks UN emissions gap report predicted 2.7C.

Petrol and diesel

With the focus on transport there was sobering news that Germany, the US and China – the world’s three biggest vehicle markets have not signed up to a 2030 ban on new petrol and diesel car sales and a 2040 ban on new petrol and diesel HGVs. Reports also suggest that VW and BMW will not join, with Toyota “highly unlikely” to add its support. Brands set to support the scheme include Ford, GM and Daimler.

Meanwhile, 18 nations signed a new declaration in support of the development on emissions targets for aviation that are aligned with the Paris Agreement’s 1.5C temperature pathway. The targets will be pre-2050 and developed in line with global net-zero by 2050.

Canada, France, Ireland, Japan, Spain, Turkey, the US, the UK, Korea, Norway, the Netherlands, Morocco, the Maldives, Kenya, Finland, Costa Rica and Burkina Faso are the first signatories to the declaration – collectively responsible for more than 40% of global annual emissions from aviation.

Aviation and shipping

The Sustainable Aviation Buyers Alliance (SABA), launched in April by RMI and the Environmental Defence Fund, is now accepting new members. Founding members included JP Morgan Chase, Boeing, Deloitte, Microsoft, Netflix, Deloitte, Boston Consulting Group and Salesforce. It aims to bring together the purchasing power of fuel buyers to stimulate the scaling of supply chains for alternative fuels and to encourage policy support.

A new Clydebank Declaration will unite at least 19 nations in developing zero-emission shipping routes between ports. The green shipping corridors will test emerging technologies. The Global Maritime Forum and World Economic Forum forecast that a mix of technologies will be needed for low-carbon shipping, including hydrogen, ammonia, methanol and electrification.

The aim is to establish at least six corridors by the mid-2020s, which are likely to be shorter routes, and to add many more routes, including long-haul, by 2030.

China and US collaborate

The world’s two biggest emitters, China and the US, have published a declaration to convene a joint working group regularly, with the first meeting set for early 2022, on issues including methane emissions, low-carbon energy and deforestation. The target is to agree long-term net zero plans with effective actions to be taken this decade, to align closely with the Paris Agreement.

How we live

The focus on Thursday November 11 at COP26 – the last day of focused discussion before the intense final negotiations on Friday and over the weekend was on Cities, Regions & Built Environment. We need more e-bikes, cheaper public transport, more energy-efficient homes and business premises, better water management and efficient use at home and work.

The UK government launched a fund to support cities and regions in developing countries to decarbonise. The Urban Climate Action Programme (UCAP) is backed by an initial £27.5m and will support cities including Lagos, Johannesburg, Jakarta, Kuala Lumpur, Lima, Bogota and Mexico City.

The Beyond Oil and Gas Alliance was launched, with 11 countries initially signed up. The Alliance requires nations to close licensing or leasing rounds for oil and gas production and exploration and to set a Paris-aligned date for ending oil and gas production and exploration on the territory over which they have jurisdiction.

COP26 had some plus points and a load of negatives at the end but the discussions and actions will continue, because they have to. The climate summit gave clear signals to business that they will need to lead on the long road to net zero.

Your pathway to net zero

Reducing carbon emissions makes sound business sense as well as helping to ease the pressure on climate. Companies can become more profitable and attractive to customers at the same time.

SaveMoneyCutCarbon will help you on your pathway to net zero. We have delivered over 1,000 projects for the widest range of customers, from blue chip businesses to SMEs.

These projects have saved 27 million KwH of electricity, 727 million litres of water, while cutting carbon emissions by the equivalent of 2 million miles in a petrol-fuelled car.

Book a call now with one of our Carbon Mentors on 0333 123 5464.