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The power of business to achieve net zero
Working for an organisation that was established over 30 years ago to harness the power of business to deliver sustainable prosperity in the North West, you will be in no way surprised that I approach the question of ‘how can we reconcile growth ambitions with net zero?’ very much from the business perspective.
In considering the ‘how’, we have to remind ourselves and others that business is a key part of society and the community, and as such they need a voice and have the right to an opinion. That is not always easy at the moment as business is seen in some quarters as a problem, or ‘the enemy’, and business is only part of the growth story for any given place and economy.
Businesses come in many different shapes and sizes, from sole traders working out of a garden shed or spare bedroom to big global corporations and mostly somewhere in between.
Most organisations are trying to get by and, if they can, do the right thing in the process.
Regardless of their size, successful businesses need three core things – a clear purpose, and the skills and resources to deliver on that purpose. From a resources point of view that means access to finance and generating profits – which has to mean growth. Similarly, to attract the brightest and best talent business has to increasingly demonstrate not only positive purpose and values, but also opportunity for its workforce – which again is linked to growth. A growing business presents opportunities for personal development and growth for its staff.
Not growing is not an option. Not growing is standing still whilst all around you keeps on moving, including costs. Not growing means not having the money to deliver against purpose.
How we want the economy to grow is a different question.
Increasingly, businesses are being scrutinised from both ends of the spectrum. Investors and funders at one end, wanting assurance that the business’ activities are positive and not harmful to society, the environment or by association reputation; and, at the other end of the spectrum, from the customer and consumer who are increasingly exercising choice based on a wider set of values than cost alone. This scrutiny is, in part, what is driving the requirements on larger businesses to report on ESG – Environment, Sustainability and Governance – as part of their annual reporting cycle.
Increasingly business will have to think more proactively about how they reconcile their growth ambitions with the net zero agenda. That is in terms of operation, process, products and waste. They also need to assess what the negative impacts of climate change might be on their own business as part of their reporting process. They need a plan for achieving net zero, and one that is robust enough to satisfy funders, shareholders and their customers, whether that be business-to-business or business-to-consumer.
Whilst at the moment much of this relates to larger businesses, banks and other funders are progressively lowering the threshold for the size of business to which these requirements will apply. Within the next three or four years pretty much any business seeking funding from a mainstream source like a bank will have to monitor and report on their environmental impact and sustainability.
To be fair there are a number of great examples of how businesses, including many energy-intensive industries and the waste sector, are working collaboratively to drive forward plans for decarbonisation and achieving net zero. Here in the North West this includes the activities of Net Zero North West, an industry-led cluster acting as a public and private sector investment accelerator for industrial decarbonisation and clean growth projects in the region. It unites business, regional leaders and academia, and is committed to delivering a co-ordinated net zero vision for the region.
For Net Zero North West in fulfilling their mission, and for the rest of us in achieving net zero more widely in the UK and globally, there will be challenges, including how the cost of transition is shared between business and consumers. The pace of change will be another challenge for many businesses; partly because of the focus brought by COP26 and partly driven by many people re-evaluating what matters more to them in the aftermath of the Covid pandemic. They want a better world and a more equitable society. They want change, and they want it now.
Those working in economic development know how long it can take to move an investment from initial concept through to a full business case and on to funding and delivery. Major industrial and infrastructure investments take even longer. Change takes time and there needs to be a degree of honesty with our communities about how quickly positive change will happen.
We can, and are starting to, make positive change now – indeed many of the businesses that North West Business Leadership Team counts as members have been doing more than just talk about sustainability and net zero for some time. However, for certain sectors and industries that will need to find hundreds of millions of pounds for investment to achieve net zero, seeing tangible change will take time.
Yet here are huge green economic opportunities, through identifying and plugging gaps in supply chain capacity and capability, adoption of digital technologies and supporting innovation in new materials and processes; and in providing opportunities for people to develop and learn new skills. Building a stronger circular economy will be key to this, along with a better recognition of the role of natural environment in helping mitigate and offset residual emissions.
So, to conclude, we can keep growing, and in ways that do not ‘cost the earth’, to coin a phrase. But it will not happen overnight.
Andy Hulme is Head of Innovation and Growth at North West Business Leadership Team, and a member of the Institute of Economic Development. Andy was a panellist on the IED’s “Economic development: how can we reconcile growth ambitions with net zero?” webinar on 9th November.