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The most important letter in the acronym changes according to who you speak to and when. Corporate governance had for some time been viewed as the most important measure, whereas social responsibility gained prominence during the days of the ‘Big Society’.
‘E’ in the spotlight
Currently, green measures are in vogue, and many organisations are looking more closely at their operations to check they have answers to questions that outside observers and potential investors ask about their environmental impact. What are your carbon emissions? How will you reach net zero? Do you invest in polluting industries?
Key to a business’ ability to answer these is the creation of a net zero transition plan. These plans will show how an organisation will reach net zero by 2050 across its operations. The Transition Plan Taskforce (TPT) has recently published draft mandatory standards that listed companies and financial firms need to observe when developing these plans, with the view to completing work this year. This could then be rolled out to other industries in the next few years.
This progress is heartening, but there is something lacking from the vast majority of plans that businesses have been working on.
A failure to plan…
A recent study by EY found that just 5% of the UK’s largest public companies have ‘credible’ transition plans – i.e. plans that meet the requirements of the draft Government guidance. This is despite the fact that 80% have undertaken at least some planning for how they will achieve net zero.
This is not surprising. Some businesses have filed the task of creating a comprehensive transition plan under ‘too difficult for now’ – which poses a host of issues. While plans are currently only mandatory for listed companies and financial institutions, a consultation on making them compulsory for all businesses is coming later this year – although this is by no means a certain outcome. Failure to produce a plan could lead to regulatory action, or at the least reputational damage – not to mention the ongoing environmental impact.
Credibility is key
Producing a credible plan means businesses must begin thinking about how they will achieve net zero now. Investors are demanding more action from industry – and plans should cover not just scope one, two and three emissions, but broader measures like the habitat destruction of the impact on endangered species. Credible means achievable – organisations must think hard about what can be achieved, and when. It also means meaningful – ongoing scrutiny of greenwashing means that plans should target carbon emissions reductions, not offsetting, where possible. Plans must also reflect the nuances of each industry – for example, demonstrating the role of financial services as a catalyst for green investment, and a driver of net zero.
To achieve this credibility, industries need to engage with the Government before it is too late. The TPT’s model must work for all industries, while providing the impetus and framework to realistically transition to net zero. Already, some in the green movement are calling the current proposals too technocratic and directive – and calling for plans that enable businesses to say what they need from Government. A policy comms campaign highlighting the needs of your sector could help shape the planning process – benefitting the reputation and environmental credentials of an organisation. Lip service is no longer enough when it comes to net zero – it’s time for Credible ESG.
If your business would like to discuss how strategic communications can help you navigate the road to net zero, get in touch with Hanover’s Sustainability Team via [email protected].