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Target shortfall

Businesses failing to set net zero strategies

CO2 and carbon

Many firms are not taking action to reduce emissions

British businesses large and small are failing to instigate net zero strategies despite the push on decarbonising the economy.

A survey by the British Business Bank found that smaller companies are responsible for about half of emissions produced by businesses and more than three in four (76%) are yet to implement a comprehensive decarbonisation strategy.

Separate research shows that of companies listed on FTSE 100 Index, 45 have no net-zero target at all and just 23 have a scientifically approved plan.

The study by ESG investment research and asset manager Arabesque found that 28 FTSE companies are on course to contribute to a global temperature rise of 2.7 degrees Celsius or above by 2050. Scientists believe such a rise would lead to a worst-case climate scenario.

Just 3% of smaller businesses surveyed by the British Business Bank say they have measured their carbon footprint in the past five years and subsequently set an emissions reduction target.

More than a third of businesses (35%) say the reason for not instigating a green plan is the costs associated with the net zero transition, particularly upfront capital costs (21%), followed by feasibility (32%). Over one in ten (12%) said that lack of information was preventing them taking action.

There is limited proactivity from businesses to improve their own knowledge and capability, for example, with more than half (56%) in the survey saying they have taken no actions to change this. 

The data reveals around half (52%) of smaller UK businesses are reactive or simply disengaged in their attitudes to cutting emissions and have ‘low carbon transition maturity’.

20 barriers to action

The research found that smaller businesses identified more than 20 barriers preventing action on net zero, demonstrating the complexity in addressing the issues on a wide scale and the need for tailored approaches. 

British Business Bank CEO Catherine Lewis La Torre said: “More than half of smaller businesses say they’re not ready to prioritise decarbonisation, so clearly more needs to be done.”

Small business minister Paul Scully said: “Small businesses need to be front and centre in our national effort to reduce emissions, which is why we’re working closely with the government’s British Business Bank to bake our top priority of reducing carbon emissions into the business finance pie.”

The research comes on the back of the government’s highly-publicised net zero strategy.

“We are pulling every lever we can to get every part of the UK’s business community on board with the vital need to reduce emissions and build back greener,” Mr Scully added.

Failure to set ESG goals

Nearly a quarter (24%) of business are not making any attempt to measure the potential impact of their environmental, social and governance (ESG) goals. Nor are they seeing the benefits a robust ESG approach could have on business and society.

A survey by audit, tax and consulting firm RSM UK revealed that almost half (44%) of 416 UK middle market business leaders (defined as companies with a turnover between £10m and £750m or financial institutions with assets under management of £200m to £7.5bn) questioned are unfamiliar with ESG.

Alex Tait, RSM’s regional managing partner for Scotland and Northern Ireland, said: ‘ESG is about responsible business.

“Being out of tune with the net zero carbon agenda and social responsibility is not a viable option.

“It’s now a clear business imperative as reticence or inactivity in this space could have very real impacts on future growth, as customers, employees, investors and other key stakeholders increasingly demand strong ESG credentials.

“However, the whole area is complicated and covers a wide range of issues. It’s difficult to define, difficult to know how best to engage and sometimes difficult to measure, despite there being no lack of standards.

“In fact, the number of different frameworks across the globe actually adds to the complexity as businesses can effectively pick and choose aspects which they report on making benchmarking across organisations very difficult.

“Without a clear, unified approach to standards, it is easy for businesses to be in the dark on what to focus on and how best to measure impact.”

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