Sustainability is rising up the boardroom agenda as businesses face growing pressure to reduce their environmental impact in line with the UK’s 2050 net zero targets. Many organisations are choosing to make their own net zero plans ahead of any mandatory reduction, adding to shareholder and customer expectations of businesses to act sooner rather than later. The strategy required to transform operations and activities to deliver such change means that sustainability needs to come from the top, yet new research has found a mixed response from finance directors on their engagement with the issue.
The need to focus boardrooms on the topic has been compounded by new mandatory reporting: this financial year, around 12,000 organisations in the UK will have to publish their carbon footprint in their annual Director’s Report to comply with the Streamlined Energy and Carbon Reporting scheme (SECR). The scheme applies to any large organisation consuming over 40,000 kWh of electricity that meets two of the three criteria (250 employees or more; balance sheet assets of £18m or more; and a turnover/gross income of at least £36m.
For many firms, this means putting environmental performance in the public domain for the first time amid growing public scrutiny. From investors to supply chains, SECR has created an easy reference point for anyone wanting to inspect or compare firms’ carbon reduction efforts. But are businesses making carbon a C-suite concern?
Pressure to act
New research conducted amongst finance directors from across the UK has confirmed that the majority of firms are feeling the pressure to reduce their emissions. 51 percent of respondents believe the impact on business reputation is the key driver behind their carbon reduction plan, closely followed by consumer expectation (41 percent) and supply chain requirements (20 percent). 60 percent of businesses also believe that the regulatory environment is influencing their plans, from government regulation to mandatory emissions reporting measures.
However, not all businesses have translated these pressures into action. Two thirds of firms have created a carbon reduction plan, but only 49 percent are actively implementing it and even fewer are actively measuring energy consumption across their organisation, a crucial tool in creating meaningful plans to reduce carbon emissions and boost efficiency.
What’s more, despite the increasing focus on firms’ environmental efforts and the need for strategic direction, just 38 percent of firms have created roles dedicated to increasing sustainability within an organisation and only 22 percent of businesses have a board member specifically responsible for the issue.
The pandemic has undoubtedly put the brakes on some plans. However, the anticipated economic pressures expected in the short to medium term from the crisis – coupled with Brexit – means the business case for cost reduction through energy efficiency measures has strengthened. Sustainability also requires long term strategy – studies consistently show that those organisations most committed to environmental social governance (ESG) outperform their competitors on the stock market – and as global credit ratings agency S&P states when reviewing organisations, “how a company performs on material individual sustainability factors relevant to their sector can be an important determinant of overall performance”.
A roadmap for success
Businesses will be expected to play a significant role in the UK meeting its 2050 net zero targets, meaning action to reduce emissions will no longer be optional.
Reporting schemes such as SECR can help organisations to structure their energy reduction plans and focus the boardroom on sustainability. A third of finance directors weren’t yet aware of their reporting obligations, but the requirement to publish a firm’s annual carbon footprint – along with commentary to explain what has (or hasn’t) been done to reduce it – is proving to be a key driver for many organisations.
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External scrutiny is undoubtedly a crucial factor behind firms’ plans to bolster their green credentials, but acting on energy and emissions reduction can unlock both reputational and environmental benefits as well as significant cost efficiencies: put simply, sustainability makes good business sense.
SECR requires businesses to compile detailed reports of their energy and transport usage and emissions. This insight should form the basis of any plan, from identifying priority areas and quick wins to informing transformative strategies. That could mean immediately implementing behavioural changes and switching to ‘green’ renewable energy tariffs through to setting science-based targets to create meaningful emissions reduction goals for the future.
Many organisations are using SECR to shout about their sustainability efforts and stand out from competitors. At Inspired Energy, our experts are already working with businesses to ensure compliance as well as helping to plan, implement and optimise carbon reduction strategies and projects that stand up to scrutiny.
Whether starting from scratch to ensure compliance or determining how to evolve plans to create a long-term strategy, taking action now should mean businesses reap the benefits in the future. More information about creating sustainability plans and a copy of the research report Sustainability in the C-Suite is available at https://inspiredenergy.co.uk/report