Businesses complain at lack of funding to reduce their own emissions

12 October 2023 4 min. read
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In spite of another year of insistence that “now is the time” for businesses and governments to act on climate change, many leaders continue to drag their feet on sustainability issues. A new study from L.E.K. Consulting found that three-quarters of UK business executives suggest they see funding as a barrier – though as fires raise and seas rise, the validity of this excuse is a focus of growing debate.

“It is tempting to delay investment, especially in the face of economic challenges,” summarised L.E.K. Consulting Vice Chair for Sustainability John Goddard. “But the stakes are clear – firms that are farther along in their decarbonisation journeys are already realising benefits, and delaying investment is likely to put your firm at a competitive disadvantage. The time to invest — and to act — is now”.

Global strategy consultancy L.E.K. surveyed 400 leaders of global companies to gain insight into decarbonisation strategy and challenges. Of the respondents, 34% were in the industrials sector, 24% in healthcare, 21% in consumer products, 15% in transport and 8% in energy. And despite the challenges, the report found that the majority of UK business leaders were making aggressive plans to eliminate carbon emissions.

U.K. business leaders say decarbonisation efforts have significant benefits

While a global average of 82% of firms had established a formal decarbonisation strategy, that rises to 95% among UK respondents. UK leaders also reported what L.E.K. asserted were the most ambitious targets – with 70% of UK businesses targeting net zero on Scope 1 (direct), 2 (indirect) and 3 (supply chain) by 2050. However, considering the Paris Agreement itself sets out a call to see emissions reduced to net zero by 2050, the study also finds that whether or not the national economy is ahead of the international curve, 30% of its businesses have not drawn up plans to hit the bare minimum targets to help keep global warming to no more than 1.5C.

At the same time, the Paris Agreement also suggests emissions need to have been reduced by 45% by 2030. While the global average of 73% said they were ‘on track or ahead of their targets’ relating to 2050 – rising to 82% in the UK – it is unclear where they are on their journey to 2030. Meanwhile, in the UK 18% of firms with targets – as well as the 30% without net zero targets for 2050 – there is a sizeable portion of firms which are ultimately not doing enough to help avert a global catastrophe.

Rebecca Scottorn, co-founder of the L.E.K. Sustainability Centre of Excellence, commented, “Customers, employees and investors continue to demand decarbonisation. These drivers very much remain, regardless of a changing policy environment. Despite the increase in uncertainty created by long-term targets moving, it will be important for leaders to develop realistic and tangible roadmaps to make progress in the short-term.”

Top 3 Barriers to Decarbonisation in the U.K.

When it comes to what exactly is holding UK businesses back on their sustainability journey, the answer might not come as much of a surprise to many people. Even as 57% of executives insist that sales have been positively impacted by their decarbonisation efforts, 55% saying they are more energy efficient, and 53% saying this has led to reduced operating costs, 77% of leaders in the UK say a lack of funding sustainability is a barrier to their net zero efforts.

With the apparent economic advantages in place, it might be difficult for leaders to justify a massive transfer of wealth from the public to fix a problem the unchecked industrial actions of business helped cause in the first place. At the same time, it is a hard sell to suggest this funding should help sate the demands of the 72% bemoaning a lack of ‘economically viable’ low-carbon or technological processes to help become more sustainable. Every driver in the UK is required to have car insurance before they take to the road, and suggesting it is not ‘economically viable’ has yet to see that obligation waived for anyone. In a more direct comparison, businesses already have to meet a number of legal and social obligations to operate in the UK.

Firms are required to pay the minimum wage, so that their employees can guarantee a minimal standard of living while in their employment, for example. If a business cannot meet that obligation, the options open to its leaders are either to run everything themselves, or not to have a company – not to have that waived because it is not ‘economically viable’, or because there is a lack of state subsidies to take on new workers. With businesses having already traded on decades of R&D credits for sustainability, if they are still coming up short, it remains to be seen if governments begin to police them in a similar way on environmental standards.