Decarbonisation progress of UK businesses slowing down

06 May 2024 Consultancy.uk 3 min. read
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UK businesses will fall behind the Paris Agreement pathway by 2025 at their current rate of decarbonisation, according to a new study. Analysing the disclosures of 1,800 UK-headquartered companies, the researchers found that the average rate of emissions reductions has fallen by 3% over the last two years.

The last year has seen a number of whitepapers contest whether or not the UK is on course to meet its net zero goals. Early in 2023, the government’s updated carbon budget delivery plan was analysed by the WWF, which found that the total projected emissions reductions from now until 2037 for agriculture and land use were 58% less than the emissions reductions figures underpinning the original net zero strategy. In contrast, another study from KPMG suggested that the UK may actually be half-way to net zero.

Whichever side of the debate researchers came down on, however, there was still consensus that the hardest part of the journey to decarbonisation was still to come. Despite cutting total emissions, the UK still faces big challenges in the building, industry and transport sectors – and with the government and opposition both seemingly distancing themselves from a number of landmark green policies in recent months, some experts have warned that the country risks squandering its early sustainability leadership.

Decarbonisation progress of UK businesses slowing down

To that end, new research from The Carbon Disclosure Project and Bain & Company may make for worrying reading. The study of 1,800 firms headquartered in Britain – including 94 leading companies listed in the FTSE 100 index – found that 38% of them are not delivering emissions reductions in line with the Paris Agreement, which seeks to limit global warming to 1.5°. Worse, nearly two-thirds of companies reported an increase in absolute emissions across Scope 1, 2 and 3 emissions between 2022 and 2023, meaning the rate of emissions reductions overall fell from 9% in 2022 to 6%. If these trends were to continue, UK-based businesses as a whole will fall behind potential 1.5° pathways within one to two years.

Scope 3

One of the factors which could be to turning this tide could be Scope 3 emissions. Indirect Scope 3 emissions are estimated to account for up to 95% of a company’s carbon footprint, as they include all emissions generated within an organisation’s value chain, including upstream and downstream emissions. So, while firms have made rapid progress on Scopes 1 and 2, which come from assets or environments they directly control, if they were to make more rapid progress on Scope 3 emissions, it could be much more helpful in keeping them on track for their net zero targets.

Decarbonisation progress of UK businesses slowing down

Amid the rise of costs around the world, many companies have also sought to pass the buck to consumers. This might be counter-intuitive, though, as customers are increasingly expecting sustainability to be a normal feature of any product, and not a premium add-on – leading them to shop elsewhere. According to the researchers, addressing this could also help supercharge businesses’ efforts to bring their emissions down.

“UK-based companies are failing to maintain the pace of decarbonisation needed to align with a 1.5° pathway. A key driver of this is that many of the easiest emissions reductions may have already been achieved, so businesses must now grapple with harder-to-abate parts of their operations,” said Katherine Kajzer-Hughes, a partner in Bain & Company’s sustainability practice who leads the firm’s sustainability work with UK industrial business. “Companies can still establish credible transition plans that reinvigorate their rate of decarbonisation. We find that companies that link decarbonisation with value to the customer, and to financial outcomes, can catalyse emissions reductions.”