27 Mar Lewis Davey Monthly Update
Chris Skidmore announced ‘Better Earth’ plan to support a low carbon future
Net Zero Review author Chris Skidmore has announced the launch of a new strategy to support national and local governments’ design and implement progressive legislation to accelerate the movement to a low-carbon future.
The announcement happened at the recent Edie 24 Better Earth conference in London. During a speech on policies for the net zero transition, Skidmore explained that Better Earth intends to support decarbonisation plans, offering support and investment to enable emissions reduction plans to be achievable. The strategy will be managed industry professionals in energy infrastructure, green finance and policymaking. The core focus will be creating real-term and real-time reductions in emissions by 2030.
Climate scientists have emphasised that global emissions should be reduced by 50% by 2030 to realistically achieve the global heating target of 1.5C. Skidmore highlighted that achieving decarbonisation and emissions reduction has never been focused on the 2050 target and believes the UK must focus on the short-term goals and drive continued progress.
Net Zero Policy Tracker 2024 Update
Across the entire economy and each industry, the latest net zero policy tracker assessment suggests a continued lack of progress on decarbonisation.
As the time to implement effective climate actions reduces, the next Parliament will be critical. The latest tracker update suggests that strong leadership covering all elements is required, especially in areas of the economy where decarbonisation plans are most needed. In these fields, we require innovation and ambition to take action, supported by solid policy planning.
With some concerns over the rate of progress on environmental action in the UK Government, it’s critical that political leaders, especially those connected with the decarbonisation strategy, deliver structured and credible plans on how the UK can remain on a path to net zero. Read the latest tracker report here.
Greenwashing crackdown in UK could leave big business with hefty fines
A recent report has suggested that up to 50% of big businesses in the UK are at risk of being fined for greenwashing due to stricter enforcement within the consumer protection law from the Competition and Markets Authority (CMA).
A few years back, several consumer protection agencies collaborated and conducted a survey that found that 40% of international businesses had made misleading environmental claims. The CMA has invested £1.3 million and thousands of hours into greenwashing studies between 2021 and 2024. Some of the findings highlight the use by organisations of vague language associated with sustainability and environmental measures. Such wording and potential claims require clear evidence, or businesses could face significant penalties. The CMA can impose fines of up to 10% of a company’s global turnover.
Many cases of greenwashing may be unintentional due to the lack of legal definition associated with this space and a rapidly changing regulatory environment. The EU recently banned greenwashing via the Empowering Consumers for the Green Transition Directive. There is also the new Green Claims Directive, which ensures any green claim in the European market is verified by an independent party. The Green Claims Directive is part of the EU Green Deal – a set of over 70 regulations that UK retail businesses looking to export overseas must follow. EU members have also actively supported the Corporate Sustainability Due Diligence Directive (CSDDD), which holds businesses accountable for environmental and human rights impacts within their value chains. This directive means that companies with a turnover exceeding €450 million who seek to have their products sustainably certified must ensure their entire value chain meets the necessary standards.
Some business leaders believe there are challenges associated with implementing new regulations. Business leaders will need to perform comprehensive reviews of any environmental claim.
Compare Ethics believes the penalties for greenwashing will increase over the next year. Regulators are holding businesses accountable, and investors are actively monitoring business activities because they have regulatory pressure that needs attention. There has been an increase in the number of European consumer protection groups and legal groups referring companies to those authorities.
The Compare Ethics study suggests that many large companies lack the investment in the processes required to comply with new sustainability regulations. The investment for a standard organisation is in the region of £500,000-£1 million annually, if it decides to manually verify all green claims. Establishing the technology would increase the costs to £2-4 million, and an additional £1-2 million would be required to manage the system.
It takes considerable time to gather the correct information, establish the verification systems and report to the appropriate regulators. As a result, many UK businesses could experience product issues if they fail to verify their entire product supply chain and meet the other necessary measures.
Iberdrola announces major investment in renewable energy projects
Iberdrola has confirmed it will commit to £15 billion of investment in renewable energy before 2026, which includes £4 billion in partners in projects already established. This announcement came with the larger plan to invest £40 billion in enhancing electrification.
Over 50% will go to offshore wind projects in the US, UK, France and Germany. All of the investment will go towards projects already in construction. Ignacio Galan, the executive chairman of Iberdrola, explains that the electrification of energy is expanding exponentially in the coming years, supporting decarbonisation, strengthening energy security and reducing the impact created by fossil fuels.
Customers are also motivating the necessary changes, and people are choosing alternatives to fossil fuels. More individuals shift to electric vehicles or from gas boilers with heat pumps. Iberdrola’s strategy will focus on generating an enhanced grid to strengthen the security of supply and a strong expansion of renewable energy capacity, driven by the decline of fossil fuels and rising demand for alternatives.
International investors looking overseas for stronger green policies
Under 20% of international real estate businesses believe the UK is a leading market to invest in sustainable buildings, with over 60% intending to move investments overseas to other markets more capable of supporting their sustainability goals. This could collectively amount to over £30 billion of private investment this decade.
The findings were presented by the UK Sustainable Investment and Finance Association (UKSIF), a collaborative group of over 300 financial institutions managing nearly £20 trillion of assets worldwide.
UKSIF assessed 100 decision makers at businesses with investments in the UK housing market, including associates from HSBC and Federated Hermes. The survey highlighted that delays, alterations and changes in green policy from the national government have impacted investment into low-carbon buildings and driven many investors to look overseas.
Over 60% of those surveyed expect to reduce investment in the UK and reallocate their money overseas, in markets more appealing for low-carbon new build or retrofitting. Two in five stated that accessing private capital for low-carbon projects remains a challenge in the UK, especially for retrofitting.
The survey discovered that an impactful policy change from the UK Government involving the removal of requirements for landlords of privately rented properties to improve their energy efficiency had a significant impact. The requirements would have made landlords upgrade properties to reach an EPC C rating by 2028.
Research by UKSIF suggested that re-instating this commitment but shifting the deadline to 2035 could support landlord concerns and display a decisive message to investors.
James Alexander, the CEO of UKSIF, explains that investors require further clarity from the government on sustainability policies, and only then will there be opportunities for the UK housing market.
The research suggests a demand from real estate businesses and investors to invest in the UK. Changes to policy and government measures to reduce the skills gap are vital if the UK wants to remain competitive and attractive to other countries.
Resistance to implementing the CSDDD
The EU Council recently confirmed that they had failed to pass the Corporate Sustainability Due Diligence Directive (CSDDD) in a blow to the Union’s commitment to the Paris Agreement and other groups who export to Europe.
In 2022, the European Commission voted to implement a directive on corporate sustainability, and diligence would include mandatory obligations for companies to address their impact on human rights and the environment. The framework intended to strengthen the regulatory capacity of the EU in measuring corporate activities. The key elements were:
– Integrate due diligence on impacts on people and the environment into corporate plans and management systems.
-Include a detailed analysis of their approach and code of conduct
-Obligations to integrate climate transition plans and ensure business models and strategy align with the Paris Agreement.
-Create and integrate a complaints strategy with clear pathways
-Incorporate supervision and sanctions and ensure member states establish supervisory authorities to measure compliance within obligations, with up to 5% of annual revenue penalties.
Despite the clear regulatory structure of the CSDDD, large EU members resisted the directive, especially Germany and France.
Many reports have documented the impacts of European-based corporations on the environment and their infringement on the human rights of countries and communities within the global south. A significant part of the CSDDD was that the activities of these types of businesses would be subject to stricter reviews.
Before the CSDDD vote, over 50 Brazilian-based organisations urged the German Chancellor to vote for the directive. With many German businesses purchasing products in the region, there was the opportunity to create a series of benefits for this area. The organisations emphasised the connections between Brazil and Germany through a series of supply chains that require further attention on the current level of human rights and their environmental impact.
Several other organisations outside Brazil have voiced concerns about the CSDDD failing to be adopted. Many environmental and human rights organisations believe that failure to implement the CSDDD will directly impact the lives, communities and ecosystems affected by business processes and impact the credibility of the EU as a legislator.
Industry experts are pushing for the EU to adopt policies that hold human rights actions as a core value and show their legal commitment to critical climate targets.
Read the latest update on the CSDDD framework
SSE and Equinor plan to develop 900MW hydrogen power station
SSE Thermal and Equinor are collaborating on plans to construct a hydrogen power station, which could be operational by 2030. The 900 MW Hydrogen Power Station will run on hydrogen but can use natural gas for a selected period if the necessary hydrogen infrastructure isn’t readily available. According to the reports, the intention will be to transition to hydrogen when ready.
The project will reach environmental scoping next month before SSE and Equinor launch a public consultation before making the full planning application.
In the last week, the UK Government reassessed plans for gas-powered facilities. After the second consultation of the Review of Electricity Market Arrangements (REMA), plans suggested that new power plants be net-zero-ready and capable of operating on hydrogen.
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