Later this year, the UK hosts COP26 in November and also the G7.
It hopes to use that opportunity to demonstrate climate leadership and, at the same time, to show that businesses and investors share the same ambition, to reduce the levels of greenhouse gas emissions.
Chartered Accountants Worldwide recently caught up with the Rt Hon Anne-Marie Trevelyan MP, who explains why she believes chartered accountants should lead the call for achieving net zero carbon emissions.
British businesses, and therefore chartered accountants, have a really important role to play here in terms of leading by example. Part of our role in government is encouraging them to accept this challenge – so that they can exploit the opportunities arising from the net zero transition, and to set an example to their global counterparts and sectors, Ms Trevelyan says.
Few are better placed to make a statement like that. Ms Trevelyan is an ICAEW Chartered Accountant, having spent many years in practice. Last year, the UK Government made her its Champion on Adaptation and Resilience for the COP26 Presidency, and in January 2021 she was appointed as Minister for Business, Energy and Clean Growth.
Ms Trevelyan believes it’s everyone’s role to tackle climate change. Bringing businesses and the public along is vital to reach the UK’s climate change goals, and as trusted advisors of business, chartered accountants “spot risk and advise companies on managing change effectively”, she says.
There is a survival imperative behind all this, requiring businesses to adapt to survive. Ms Trevelyan lays out the danger in stark terms. “Climate change poses risks to companies, financial institutions and individuals alike. Both physical and transition risks could have material impacts on the value of companies and their assets.”
Physical risks include those arising from the climatic impact of higher average temperatures – such as the increased frequency and severity of extreme weather events. Transition risks arise from the changes in technology, markets, policy, regulation, and consumer sentiment which will result from our transition to a low-carbon economy.
If these risks are not properly managed, the Intergovernmental Panel on Climate Change estimates $69 trillion in global financial losses by 2100 from a two-degree warming scenario. Disclosure, in this case the provision of material climate-related financial information, can help support investment decisions aligned with our transition to a low-carbon economy, Ms Trevelyan says.
Committing to the UN’s Race to Zero is the most effective way of managing this risk and achieving net zero goals unlocking the benefits of net zero growth. “Via any of the accredited initiatives, a business can receive recognition for decarbonisation work already completed, and advice on how to take the next steps. The pathway to net zero is not always clear but via the UN’s Race to Zero, a business can be sure they are heading in the right direction,” she says.
Complementary to Race to Zero membership, Taskforce for Climate-related Financial Disclosures, or TCFD, is an excellent way of identifying and disclosing risks related to emissions, Ms Trevelyan says. “The UK is committed to being the first G20 country to make TCFD aligned disclosures mandatory across the economy,” she adds.
The Minister acknowledges that aiming for these goals presents challenges, but also opportunities. “Taking action now to get ahead of the curve is key here – chartered accountants should be leading this call for change,” she says.
“My message to businesses of all sizes is that the transition to net zero comes with wide-ranging benefits – reducing running costs, saving money, and attracting new customers who want to shop sustainably,” Ms Trevelyan tells Chartered Accountants Worldwide.
If we can all move together at the same time the costs of making the change are fundamentally lower and we can move much, much faster. This is why I’m encouraging businesses to work with their customers and supply chains.
According to the Minister, there are currently more than 460,000 jobs in low carbon businesses and their supply chains across the UK and low carbon exports are already worth billions of pounds each year.
Ms Trevelyan gives examples of UK businesses that are already seizing the economic opportunities to be gained from leading the green revolution. By September 2022, Drax will end the use of coal at Drax Power Station, having ceased commercial coal operations in March. The foodservice company Compass Group UK & I has goals in place that include using 100% reusable or recyclable packaging by the end of 2022, sourcing 70% fresh meat, dairy and vegetables from regenerative agriculture sources by 2030 and switching from animal to plant-based proteins across all menus by 20% by 2025, rising to 40% by 2030. Johnson Matthey, the chemicals company, is committed to sourcing 60% of electricity from certified renewable sources by 2025.
Government and business must work together to achieve climate targets, and Ms Trevelyan pointed to the progress made to date. “The UK’s successful cross-sector collaboration with government has helped to achieve record clean growth over the last three decades. Between 1990 and 2019, our economy has grown by 78% while our emissions have decreased by 44%. This is faster than any other G7 nation.”
Looking ahead, the UK has set a target to reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels. This target is consistent with the Paris Agreement temperature goal, Ms Trevelyan points out.
As this is the year of COP26, we need to lead the way and urge countries and companies around the world to join us in delivering net zero globally. Achieving our UK climate goals, like our new Sixth Carbon Budget and Net Zero commitment, requires all businesses to take action to reduce their emissions. Companies need to understand how high their greenhouse gas (GHG) emissions are and prioritise reducing their carbon footprint as much as possible. Businesses can start by carrying out climate-related financial disclosures and signing up to the Race to Zero – these are all small first steps that can make a big difference.