The UK’s commitment to net zero will necessitate fundamental changes to the way businesses operate. Shields Energy CEO, Dan Shields, outlines what is coming down the track – and why businesses that prepare now will lock-in commercial advantage.
Net zero will require businesses to eliminate carbon emissions – and firms will find it increasingly difficult to access finance and win new business if they fail to take demonstrable steps to decarbonise.
Larry Fink, CEO of BlackRock, the world’s largest asset management company that controls some $7 trillion in funds, has warned companies that they will find access to capital more expensive if they do not decarbonise. Ultimately, laggards may not be able to access capital through standard channels.
Meanwhile, directors will be held accountable, warned Fink.
“Where we feel companies and boards are not producing effective sustainability disclosures or implementing frameworks for managing [sustainability] issues, we will hold board members accountable,” he wrote in January.
“We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
Businesses that embrace an Environmental, Social and Governance strategy (ESG) will prevail as corporates are listening – and they will not do business with companies that fail to decarbonise.
Microsoft has committed to net zero by 2030 – and to become carbon negative after that. Those companies that want to remain part of its supply chain must also follow its lead: From 2021, the company will make carbon reduction mandatory within its procurement processes.
Sainsbury’s is taking a similar stance and others will follow.
For heavy industries, the challenge is existential. The Transition Pathway Initiative, a consortium of institutional investors and asset managers that advise on assets valued at $18 trillion have warned that industrial firms will die if they do not decarbonise.
“Sectors like steel and cement face tough challenges to decouple emissions from production,” said TPI co-chair Faith Ward. “These industries must transform themselves if they are to survive the low carbon transition.”
UK – shift happens
Next month the government is expected to issue an energy white paper, but while net zero policy is scant, the direction of travel is already clear. Energy and transport are converging through electrification, and the power system will soon become dominated by renewable generation.
A power system dominated by intermittent renewables requires greater flexibility.
That means everyone must change how they consume power, according to Ofgem, which in February set out an ambition to include decarbonisation within its regulatory remit.
“How and when energy is used must change,” wrote Ofgem’s new chief executive Jonathan Brearley. That means businesses and households will all need to load shift and react to market signals – or pay the price.
Ofgem is working to make half hourly settlement mandatory across all profiles. That will enable time of use tariffs throughout the day and the disparity between off-peak and peak prices will likely increase.
As well as load shifting, sharper price signals should also make energy efficiency increasingly valuable – especially now that incentives to avoid peak network charges have been removed.
Take action: digitise to decarbonise, digitise your ESG strategy
Step change starts with small steps. The fundamentals of any ESG strategy is energy management – measure, manage, improve – form the bedrock of net zero planning.
This is where low cost sensors, and cloud-based analytics platforms can inform net zero roadmap and drive immediate energy, cost and carbon savings.
By providing quantifiable energy data – and easily identifiable hotspots – smart energy technology can help energy, facilities and procurement teams make compelling business cases to finance and investment committees.
The savings delivered by reducing consumption and wastage can then be recycled into further energy and carbon reduction measures, enabling businesses to demonstrate their commitment to decarbonisation to current and prospective clients as well as financiers and investors.
Meanwhile the granular data, connectivity and control provided by IoT-enabled energy platforms enables participation in an increasingly digitalised and flexible energy system. Which means lower bills, lower carbon and a significant competitive advantage.
Reduce your footprint by 30 per cent
Shields Energy’s CODA IoT platform delivers the reports and the visibility businesses need to make good their net zero obligations and enhance a businesses ESG strategy.
Through its consumption and control logic, CODA enables efficiency evaluation reports, benchmarking and graphical representations of buildings with live data and click-through data.
Energy reduction, the amount of energy a business or function consumes is key for decarbonisation.
However most businesses are ignoring site and asset maintenance when looking at decarbonisation activities and route to NetZero. By reducing planned, preventative and reactive maintenance activities and reducing time on site by maintenance personnel this further adds to a businesses drive for decarbonisation. CODA provides solutions for remote maintenance and where personnel are on site, through GIS (geographical information systems), ensures the time for investigation is reduced and assets are identified and faults rectified immediately.
Via CODA, Shields’ aim is to create up to 30 per cent operational and energy efficiency savings for business large and small.