Slow progress and varied approach on carbon emissions are jeopardising UK aim to become world centre for ‘green’ finance, IPPR report warns
Call for new ‘Office for Climate and Environmental Targets’ to regulate businesses’ transition plans and put an end to ‘greenwashing’
Companies that don’t meet agreed common standards in their net zero transition plans should be publicly ‘blacklisted’, says report
Only one in 40 large UK companies have so far fully adopted the most challenging ‘gold standard’ targets for setting a course to net zero, a report by the IPPR think tank reveals today, putting at risk ambitions for the UK to become a global centre for green finance.
One in 20 have signed up in principle for the new ‘science-based targets initiative’ (SBTi) aimed at measuring companies’ progress, but have not actually set their targets, the report says. A further 151 small or medium enterprises (SMEs) have signed up and fully set their own targets.
That means that the vast majority of the claims by companies to be ‘green’ can’t be directly compared, or are not fully supported by science, the report finds.
The science-based system of targets was set up to provide a consistent way for government, investors and the public to compare companies’ performance and prevent ‘greenwashing’ of corporate reputations.
Rishi Sunak, as chancellor, committed the UK to developing the world’s first net-zero aligned financial centre, and to require all large companies to develop their own net zero transition plans. The science-based targets that IPPR says should be used in all corporate transition planning reflect the findings of a task force the then chancellor set up at the time.
Meanwhile, IPPR warns, the government appears to be backing off its pledge to compel large companies to begin some kind of transition planning this year.
Although the UK is ahead of some key competitors in the pace of companies adopting and setting science-based targets, it lags behind others – with Sweden and Denmark significantly further ahead.
The report highlights the 'dizzying’ and sometimes contradictory array of ways companies currently claim their progress towards net zero, which it says makes it easier for some companies to ‘greenwash’ their reputations. Fully science-based targets include a company’s own carbon emissions in making and selling its products, those of its ‘upstream’ suppliers and those generated when its own products are sold and used.
IPPR's report calls for urgent reform to ensure that plans meeting these new high standards are quickly adopted and applied, and better understood, and calls for government and private firms to work together to ensure they become the universal gold-standard tool used by businesses and international investors.
To prevent greenwashing, only companies that meet these standards in their own transition plans should be allowed to call themselves “green” or “net zero”, IPPR says.
To achieve this, the report urges the government to:
Establish a new regulator – an Office for Climate and Environmental Targets (OCET), with the task of developing consistent and comparable pathways to net zero across the UK economy. These would include:
- Consistent timelines, with uniform baseline years and clear dates for targets, and pathways for different sectors
- Ensure continual progress so that markets, policymakers and the public can investigate and understand each company’s headway towards its targets
- A further environmental target beyond simply net zero, to ensure that impacts on nature, biodiversity and use of resources are included in the assessment
Prepare a public blacklist of companies that consistently fail to make and publish adequate transition plans, or to adequately follow them. Blacklisting would send a powerful signal to investors, including financial institutions that also need to meet transition targets. Companies blacklisted would be blocked from receiving government contracts and prevented them benefitting from any ‘green’ tax incentives.
Sam Alvis, IPPR associate fellow in its energy, climate, housing and infrastructure team and Fair Transition Unit, said:
“Working with the financial sector to develop clear, consistent plans for businesses to become net zero is vital not just to reduce emissions but ensure a resilient economy for the future.
“Transition plans shouldn’t just be a document slid out for investors that no one sees, but a tool that helps government and the private sector work closer together.
“Transition plans can and should inform government’s green industrial policy and in return for that support government should expect greater pace and ambition in emissions reductions from the private sector.”
Luke Murphy, associate director for IPPR’s energy, climate, housing and infrastructure team and head of the think tank’s Fair Transition Unit, said:
"’Greenwashing’ threatens to undermine the UK's ambition to become a global leader in green finance. With just one in 40 large UK companies adopting 'gold standard' net zero targets, urgent action is needed to regulate businesses' transition plans and prevent misleading claims of environmental sustainability.
“The solution is a new 'Office for Climate and Environmental Targets' to establish consistent timelines and ensure continual progress, while publicly blacklisting companies that fail to meet agreed standards.
“Let's hold companies accountable and make sure only those with truly science-based net zero transition plans are able to call themselves 'green' or 'net zero.”