The risks and benefits of companies going net zero

The risks and benefits of companies going net zero
Cecelia Fadipe (FCMA)
Cecelia Fadipe (FCMA)C-F Business Links Ltd (CFBL Consulting)

Posted: Mon 10th Oct 2022

Achieving a balance between the amount of greenhouse gas added to the atmosphere and the amount removed is known as "net-zero."

A similar idea underlies achieving net zero based on a specific science-based target for balance between greenhouse gases produced and absorbed.

Attaining net-zero targets is key to tackling climate change and reducing global warming - actions over the decade to limit emissions will be critical.

Therefore, countries, industries, and sectors from financial to energy and construction must collaborate to reduce the impact and cost of carbon.

The process of reaching net zero refers to reducing greenhouse gas emissions as closely as feasible to zero, without any leftover emissions being re-absorbed naturally from the atmosphere, for example by oceans and forests.

The benefits of net zero to the economy

The balance between emitting carbon and absorbing it from carbon sinks is known as carbon neutrality. Any system that absorbs more carbon than it emits, such as forests, soils, and oceans, is considered a carbon sink.

Carbon neutrality is when the amount of carbon removed from the atmosphere equals the carbon emitted.

Our carbon footprints can be reduced, and total environmental effects can be reduced, by adopting more environmentally friendly lifestyle choices.

This could entail limiting food waste, recycling plastics and used clothing, choosing public transportation over driving a personal vehicle, and keeping an eye on how much carbon-intensive energy your home uses, specifically focusing on the removal of carbon.

Carbon neutrality is beneficial for businesses to be sustainable in the long run. Achieving it allows businesses to optimise costs through operational efficiencies and tax reductions whilst protecting the environment and communities of relevant stakeholders necessary for a project to succeed.

Financial benefits for businesses

From our experience, here are some of the financial benefits of decarbonisation:

  • Improves business brand value, reputation, and expansion

  • Meets consumer demand for low-carbon products and services

  • Improves the recruitment and retention of the best talent

  • Ensures a sustainable supply chain where purchasing decisions are made

  • Ensures operational cost reductions and improved financial decisions

  • Satisfies the demands of stakeholders, investors, and funders

  • Ensures that the business remains a sustainable growing concern

  • Safeguards future performance, lost market share, and revenue

Cost and savings from net zero investments

Government investments presently fall short of what is needed. According to all 193 parties to the Paris Agreement combined, current national climate policies will result in a significant increase of about 14% in global greenhouse gas emissions from 2010 levels by 2030.

All countries, especially the biggest emitters, must significantly increase their Nationally Determined Contributions (NDCs) and take decisive action to cut emissions.

All nations were urged by the Glasgow Climate Pact to improve the 2030 targets by the end of 2022. In the UK, only about £10 billion in public and private investment went toward low-carbon projects in 2020.

The independent Climate Change Committee believes net zero investments need to increase to £50 billion annually by the late 2020s on transportation, renewable energy, and construction until 2050.

Importantly, there will also be significant savings. The CCC predicts that by the late 2030s, decreases in routine spending (operational expenditure), particularly from electric car increased efficiency, will offset this additional investment (capital expenditure).

Similar findings have been reached by other analyses in general. The Office for Budget Responsibility projected the net cost of the UK achieving net zero by 2050 to be £321 billion, or just over £10 billion per year, in a study on fiscal risks published in July 2021. This consists of around £1.4 trillion in costs and approximately £1.1 trillion in savings.

Who will pay for net zero?

There will be a need for significant investment initiatives, driven by global governments but mostly funded and implemented by the private sector and ordinary people driving change through reduced spending and investment in products and services that are not carbon friendly.

According to the CCC, governments are unlikely to provide the majority of the funding to encourage the private sector. Investment and cover costs of decarbonisation now must be evidenced to be able to generate future economic benefits.

When deciding who will pay the cost of decarbonisation, policymakers will consider five overlapping groups:

  • Ordinary taxpayers and investors

  • Consumers, by placing costs on energy providers

  • Charging customers via higher bills (we are seeing this already)

  • Restricting the use of high-carbon alternative

  • Taxing businesses - ultimately customers, staff, and shareholders

Relevant resources

Connect with Cecelia today for more brilliant business support!

Cecelia Fadipe (FCMA)
Cecelia Fadipe (FCMA)C-F Business Links Ltd (CFBL Consulting)

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