What companies should do now politicians are cooling on net zero policy

While the planet may be getting warmer, politicians seem to have cooled on their climate positions.

Under the Tories, the ban on the sale of petrol and diesel cars has been given a five-year reprieve and will not now begin until 2035.

A pledge to improve home energy efficiency thresholds by 2028 along with proposals to tax meat and increase air passenger duty also seem to have taken a back seat.

There’s been similar back-pedalling on Labour’s net zero policy. Its commitment to spend £28bn per year until 2030 to cut emissions and build up green industries has been watered down to a possible £5bn per year.

And it’s a common theme elsewhere.

European parliamentary elections are due to be held this month. A populist-right surge of support could threaten progress on the Green Deal — the world’s most ambitious climate plan.

And let’s not forget that if Donald Trump returns as US President, he’s vowed to “drill, baby, drill.”

Inflation, the cost of living crisis, farmers’ protests, sluggish economic growth and constrained government budgets have forced politicians to relegate their environmental ambitions.

This all leaves companies in an uncertain and difficult position. Business strategies that incorporate carbon reduction plans can’t be reactive or short term. Resources need to be allocated, skills developed and growth managed.

So how should companies respond to this lack of clear guidance?

They should treat decisions about green issues the same way they treat other strategic and commercial decisions — on their individual merits and based on what is in the long-term best interests of the business.

Here are some questions company management teams should ask:

• How much do our customers care about the climate or net zero targets? Is it enough for them to actually change their purchasing decisions? Will they stop buying our product altogether, switch to a different brand (with better climate credentials) or just continue to buy regardless?

• If our customers don’t make climate-driven purchases today, how likely is that to change in the future? Will it be driven by changing attitudes (e.g. as we see more extreme weather events)? Or by a demographic change (e.g. as Gen Z becomes a larger proportion of our customer base)?

• Will our climate strategies affect our hiring and retention capability?

• Is there a threshold of action we need to cross to prepare for changes to customer or staff behaviour? For example, is it enough to plan to be net zero by 2030 or do we need to do it sooner? Alternatively, could it be delayed provided we demonstrate a credible carbon reduction plan? Do we actually need to decarbonise (which is more expensive) or can we use (cheaper) carbon offsets? Will our customers see the latter as greenwashing?

What’s crucial in the decision-making process for any company is that money spent on voluntary decarbonisation initiatives should be more than compensated for by extra profit made from higher sales.

These should be driven either by an increased volume of customers (won from competitors with less credible decarbonisation plans) or raised prices (that reflect the value a customer is willing to pay for a product with reduced or zero climate impact).

Marketing efforts will be critical here — for customers and staff. If they care enough about the climate or net zero policies to change how they buy or who they work for, they’ll welcome simple information about their choices (devoid of jargon and complexity). This is where clear and visible actions that are made easy to understand can pay dividends.

What companies need to focus on is the long term.

Governments may be rowing back on net zero policies now but we have to expect that the direction of travel will remain towards a lower carbon economy in the future. No one has a crystal ball but spending that’s voluntary today could become inevitable or compulsory later down the line.

Of course, for some business leaders, climate strategies are a personal commitment, independent of any commercial considerations. This adds risk, especially if the company forsakes its customer in favour of what it sees as a moral obligation.

The best any company can do is to weigh up the pros and cons of current versus future costs and then (hopefully) aim to make the right choice (that doesn’t compromise profitability).

If you need more advice, here’s how you can get started on your carbon reduction plan and how it should fit within your overall small business strategy.