Watch the webinar
Build back better” has been the mantra of the CBI throughout the Covid-19 crisis. A green recovery is a big part of that idea. In today’s webinar, we spoke to Professor Cameron Hepburn, Director of the Smith School of Enterprise and the Environment, at the University of Oxford, Guy Grainger, CEO EMEA of JLL and Rain Newton-Smith, CBI Chief Economist to talk about how we can restart in a sustainable way.
Here’s what we discussed:
- Key updates
- Towards a green recovery
- Can we afford it?
- The role of government
- The role of business.
To start the session, Rain gave some information about the big updates over the last 24 hours. A few school years returned yesterday: reception, year 1 and year 6. More parents took their children back than anticipated, a sign that as confidence grows, those numbers will rise. Car showrooms and open air markets are starting back this week and non-essential retail will be building back later this month.
The test and trace system is up and running, but there are two outstanding questions from businesses about how to manage it according to Rain:
- How can we get the right provisions in place in terms of sick pay to protect employees who do test positive?
- If someone on my premises test positive, can I get other employees tested? At the moment it looks like a no. Only people with symptoms are allowed tests.
Late last week, updates to the job retention scheme (JRS) were announced. A partial, flexible furlough scheme will be brought in from July with options to furlough staff on any shift pattern, said Rain. Employers will have to pay for national insurance and pension contributions from August, with a phased introduction of cost-sharing for non-worked hours between employers and the government.
Towards a green recovery
In some ways the Covid-19 crisis has shown us “how people’s behaviour can change” in the face of a “common challenge,” Rain said. Climate change is one such issue where radical, worldwide changes are needed to combat it.
“The climate challenge is like Covid in slow motion,” echoed Cameron Hepburn. “One of my hopes from this experience – which has been terrible and tragic in many ways – is that we learn the lessons around the importance of government and business working together and also of international cooperation to tackle these challenges,” he said.
The reduction in activity and output seen during Covid could reduce emissions by 8% this year, but Cameron stressed that if there is one thing we can learn from the pandemic it’s that emissions targets will not be reached by extreme mass behaviour change like this because it is not sustainable or desirable for the economy. “We want a thriving economy built on green foundations,” he said. Companies need to think about how to drive efficiency in their use of energy and resources. “This challenge is a business challenge,” Cameron stressed.
Can we afford it?
Covid-19 has been very costly to the government and to the wider economy. Few businesses have the cash available to make big investments in changing their business practices and adapting their premises to make them more green.
Guy Grainger countered that point of view. He highlighted that companies who focus on sustainability will “enhance their value proposition” to investors, employees and consumers. He advised that businesses should “not believe the myth that it costs more” to invest in sustainability. Over a longer time frame, businesses will see returns on the investments that they make, saving money on energy bills and reaping the benefits of consumer attraction to companies with sustainable credentials.
Cameron likewise explained that the findings of his research show that of 25 different economic stimulus measures for governments, the green measures tended to emerge with higher ratings for their economic impact. While many businesses are strapped for cash, governments can take advantage of the very low interest rates for borrowing. This money can be used to invest in sustainable infrastructure growth. “Don’t borrow and binge it on consumption,” Cameron said. “Borrow and invest in the set of assets that are going to deliver the economy we need in the future.”
The role of government
Net zero by 2050 is a “core part of government policy,” said Rain. It remains so even in the midst of Covid-19.
As we build back, Rain offered several big green policy areas that the government might consider:
- Can the government support initiatives to increase energy and resource efficiency for businesses and homes, especially now that businesses do not have ready cash to invest themselves.
- Heating our homes. Can we retrain engineers to provide low-carbon alternatives to oil and gas heating?
- Greener cities: can we create incentives for households and companies to use electric vehicles? Can we increase the number of charging points? What is the role for communities and city centres in this?
- Can we invest more in sources of green energy: solar, wave, offshore wind farms, and tidal technologies?
At present, government policies can create “perverse incentives” for businesses not to invest in clean energies, said Rain. For example, investments in solar panels can increase the value of properties and drive up business rates, undoing savings made on energy bills. These sorts of policies need to change.
The government itself also has a responsibility to lead by example on sustainability, said Guy. When they implement policies they need to stick to them and they should be leading the way on making sure that their premises and the companies that they own are investing in sustainable solutions.
The role of business
Guy made a rousing case for the idea that UK businesses “shouldn’t wait for government” to make changes. At present the country is “trying to find its place in the world.” The country is already skilled in sustainable energy and offshore wind technology and is a leader in green finance. Business should invest in those capacities, he argued.
He likewise explained that there are reasonably simple things that businesses can do to reduce the carbon footprints of their built environments. As an example, commercial buildings often have inefficiencies in their heating and air conditioning systems, leading them to use more energy than they need to. Simple fixes like changing the motors in AC units to more efficient ones can make massive savings both to operating costs and carbon footprints.
The impetus for companies to change their polluting habits has often come from their employees, explained Guy. Business leaders and non-executive directors have a duty to listen to employees and to take the case for sustainability to their boards, he said.
Key questions we answered:
- Rain, why is a green economic recovery so critical and what opportunities could it bring?
- Before the pandemic, the business contribution to tackling the climate crisis was a huge priority for us at the CBI, and we backed the UK Committee on Climate Change’s call for a net zero target by 2050.
- But this can only be achieved if we all work together, put the right policies in place and invest early.
- This crisis has shown how quickly we can change our behaviour when faced with a common challenge, but also the benefits of clean air in our cities and a better balance with nature.
- Businesses still see this as an urgent priority and are willing to lead the charge.
- As we saw with letter to FT – want to ensure the policies we put in place as we look to revive the economy are rooted in a low carbon transition.
- Some important areas to consider:
- Energy efficiency – we need further investment by business and households, not just in renewable energy but also how much energy (and other scarce resources like water) we use.
- Future of mobility – we need to put in place the charging infrastructure for electric vehicles, help people buy ultra-low emission cars, and help cities build green centres.
- Renewable energy – we need to harness the power of on- and off-shore wind. Over 50% of our energy use is renewable, but we can go further and faster.
- Cameron, how should we think about climate change in the context of the Coronavirus?
- Both are challenges where we need internal and international coordination based on science.
- The International Energy Agency forecasts that we’ll reduce emissions globally by around 8% this year. According to the UN, we’ll need to reduce emissions by around 7.5% every year over the next 10 years.
- I don't think any serious environmentalist wants the situation we're in now. What we want is a thriving economy where people are wealthy and prosperous, but also a clean economy.
- One of the key lessons of this experience has been that we won’t get to net zero by imposing radical behaviour changes on people. We’ve seen radical behaviour change forced upon us – but you're not going to do that again year-on-year.
- Cameron, most environmentalists believe in less consumerism, not more. Surely this contradicts the need for the creation of employment?”
- What we want is social well-being and wealth for everybody. I don't think there's any contradiction between wanting a clean economy where biodiversity thrives and where we can be in harmony with nature, and an economy that's prosperous.
- I just don't think we get to where we need to be by all stopping. The answer is to rewire the economy so that we can deliver products efficiently.
- Guy, what was the conversation around sustainability, energy and efficiency centred on pre-Covid?
- The key thing was that businesses were starting to realise that the route to net zero was often through the buildings they operate from.
- Many buildings are heated and air conditioned at the same time. There are lots of inefficiencies out there, which means we're using far more energy than we need to.
- The major shift in the last five years was the push from employees for businesses to have a better impact on the environment and more connection to the community.
- We saw sustainability go into the top three strategic priorities in our area – and it never been there before. The question is, will it be there when we come out of the crisis?
- I think we'll find out the truth about companies, about leaders, about shareholders and investors, because there'll be some heroes that come through this and say it's even more important to stay true to it, even if it costs us more money.
- I honestly believe that companies that do that will materially enhance their value proposition not only to employees, but also to investors.
- of people have made announcements about net zero. But it’s following up with action that is really important to demonstrate you are just as good at execution as you are telling the story.
- Guy, how have companies responded to pressure from their employees to be more sustainable?
- We're seeing in the Nordics, in Scandinavia, for example, a lot more regulation around the environment. This includes re-purposing existing buildings, particularly those using lots of concrete (which is a massive contributor to carbon).
- We've just opened a new office in Manchester. It's the first of our offices since we made our commitment to go to net zero in our workplaces by 2030. The office is not only using 100% renewable energy, but it's also using virtually totally reused or recycled equipment in it.
- We have sourced all the material from manufacturers and producers that reuse – everything from the tables in the office to the office reception, which is made of yoghurt pots.
- It costs already cash-strapped businesses a lot of money to make themselves greener. How can spending this money be justified if it means less investment in other areas?
- The longer your timeframe, the more return you can get for this investment, because your brand will be enhanced.
- The market is screaming out for leadership from the public sector to encourage businesses to invest in productive assets that are going to deliver the economy that we need in the future.
- If we down the ‘business as usual’ path of fossil fuels, then we may have to kiss large parts of human civilisation goodbye.
- If you plant trees, reforest, and regenerate ecosystems, these investments pay off down the line. Once you’ve increased your energy efficiency or your renewables, you are not requiring as much fuel.
- Cameron, should the government be bailing out airlines?
- The aviation industry has been providing us with significant economic value for many decades.
- I think it's a case of saying “we’re going to bail you out, but the quid pro quo is that we're going to ask you to set some more ambitious targets to bring emissions down”.