Chapter_Zero_UK_Green_Day_policy_announcements
30 Mar 2023

UK ‘Green Day’ policy announcements – implications for non-executive directors

In March 2023, the UK Government published a suite of documents outlining its latest climate and energy policy. ‘Powering Up Britain’, the flagship report, highlights key points from the Government’s updated Energy Security and Net Zero plan. This summary outlines the key messages and implications for non-executive directors.

On 30 March 2023, the UK Government published a suite of new and updated documents outlining its latest climate and energy policy. Whilst the documents primarily reframe existing commitments, there are clear opportunities to accelerate climate action, ensure the businesses you represent are aligned with policy changes, and remain competitive and resilient into the future.

The headline document, the new ‘Powering up Britain’ strategy, outlines how the UK will seize opportunities associated with the net zero transition, and improve energy security in light of the war in Ukraine and energy price rises. It brings energy security and net zero together as ‘two sides of the same coin’. Powering up Britain is based on:

Other key documents include:

Key takeaways for non-executive directors (NEDs)

  • There is a clear business opportunity associated with the UK policy offering – the UK aims to be the world’s first ‘Net Zero-aligned Financial Centre’, and the UK Government has identified a £1trillion opportunity to 2030 for UK businesses to supply net zero goods and services.
  • There are opportunities for NEDs to directly shape the future direction of net zero policy in the UK, through working groups such as the Net Zero Business and Investment Group and by engaging with upcoming consultations – see Table 1 below.
  • Although there is cross-party consensus around the economic opportunity offered by net zero, the specifics of these latest announcements carry significant political uncertainty. NEDs will need to play a steering role to ensure their companies’ ongoing resilience.

Key points from the updated UK policy documents

Key questions for NEDs and your boards

  • Opportunities:
    • It will be important for the board to consider new opportunities emerging across your organisation’s products and services, and how you will capture market growth, including impacts on exports.
    • Who in your organisation is exploring how these policy updates will influence demand and behaviour of your organisation’s clients and consumers, including impacts in the value-chain?
    • Are you supporting your organisation, and its value-chain, to innovate and transform at the pace required by these policy commitments?
  • Risks:
    • How is the board assessing, managing and disclosing climate-related risks for the organisation and its value-chain, including, climate policy uncertainty, geopolitical risk translating to energy and climate policy, energy price uncertainty, energy market changes, and the speed and balance of the net zero transition?
    • How are you ensuring business resilience and competitive advantage in light of these risks?
  • Government support and finance:
    • Is your organisation making the most of direct support and finance available, as highlighted above?
    • How will the board ensure the organisation’s capital, investment and finance structures align with the UK pathway towards a Net Zero-aligned Financial Centre?
  • Net zero commitments and transition planning:
    • How is the board ensuring that the organisation’s commitments align with a 1.5 degree pathway?
    • Is a net zero transition plan in place or being developed?
  • Disclosure:
    • Is the board informed of existing and upcoming sustainability disclosure requirements (financial and non-financial), and is the organisation sufficiently prepared for these?  See Table 1 for further information.
    • See Chapter Zero’s briefing on navigating the climate disclosure landscape.
  • Engagement in forthcoming regulation, policy and industry collaboration:
    • Consider the opportunity to strengthen your organisation’s strategy and positioning by helping to shape future policy.
    • It may be helpful to encourage your organisation to participate in upcoming consultations, industry working groups and collaboration forums as highlighted in Table 1.
  • Workforce transition:
    • Is the board discussing and assessing the organisation’s strategies in place to upskill its workforce to deliver on the net zero transition?
  • Nature and biodiversity:
    • How is the board assessing the impact of the Government’s new Biodiversity Framework, Nature Markets Framework and upcoming TNFD disclosure requirements?
    • What is the decision-making process for assessing how these will be incorporated into your business strategy?

How NEDs and your businesses can shape future policy

The Government’s rhetoric is strongly focused on growth and investment, and therefore business voices are likely to be particularly persuasive in shaping government policy going forward.

Industry groups established under the Government’s strategy such as the Net Zero Business and Investment Group, and sector-specific initiatives such as the Solar Power Taskforce, may help ensure that the Government listens to business requests when making climate policy decisions.

Another direct way of getting involved is through responding to government consultations. The Government is often keen to hear from the private sector when consulting on new policy, and directors may respond through their business, as part of an industry group or trade association, or in their own personal capacity. Consultations of interest are highlighted in Table 1 below.

Understanding and responding to climate policy announcements is vital to any business’ net zero transition, but playing an active role in shaping policy is arguably more effective strategically. Board directors should consider how they can leverage their position as business leaders to encourage effective climate action from the Government – in doing so, they can draw attention to the business risks and opportunities outlined above.

Further information

Table 1: Key engagement opportunities and next steps. Adapted from the table given in the Green finance strategy, pp121-122.

Key: Consultation opportunities [CO], Meeting opportunities [MO], Government goals [GO]

Timing Activity
Current
  • Consultation on Zero Emission Vehicle Mandate (closing May 24, 2023) [CO]
  • Consultation on Clean Heat Market Mechanism (closing June 8, 2023) [CO]
  • Consultation on Carbon Leakage (closing June 22, 2023) [CO]
  • Consultation on the Regulation of ESG Ratings Providers (closing June 30, 2023) [CO]
In 2023
  • Publish a series of net zero investment roadmaps and a nature investment roadmap [GO]
  • Consult on the specific steps and interventions needed to mobilise additional finance through high-integrity voluntary markets and protect against the risk of greenwashing. [CO]
  • Work with UK financial institutions to start a series of government-convened roundtables to further tackle deforestation-linked finance. [MO]
  • Host a series of roundtables to engage stakeholders on how to continue to clarify fiduciary duty [MO]
  • Consult on the UK Green Taxonomy [CO]
Q2 2023
  • Bring into force amended regulations to implement pensions reforms, subject to Parliamentary approval, as early as April 2023 [GO]
  • First meeting of Net Zero Business and Investment Group [MO]
Q3 2023
  • Launch a formal assessment mechanism as soon as the first two IFRS Sustainability Disclosure Standards are published (expected June 2023). [GO]
  • Set out further detail on the SDR implementation timeline to reflect the rapid development of international standards [GO]
  • Engage stakeholders on an update to the Environmental Reporting Guidelines, which provide voluntary reporting guidance for UK organisations [CO]
  • Launch a call for evidence on Scope 3 emissions reporting [CO]
  • Publish the first impact report detailing the environmental impacts and any social co-benefits resulting from the expenditures of the Green Financing Programme, in September 2023. [GO]
  • Host the Global Investment Summit, 2023. [MO]
Q4 2023
  • Provide further information for trustees on their fiduciary duty in the context of the net zero transition by reviewing Stewardship Guidance (late 2023) [GO]
  • Consult on the introduction of requirements for the UK’s largest companies to disclose their transition plan if they have them. This consultation will take place once the TPT has completed its work in Autumn/Winter 2023. [CO]
  • Explore how best the final TNFD framework (expected September 2023) should be incorporated into UK policy and legislative architecture, in line with Target 15 of the Global Biodiversity Framework. [GO]
  • The FRC – working with the FCA, the government and the pensions regulator – will review the regulatory framework for effective stewardship, including the operation of the Stewardship Code. [GO]
In 2024
  • Set out adaptation finance deliverables and action plan [GO]

Acronyms

CCUS Carbon Capture Utilisation and Storage
ESG Environmental, Social and Governance
EU-ETS EU Emissions Trading Scheme
FCA Financial Conduct Authority
FRC Financial Reporting Council
GHG Greenhouse gas
IFRS International Financial Reporting Standards
ISSB International Sustainability Standards Board
SDR Sustainability Disclosure Requirements
TPT Transition Plan Taskforce
TNFD Taskforce on Nature-related Financial Disclosures

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