Reduction, Targets, 4-Day Week, Wind & Banks

1. Under pressure

When you think of how best to reduce #carbon emissions, procurement may not feature highly on your list. But it may be one of the most important levers for change we have. And it’s something increasingly on businesses’ radars.

This is partly because of the UK Government’s not-so-snappily named ‘PPN 06/21’. This is the requirement that businesses bidding for government contracts over ￡5M have a published ‘Carbon Reduction Plan’, which includes annual emissions reporting, a commitment to align with the UK’s #netzero target for 2050, and details of how they will reduce emissions.

A lot of governments’ influence on emissions comes through setting regulations, but they spend large amounts of money on products and services supplied by businesses, all governed by strict and non-negotiable terms and conditions. Integrating emissions reductions into these conditions will force those companies that bid for government work to take responsibility for their climate impacts.

Procurement between businesses is another area where this control can be leveraged. The Science Based Targets initiative (SBTi) recognises this huge power, by allowing companies to set targets based on their suppliers committing to emissions reductions.

For many businesses, taking action on climate still remains voluntary. So the influence that large companies can have by asking suppliers to provide evidence they have set science-based targets is an important lever for change, and if the threshold for PPN 06/21 is lowered from its current level – as may well happen – even more companies selling goods and services to the public sector will be brought into its scope too.

As the expectations and requirements of clients, customers, investors and employees build, the line between voluntary and compulsory is becoming increasingly blurred – to fall behind on expectations is to lose out on opportunities. There’s never been a better time to get ahead and commit to climate action.

2. Tying targets

Research by 普华永道 UK and the 英国伦敦商学院 shows that the number of companies linking #esg targets to executive pay is on the rise. The study included 50 European companies and found that 78% of these companies have now introduced carbon-related components to executive pay packages, with pay-outs averaging 86% for disclosed targets last year.

It has become increasingly popular for companies to link executive pay to progress against environmental objectives and has become a way for companies to prove to investors that they are embedding approaches to #sustainability. And there is lots that is good about this approach – it sets out a clear ambition, signals the importance of the issue and – of course – focuses minds on achieving change.

That said, the devil is – as always – in the detail. Progress on sustainability takes many forms, and targets will typically focus on just one or two dimensions of sustainability. And even within a focused area such as climate and carbon reduction, the way the target is structured is essential – too ambitious, and it won’t be motivating, too weak, and it won’t drive change. And getting it right is hard – who is responsible and accountable for change, how will that change be evidenced, how do you align short term remuneration and bonuses to longer term sustainability goals, and – crucially – how do you ensure you’re focused on the right thing, rather than the easy thing?

Putting sustainability on the board agenda and making it an important part of how success is measured is critical. But when you reflect on the fact that there is broad consensus that companies are failing to make adequate progress on carbon emissions reductions, the fact that pay-outs in relation to carbon targets included in the study were so high gives us pause for thought. Well-structured financial targets are part of the answer to putting sustainability higher up the agenda of leadership teams, but they aren’t the only solution. And more board members being paid more for sustainability-related activity is only a good news story if the underlying direction of travel is the right one.??

3. Less is more

The results of the largest four-day week trial are in, and they are impressive – of the 61 organisations who took part, including Charity Bank , Royal Society of Biology and Stellar Asset Management (reducing working hours for all staff for six months with no fall in wages), 92% intend to continue.

Self-report measures from employees revealed that 71% had lower levels of “burnout”, and 39% were less stressed. Work/life balance improved: 60% were more able to combine paid work with care responsibilities, and 62% found combining work with social life easier. Interestingly, workers were also less inclined to kill time, instead seeking out technologies that improved productivity to ensure they continued to perform well, and reforming working practices such as shorter meetings, and interruption free “focus periods”.

Arguably, evaluating via self-report measures introduces bias: who wouldn’t want to show their boss a four-day working week works. However, the trial also demonstrated value for employers. They experienced a 65% reduction in sick days and a 57% fall in the number of staff leaving compared to the same period the previous year. Furthermore, company revenue increased by 1.4% on average for the 23 organisations able to provide data.

Though the four-day week is more appropriate for some businesses than others, the trial was successful across different industries, and can be adapted to company needs; some introduced an all-company three-day weekend, while others staggered a reduced workforce over five days. One restaurant calculated the reduced hours over an entire year, implementing longer opening times in the summer, and shorter in winter.

We think these results are interesting and thought-provoking. Of course what works for one person won’t always work for another, and we are big believers in working to create personalised and individual working patterns where possible. But considering how employees can work smarter rather than longer is a great piece of the puzzle.

4. Intensive intelligence

Last week, we highlighted some of the social risks inherent in generative artificial intelligence (AI). But what about the climate impact?

Cloud computing needs electricity to run the servers, water to cool servers and then there are the embodied emissions from all the equipment. And #AI is particularly energy hungry. Large language models (LLMs) require vast amounts of energy to train and run. And in the rush to experiment with and utilise services such as #ChatGPT, it’s easy to forget that our online, dematerialised activities have real world consequences.

But it's possible that AI could be part of the solution, as well as the problem. One significant challenge to a smooth energy transition is the unpredictability of renewable energy sources. When will the sun shine, or the wind blow? Without that, planning and adapting renewable energy capacity and supply is extremely difficult.

So there is encouraging news on this front from an ongoing trial for an AI-based solution to optimise wind energy management. The AI solution enabled energy company ENGIE to predict how much electricity generated by wind turbines should be sold on which power markets, at what time, and at what price.

Perhaps better data and insights could save the UK taxpayer too, who paid ￡215 million to turn off wind turbines last year, and ￡717 million to buy gas-powered electricity to make up the shortfall in generating capacity. Sounds crazy, but apparently on the windiest of days, the grid is not able to deal with the power that wind turbines generate, meaning they need to be turned off.

There are enormous opportunities, and risks, from any new technology, and AI is no exception. Thinking about how we use it – for good – needs to go hand in hand with thinking about how to manage and mitigate its impact.?

The Goods: I wouldn’t bank on it

Despite most banks proudly boasting about their net zero commitments and sustainability ambitions, over the past six years, the top 60 private sector banks have funnelled $4.6 trillion into #fossilfuels. That means that while you might have made substantial efforts to reduce your own carbon footprint at home, if your money is sitting in a bank, chances are it’s being used to fund fossil fuel production and extraction projects, driving us further into the climate crisis.?

Looking to shine light on this, a group of volunteers have founded Bank.Green, a platform that works to increase transparency around the fossil-financing practices of different banks, while pointing you in the direction of some more sustainable options. A quick search of your bank reveals its global or continental ranking in fossil fuel-financing and shows the (often jaw-dropping) amount of money that they’ve loaned or invested in fossil fuel extraction infrastructure since the Paris Agreement six years ago.?The platform also provides a list of financial institutions that offer sustainable banking services, including those that have gained a Fossil-Free Certification, meaning they’ve publicly stated that they will not make investments or loans which aid the expansion of fossil fuel related investments. With information on how to change banks and a nudge to send an email or physically visit your bank to express dissatisfaction with their practice, Bank.Green rallies its users to seize what power they have to push for change. It even lets you pledge your commitment to change if now isn’t the most convenient time.?

?If you’re thinking about switching banks, or are curious about where your money is landing, go and check out Bank.Green, although we can’t promise you’ll like what you see.?