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Treasury plans on net zero will increase transparency, but contain significant holes

Posted by Warwick Business School at 03 November 2021, 18:56 CET |
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Commenting on the Government's plans requiring firms to show how they will hit net zero, Dr Frederik Dahlmann, Associate Professor of Sustainability at Warwick Business School said:

"The treasury's plans for financial institutions and companies with shares listed on the London Stock Exchange to publish net-zero transition plans for review by a wide range of stakeholders present clear benefits and risks.

"On the plus side, it raises transparency and accountability about how exactly companies are planning to reduce their carbon footprints in line with the Paris Agreement. Many companies are already setting ambitious targets, but they are often less clear on how exactly they should be achieved.

"On the other hand, if the publication of these plans is not mandatory, companies will end up considering primarily public reputation benefits and commercial risk impacts from disclosure, rather than dedicate time and effort to plan their net zero strategies with the necessary detail.

"Importantly, decarbonisation efforts will need to account for significant variation across the firms covered by this proposal. Every firm, and every industry, is different and so there needs to be sufficient flexibility to account for different circumstances as well as wider economic and industry trends in the evaluation.

"Moreover, in many cases, companies' own carbon footprints are significantly outweighed by those of their supply chains. If these transition plans don't cover all of so-called scope 3 emissions (and ideally impose similar reporting requirements on non-listed firms), the benefits of the proposal may be insufficient to really bend the emissions curve across the UK economy as a whole.

"Finally, the treasury has to explain what exactly happens with these transition plans once they have been reviewed. They may be useful for opening a wider discussion on decarbonisation within firms, but what are the consequences of failing to meet these self-imposed plans?"

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