The tech transition to net zero
- Date Published
For our latest Growth Series event for SEP portfolio companies, we turned our attention to how technology companies can achieve net zero targets and welcomed independent ESG consultant Alison Hampton and Chairman of Thames Water Utilities, Ian Marchant, who gave valuable insights regarding the risks created by climate change and the opportunities to use tech innovation to achieve net zero.
Drivers for change
Against the backdrop of COP26, commitment to climate change initiatives has never been more pressing. 2020 was named the second hottest year on record, despite constraints on heavy industry and air travel because of the Covid-19 pandemic. With data centres producing the same amount of CO2 as the commercial airline industry, it’s clear that achieving net zero targets can only be achieved with strong engagement from technology businesses. Alison Hampton, ESG consultant commented:
“We’ve reached a tipping point where we can’t reverse what’s happened, but we can try and limit further damage.”
Within the technology landscape, our discussion identified several key business drivers for change:
A tighter regulatory environment with increased climate laws, reporting requirements and emissions targets: Until now, the extent to which companies engage in these regulations has been voluntary, but we can expect a move towards greater enforcement and penalties for non-compliance. For example, it was recently announced that UK listed companies would be required to publish their CO2 reduction plans from 2023.
Shifting investor expectations: As a signatory to the United Nations Principles for Responsible Investment, we are committed to responsible investment and engage with all our portfolio companies on ESG matters. Companies should expect that sustainability considerations will be of increasing importance to all key stakeholders and must ensure climate considerations are addressed as an integral part of business planning.
Demand from customers: Customers are also becoming increasingly focused on their own carbon footprint and contribution to net zero targets. Businesses should expect greater demand for climate related information from their customers as they evaluate their own supply chain and be prepared to deliver.
Elevating the issue
Stressing the need for action, Ian Marchant, SEP Advisory Board member said:
“Climate change is no longer a focus for the CSR person only. As one of the most important issues facing businesses today, it needs to be a board issue and afforded a much higher agenda than before.”
Some key steps were suggested to help foster this mindset:
A top-down approach. The climate agenda must come from the CEO or other member of the executive leadership team. There will be a coalition eager to help support the cause, and they can be mobilized to lead real change.
Education. Invest time in increasing knowledge on climate change and the solutions available to address it. The Climate Solutions Network runs useful training courses and there are a variety of great books on the topic. (Bill Gates ‘How to avoid a climate disaster’ was recommended.)
Engage the workforce. Managers can consider sustainability targets for their team or make use of employee engagement tools such as Pawprint.
Measure measure measure. If you can’t measure, you can’t manage. Companies must measure monthly and ensure consistent changes are made to improve the figures.
Prioritise. If it is not there already, put a net zero strategy on the board agenda and develop a plan to deliver on this, setting realistic targets (ideally science-based ones) with regular reviews on progress.
Assess your impact. The UN Sustainable Development Goals are a great place to start. Look at the framework and assess where your organisation has a positive or negative impact.
Include climate in due diligence. Companies must think ahead to their future owners i.e. corporate / private equity / IPO. They will seek clarity on carbon footprint and measures to reduce emissions. The more businesses are prepared and can demonstrate progress, the better.
As well as the evident benefits for the planet and all those living on it, making a commitment to sustainability initiatives comes with its own set of business benefits too. It makes companies more attractive within a competitive market, both to investors, customers and new employees. Willie Watt, SEP Advisory Board member highlighted that:
“The move to net zero is one of the largest industrial revolutions of our time, and the companies that lead the way are the ones which will gain significant competitive advantage as a result.”
Over 90% of our portfolio companies have workplace green initiatives and we are committed to supporting our management teams to achieve their sustainability agendas. During the session, three of the companies attending shared their progress. As of 2021, Mister Spex is a certified climate neutral company and has committed to only using electricity from renewable sources, recyclable, sustainable materials for packaging, and climate friendly alternatives for shipping. In addition, it is seeking to increase its range of eco-friendly and sustainable brands. FundApps became a certified B-corp in 2018, and places key focus on reduced emissions through staff engagement, Green IT and supply chain monitoring. Vital Energi is an expert in energy generation and multi-utility network distribution schemes based on low carbon / zero carbon technologies and is investigating new ways of heat generation from low carbon sources.
Our ambition is to increase the positive impact SEP and our portfolio companies can have and you can read more about our approach in our first Responsible Investment Report.
- ThinkHazard – helps to determine physical risk factors in different areas of the world
- Tech Zero toolkit – aims to demystify climate jargon and make it easier for companies to measure their emissions and set a net zero plan.
- The Green Software foundation – a trust ecosystem of people, standards, tooling and best practices for green software
- The Climate Solutions Network – practical solutions that managers can implement to help tackle climate change
- Pawprint– employee engagement tool which helps direct climate change support into real action
- UN Sustainable Development Goals – the blueprint to a better and more sustainable future for all