Responding to Emerging Climate Policy Divergence: Takeaways for Business

Responding to Emerging Climate Policy Divergence: Takeaways for Business
10th November 2021 Jessica Clavette
In Blog

Policy divergence is expected to increase as devolved and local governments develop their own approaches to climate action. At Sancroft, we’ve identified four key takeaways that businesses can use to begin navigating impending impacts.

Local Operational Flexibility and Policy Divergence

Achieving the UK’s climate change commitments and sustainability ambitions will rely on national and local governments playing an increasingly important and central role in delivering plans to achieve decarbonisation. With emission reductions dependent on change at national and local levels, governments will need to be able to exercise local operational flexibility in their policies –plans that consider and cater to local context and people. While this will help mobilise the necessary change, it is likely to increase policy divergence as localities develop their own approaches – and regulations – to cater to their communities’ contexts. As different parts of the country develop different policies, the private sector will need to navigate the challenge of evolving policy divergence. Despite this, there are a few early takeaways for businesses to consider when planning to address this challenge over the longer-term.

Westminster and the Devolved Governments

England, Scotland, Wales, and Northern Ireland share commitments to climate action, underpinned by the broad support that the Climate Change Act of 2008 garnered. However, approaches to decarbonisation will differ considerably based on differences in targets, national governments’ ability to shape legislation that fits regional and local context and emission sources.

For the first, Scotland’s challenging targets (net zero by 2045) and use of annual targets vs. five-year targets in England will require more robust policy measures. Wales has legislated for a 2050 net-zero target while signalling its ambition to accelerate delivery along the way. Unlike Scotland and Wales, Northern Ireland has not legislated for greenhouse gas emission reduction targets although the Climate Change Committee has recommended that any climate legislation for North Ireland include a target to reduce all GHG emissions by at least 82% by 2050, as part of a fair contribution to the UK net zero target in 2050.

On the second, devolved administrations in Wales, Scotland and Northern Ireland develop policy independently on devolved matters or areas of government where decision-making has been delegated by Parliament, such as agriculture, forestry, fisheries, environment, land use planning, local government, and many aspects of transport. The variation in environmental and climate change policy between national governments that already exists is likely to increase following Brexit as former EU policy areas become devolved matters.

Finally, the quantities and primary sources of carbon emissions vary greatly within the UK. Emissions in England are by far the highest of all the devolved governments, while agriculture and forestry are considerably larger emission sources in Scotland, Wales, and Northern Ireland than in the UK as a whole. As a result, there have been widespread calls for devolved climate plans and local approaches, which are likely to depend on political narratives with sufficient legitimacy to mobilise state, business and civil society actors around new policy goals and institutions.

Local Government

While the Climate Change Act did not include a legal requirement for local authorities to deliver decarbonisation in line with the UK’s carbon budgets, local authorities deliver a range of services to people within their areas that carry emissions impacts: for example, transport planning, land management, housing and planning, and recycling and waste services. According to BEIS’ UK local authority carbon dioxide emissions estimates for 2019, the transport sector is the largest emission source in 63% of local authority areas, followed by the domestic sector as the largest emission source in 26%, and commerce & industry in 10%. Local authorities, therefore, have an important role to play in delivering emission reductions across these areas. With consensus being that central government-led measures alone will not be enough to drive the depth of emissions reductions needed across the UK, there are increasing calls for local authorities to have a statutory duty to develop and implement low-carbon plans.

What has this looked like in practice so far?

To date, there have been early differences in policy and decarbonisation approaches. In the case of devolved governments, some have been more ambitious than the UK. For example, the Scottish Government designations for marine protected areas is more advanced than the UK’s – both in area covered and stringency of policy. Scotland also saw the introduction of a deposit return scheme that preceded the promised UK-wide proposals by a year.

For local authorities, the current ad hoc approach to decarbonisation has provided some regions with a clear advantage. Leeds, Manchester, Cambridge, and Oxford have all been identified as leading UK cities in addressing the climate crisis, through, for example, planning criteria, which may exceed current national standards for energy efficiency in new domestic and commercial builds. Examples include Ipswich and Cambridge councils, which have both implemented a requirement for all new homes to meet a standard equivalent to the Code for Sustainable Homes level 4 – a 19% improvement to the current national standard.

Other developments across local authorities include:

  • Nottingham City Council’s ambitious target to become the first carbon neutral city in the UK by 2028 – with objectives and actions covering transportation, the built environment, energy generation, waste and water, and consumption. Among a number of measures, Nottingham have strengthened air quality standards affecting the City Centre Clear Zone to ensure that only the cleanest delivery vehicles will be able to access the city centre; stepped up enforcement of private rented and non-domestic Minimum Energy Efficiency Standards regulations; and are investigating ways to eliminate the remaining 7% of waste going to landfill and implement into council policy.
  • Haringey Council generates funds for energy efficiency by using the requirement in London for zero carbon homes to facilitate builders’ offsets, providing funds for carbon reduction in older properties as an alternative to zero carbon new builds. Commercial properties will be included in an upcoming extension.
  • Greenwich is developing its Carbon Neutral Plan, which is designed to deliver on the commitment to achieve Carbon Neutrality by 2030 across the Borough. Impact areas include reducing food waste, more local food production, skills development for a greener economy, and decarbonising heat for homes and other premises, in the Council’s estate and more widely.
  • Waltham Forest, Southwark, Haringey, Hackney, South Yorkshire, and Merseyside councils have all moved investments out of coal, oil and gas companies whose actions are fuelling climate change.

Four takeaways for businesses

Progress on the UK transition to net zero remains at early stages. However, there are a few initial takeaways for the private sector in navigating the increasing complexity of climate policy divergence at national and local government levels. Here are four actions business can take now to leverage current trends and drive even more progress:

  1. Strengthen your sustainability strategy by including place-based initiatives or approaches. Differences in local, national, and regional policy will require a corporate approach to sustainability that is place-based and balances UK-wide efforts, targets, and goals with those that are specific to local authorities and the devolved governments’ evolving requirements. This doesn’t negate the need for an overarching corporate sustainability strategy and an aligned approach, but rather recognises that there may be appropriate areas where adjusting to local and regional circumstances can deliver benefits, including stronger community-based relationships (including with LGAs themselves), enhanced reputation, competitive advantage, and greater proximity to opportunities that will arise as local governments develop their own approaches.
  2. It pays to be proactive. By developing and implementing credible and ambitious sustainability and net zero plans, businesses can stay ahead of the sustainability transition and regulatory context. It is increasingly accepted that delaying transition to carbon-neutral and sustainable methods of operating could pose increasingly serious risks to the business as well as make picking up the sustainability agenda later impractical or unaffordable. Dealing with the changes sooner rather than later will facilitate an easier transition and potentially eliminate the challenges associated with navigating increasing policy complexity. Consider it an investment that reduces regulatory burden and challenges over the long-term.
  3. Be prepared to address divergent policies in sustainability and operational planning. Particularly those with facilities spread across the UK, businesses should invest early on in their monitoring and planning capacity to spotlight operational issues where national and regional or local government powers intersect, in order to mitigate risk effectively. Medium- and long-term business plans must stay abreast of the evolving regulatory context alongside the skills of existing teams to take responsibility for action. By continuing to keep an eye on the local and national context, companies can mitigate risk as well as seize opportunities as they emerge – whether to establish competitive advantage or to demonstrate sector leadership. Consideration should be given as to how to build ongoing monitoring of evolving policy divergence into existing corporate risk management processes.
  4. Collaborate and engage more closely with national and local authorities to avoid unnecessary challenges resulting from regulatory divergence. There is no doubt that both national and local governments will be key partners in achieving net zero through direct service delivery as well as setting standards and regulations for business. The priorities, resources and approaches to climate action will vary considerably with powers and functions; therefore, collaboration will be essential to developing policy that best suits particular localities and regions. To prevent unnecessary regulatory burden and challenges, companies should work hand-in-hand with local authorities and devolved administrations to implement best practice, help streamline systems to reduce reporting burden, and identify opportunities for alignment in policy.

 

Ultimately, some amount of regulatory divergence is inevitable. Businesses will find themselves facing different regulations in various parts of the UK over the longer-term – the extent of which will depend on the UK’s overall strategy for guiding national and local governments in developing policy. By taking these early takeaways into consideration when developing out corporate sustainability strategies and risk management processes, businesses can build expertise in navigating this complexity.

 

If you would like to discuss the evolving regulatory picture affecting your business and how Sancroft can help you tackle the challenges, please get in touch with Jessica Clavette at jessica.clavette@sancroft.com.