In the final piece in our series commenting on Manchester’s aims to achieve net zero by 2038, we look to the future and offer our predictions as to some of the key environmental issues for businesses going forwards.

Manchester’s objectives – and the UK as a whole – are clear, as are the opportunities for businesses to cooperate and participate in achieving net zero. As we have highlighted in our previous blogs, businesses can no longer shy away from their environmental impact, and must integrate ‘green’ issues and how they consider them in their day-to-day operations.

But what does this mean in practice?

Whilst environmental impact is not a new concern for businesses, unlike in the past, in the next few years the promotion of environmental objectives will be placed onto at least an equal footing and importance as other daily business concerns.

Appreciation of environmental impact

As we have highlighted in previous blogs in this series, there are many ways in which businesses can help contribute to Manchester’s goals.

All of these measures however require businesses to evaluate their environmental footprint, and then to take measures to address specific issues arising. For example, we have previously touched upon cycle to work schemes and onsite EV charging. Whilst not necessarily applicable to every business, these are perhaps obvious areas for businesses to consider if they can reduce their carbon impact.

Likewise, our blog series has also commented on the potential to retrofit the built environment. There are a number of potentially ‘easy wins’ in this regard, in terms of upgrading insulation and heating systems, but there are cost consequences.

We recommend that businesses take the time now to consider all aspects of their operations, and assess where and how measures can be taken to contribute to the net zero aims. It would be advantageous for businesses to undertake this task now, before they are compelled to do so, in order to best position themselves going forwards in light of expected growth in this area.

Lengthier due diligence exercises

As environmental awareness increases, and local and national drives to achieve net zero pick up pace, we anticipate that this will be reflected in more protracted and complicated due diligence exercises.

We have touched upon some of the relevant concerns within this series, but the net result will require businesses to consider additional matters when considering purchases and acquisitions. For example, where new build commercial properties are constructed with the benefit of on-site energy generation, issues of licensing, regulatory requirements and health and safety will need be incorporated into enquiries. The consequence of considering such additional matters will be to increase the cost of, and time required to complete, legal due diligence.

Cultural change

It is accepted that net zero cannot be achieved overnight, and will require a concerted and consistent approach across all sectors. That being said, change needs to start somewhere and may for many businesses require a cultural change and significant revision to their current operating procedures.

Such changes can only flow from the top of an organisation, and the active promotion and furtherance of environmental aims cannot be seen or treated as a simple tick-box exercise. The achievement of net zero will require a new mindset and a genuine prioritisation of the objectives to be achieved.

Solid foundation for environmental claims

In contributing to the region’s net zero aims, businesses may want to promote their own environmental credentials – either by way of encouragement of others, or to promote the steps they are taking. However, organisations must remain mindful that any ‘green’ claims they publish about themselves must be accurate and not misleading. Recent years have seen an almost overnight increase in the number of ‘greenwashing’ claims, and the Competition and Markets Authority is actively investigating claims of sustainability.

In order to avoid falling foul of these novel causes of action and litigation, businesses need to be conscious of the way in which they publicise their net zero actions and, where necessary, have in the background clear data to demonstrate the validity of their claims – for example, in terms of their environmental sustainability or net zero achievements.

Increasing importance of ESG scores

Environmental, social and governance scores have existed for many years, although historically they have been used by financial institutions to benchmark their performance against competitors and assess likelihood of default by a business.

The last few years has seen a rapid increase in their prevalence, across all sectors, and we predict that they will only play an ever more central role over the coming years. Not only does the EU Corporate Sustainability Reporting Directive serve to mandate the inclusion of ESG scores within companies’ annual reporting processes, but this information will also likely play an increasingly seismic role in M&A deals, and is already being seen as a key influencer in investment decisions:. Investors will require clear and unambiguous confirmation that their investments have verifiable ‘green’ credentials.

Carbon accountability

Han-in-hand with the increase in ESG scores, we anticipate that the next few years will see an increasing awareness, and benchmarking, of carbon accountability. Manchester has already provided information as to how much carbon its net zero measures have saved, and we consider it is only a matter of time before similar information is volunteered by other sectors.

To date, these scores have mainly been used by aviation companies to provide information as to the carbon impact of individual flights, but we anticipate their spread into construction, hospitality and retail.

As worldwide efforts to achieve net zero increase, and consumers become more alive to their own environmental impact, carbon scores will likely become increasingly omnipresent and a key driver of consumer behaviour. It may be the case that carbon limits are in time placed on businesses, and potentially individuals, as further drivers of change. For example, similar initiatives have been introduced by some banks which have already started to offer card accounts with an in-built carbon tracker.

In time, it may be the case that retail goods, and other purchases, are provided with an individual ESG/ carbon accountability score in much the same way that energy efficiency ratings currently attach to white goods.  We therefore recommend again that business look now at where their main carbon spend is occurring, and what measures may be available to address and reduce this.

War on plastic

Although our series has not focussed on the war on plastic, Manchester’s actions towards net zero are taking place against the national background of this issue. The government has stated its desire to avoid all avoidable waste by 2042, and recent years have seen the prohibition on sales of certain items, such as single-use plastic cutlery, and the introduction of the plastic bag charge.

Businesses are not immune to these measures and have been equally affected by the Plastic Packaging Tax and extended producer responsibilities, both of which serve to impose waste management cost obligations on businesses for the packaging they generate and handle.  Whilst the purpose of these regulations is to encourage and incentivise durability, repairability and recycling, and move away from disposal as the default option at a product’s end of life, the additional costs generated are almost certainly going to be passed on throughout the supply chain.

As part of the suggested internal review and assessment identified at the start of this piece, businesses need to start considering now whether any of their produced items can be redesigned using environmentally friendly components, or re-packaged in a way that supports environmental targets.

What does the future hold?

Absent of a crystal ball, no one can predict with certainty what tomorrow may bring, but so far as the achievement of net zero and climate action are concerned, the route is clear: preservation of the environment is to be promoted.

We suggested at the outset that businesses may want to consider now (before they are obliged to do so) what their environmental footprint is and how they may be able to reduce this so as to contribute not only to their immediate community, but also the wider objectives stated by Manchester and central government.

Whilst this will almost certainly result in immediate costs being incurred, these perhaps pale into insignificance given the greater good to be achieved.

Photo: Sakorn Sukkasemsakorn

In our penultimate article on Manchester’s intention to become a zero carbon city by 2038, we consider this week the built environment, the measures available to help contribute to objectives, and the implications for those involved in the management and/ or transaction of real estate.

Manchester’s Climate Change Framework estimates that housing, and the built environment generally, may contribute up to 30% of the city’s total carbon emissions. Real estate is therefore considered to be a key driver in efforts to achieve carbon neutrality, with buildings being categorised as ‘net zero’ if they have no net carbon emissions during either their construction or operation.

However, the obstacles to overcome to achieve this objective are two-fold: not only is it necessary to remedy defects or environmentally prejudicial characteristics within existing stock, which includes those premises constructed before there was the current awareness of climate change; but in addition, net zero requires that those buildings yet to be designed or constructed also contribute to the target to be achieved.

What has Manchester done to date?

Despite the enormity of the task at hand, numerous retrofitting measures are commonly available, for example: installation and upgrade to energy-efficient lighting; high efficiency boilers; installation of double-glazing; and cavity wall insulation.

Although these measures may not be considered individually onerous or overly time-consuming, wholesale retrofitting of existing stock is not without cost. To meet its net zero aims, Manchester estimates that around 84,000 properties will require retrofitting, at an anticipated cost of between £25,000 to £30,000 per property. With only limited funding available for retrofitting, the question remains: where is the money going to come from?

In addition, current plans to retrofit real estate portfolios do not operate in a vacuum and take place against the continued introduction and implementation of the Building Safety Act. That Act, supported by secondary legislation, prescribes and mandates new regulatory obligations in respect of building safety and fire management provision. Building safety is paramount, but those involved in the design of new builds will need to consider how best to balance the achievement of net zero and carbon neutrality whilst also ensuring the total safety of a building throughout its lifetime.

What about future builds?

A significant proportion of the real estate infrastructure which is expected to exist in 2038, being Manchester’s deadline to achieve net zero status, is yet to be designed and constructed. Therefore, there also needs to be consideration as to how these future builds will help towards reaching that goal. This requires consideration not only of how those buildings will operate once in occupation, but also how embodied carbon (being the carbon contained within construction and civils materials) will be either managed or off-set. This will require a full review of all aspects of a supply chain to ensure that materials are genuinely carbon neutral in their production.

We have already touched upon some of the measures which can be introduced to an in-occupation building to help limit climate change, but in addition to domestic measures, designers may wish to consider the introduction of on-site renewable heat and electricity generation, such as photovoltaic sensors, as well as district heat networks.

The UK Green Building Council’s framework definition of net zero carbon buildings recommends that onsite renewable energy sources should be prioritised and should be pursued by building developers, owners and occupiers, where feasible. Not only is it anticipated that the presence of such measures may increase a building’s value, but it will also concurrently reduce pressure on the national grid.

What are the practical implications?

Implicit in all of the foregoing is that a building’s Energy Performance Certificate (‘EPC’) is going to become an increasingly important document over the coming years. Whilst they are already central to many transactions, we anticipate that their contents will be subject to additional review and transactional discussions. For example, going forwards, it is likely that EPCs will need to be carefully scrutinised during transactions, with the buyer working to achieve full understanding as to when the EPC will expire, whether any measures can be taken to improve the rating and if they have been appropriately registered.

In parallel, we anticipate that corporate due diligence, to the extent it involves real estate transfers, will also become more protracted. For example, there will need to be careful consideration as to whether retrofitting is necessary, who is to be responsible for this and whether any such revisions are permitted within the lease in place. In addition, where on-site energy generation is available, owners and occupiers will need to be mindful of the ownership of the generating plant, as well as apportionment of the additional regulatory burdens which accompany the generation of energy.

In respect of this specific example, where building designers and/ or owners wish to benefit from the cost-savings associated with on-site heat and electricity generation, they also need to consider whether such use is permitted in terms of relevant planning authorities, as well as the possible health and safety considerations which may arise from its operation.

Conclusion

Whilst the move towards net zero is a laudable aim, the consequences for real estate are significant: the scale, extent and cost of retrofitting existing properties is sizeable, but in addition there are also numerous opportunities for the sector to take the driving hand in bringing about real change.

Our final commentary piece next week will bring together recent articles, together with our predictions going forwards for what net zero will mean for both Manchester and the country as a whole.

In the third of our series of blogs commenting on Greater Manchester Combined Authority’s intention to become net zero, we look this week at efforts being made to help influence and ‘nudge’ behaviour towards achieving the objectives.

Whilst any form of encouragement or guidance seeking to unilaterally change an individual’s behaviour could be interpreted as having somewhat sinister overtones, the Council is eager to be seen as leading by example and has already modified its own operations in this regard.  

For example, Greater Manchester has appointed a number of Neighbourhood Climate Change Offices, to help empower communities to take local-level action and to help build climate resilience, including encouraging cycle to work schemes, turning down heating, and turning off electrical appliances when not in use. 

Can behavioural change impact net zero?

Changes in behaviour and pervading culture will not come overnight but, equally, they have to start somewhere. Greater Manchester is not alone in seeking to achieve net zero, with central government also having made a similar commitment to achieve 100% reduction of greenhouse gas emissions by 2050, compared with 1990 levels. 

However, responsibility does not rest solely with government and as the Climate Change Committee’s 2021 progress report to Parliament suggested, public engagement – and individual actions – are key enablers for achieving net zero, with the actions taken by consumer, workers, households and businesses being central to achieving the net zero objectives. 

That report went further and suggested that behavioural change can play a role in almost two-thirds of emission reductions, through adoption of low-carbon technologies, such as electric vehicles and increased use of green public transport.

How is behavioural change to be achieved?

In its net zero strategy, published in October 2021, central government stated that public engagement plays a significant role in driving green choices. At that time the government set out its approach to support green choices, which was underpinned by six core principles. Whilst these were developed primarily with the public in mind, it is accepted that they may apply equally to businesses. The six principles are: 

1. minimise the ‘ask’ by sending clear regulatory signals;
2. make the green choice the easiest;
3. make the green choice affordable;
4. empower people and businesses to make their own choice;
5. motivate and build public acceptability for major changes; and
6. present a clear vision of how we will get to net zero and what the role of people and business will be.

As the Energy Minister, Greg Hands MP, accepted to the House of Lords Environment and Climate Change Committee, it is not the business of government to force behavioural change on individuals, but rather it is the government’s role to, “encourage, incentivise and enable,” moves towards the objectives to be achieved.

In other words, far from imposing unilaterally mandated changes on individuals, what the government seeks to encourage is that individuals take ownership of their own environmental impact, and in turn contribute to local, national and global objectives.

A government survey has found that 85% of people are either concerned or very concerned about climate change and willing to do something about it in their own lives. However, any such actions must be affordable, accessible and achievable without any significant detriment to the individual. Any measures implemented must also be equitable for all. 

For example, a report published by the Cambridge Sustainability Commission in April 2021 evidenced that between 1990 and 2015, nearly half of the growth in global emissions was due to the richest 10%, with the wealthiest 5% alone contributing over a third. That report suggested that policymakers target the ‘polluter elite’ to make changes to their lifestyles, such as imposing levies on high emissions technologies and long-haul flights.

By contrast, one universally-accessible solution introduced by Greater Manchester is the introduction of 50 zero emission buses as part of the authority-controlled ‘bee network,’ with an additional 50 vehicles being delivered in March 2024. An additional 250 vehicles are expected to be delivered over the next three years.  It is estimated that the adoption of zero emission buses will reduce carbon emissions by 1.1 million tonnes.  This is a resource which is available equally to all, yet which is likely to serve to help shape behaviour by encouraging use of green public transport.

What we expect to see over the coming years, following on from government-led schemes and enabling legislation, is an increasing awareness by consumers as to the environmental impact their actions and the products they buy may have. This in turn is likely to result in further behavioural changes, including the gradual transition towards a circular economy and continued war on plastic.

Conclusion

George Eustice MP, when Secretary of State for the Environment, stated that:

Behaviour change is quite integral to many parts of government policy, but to tackle these complex environmental challenges is a shared endeavour. We all have a shared responsibility, and many of the policies we have are partly about government having a role in regulation to make certain choices easier, so that the public can make the changes we want them to make to get better environmental outcomes.

Although at first blush one may view the idea of subtle influences to behaviour and nudging as slightly sinister acts by those in positions of power, the objectives to be achieved are broadly to be welcomed, and it is clear that local actions by individuals will cumulatively bring about significant changes. 

That being said, questions do remain as to by whom, and on what basis, those individual objectives are to be determined, as well as the global (as opposed to local) impact actions will actually have, especially if other countries and agencies are not pursuing identical goals. For individual behavioural changes to have a meaningful impact, there does need to be a unified approach, which may be difficult to achieve.

Those concerns aside, the takeaway message is clear and there are low-cost steps that everyone can take on a daily basis to act in a less wasteful, and more environmentally-friendly, manner.  

Next week we will look at the built environment and how real estate initiatives may be able to help contribute to Manchester’s net zero aims.

Photo credit: cagkansayin

In the second of our series focusing on Manchester’s aim to become a zero carbon city region, we take a look at transport and travel. It is well accepted that transport is the largest contributor to greenhouse gas emissions, contributing just less than a quarter of all UK domestic emissions in 2020. Emissions from cars and taxis account for more than half of this figure.

Greater Manchester is not alone in facing a significant challenge, but it has clear objectives in response, which mirror those being pursued at a national level.  For example, in the Department for Transport publication ‘Decarbonising Transport: Setting the Challenge,’ the UK Government has set itself an ambitious target of zero emissions across all modes of transport by 2050. The publication anticipates achievement being attained through a combination of facilitating the transition to large-scale use of zero-emission vehicles, and supported by the implementation of a meaningful and effective refuelling infrastructure, including the installation of 300,000 public charge points by 2030.

How does Manchester hope to achieve its aims?

Within its own operations, the Council has committed itself to reducing direct emissions by replacing its fleet with electric vehicles, and hopes to reduce its emissions by between 35%- 45% by 2025.

The city region is eager to encourage sustainable and accessible travel options across its boroughs but beyond its own activities, the wholesale uptake of zero-emission vehicles faces a number of significant logistical hurdles. For example, electric vehicles require somewhere to re-charge and whilst for many it is possible for their vehicles to be charged at home overnight, within Manchester approximately 60% of homes do not have access to off-street parking.

For those who do not have access to home charging, their only option will be to access the public network. Pending the development of improved battery technology and mileage, the fundamental difficulty of availability of charging stations is not easily overcome.

To meet objectives it is expected that by 2030 there may need to be upwards of 3,000 additional public charge points within the Manchester region. Manchester has published the EV Charging Infrastructure Strategy which sets out its role in providing more charge points, but the Council is reluctant to install on-street charge points as these can:

“cause obstructions to pavements and street clutter, and we do not support the use of cables crossing the pavement to charge vehicles at the roadside… as these can cause trip hazards.”

Recent figures indicate that Manchester is perhaps some way behind other regions in the UK in this regard, with around 24 charging points per 100,000 population, compared with the UK average of 42 per 100,000.

Although there is no statutory duty to provide public charge points, Manchester is looking at opportunities within council-owned car parks to expand the public network for residents and businesses, and within the last few months there have been announcements to construct charging ‘oases’ within the city to address some of these concerns. However, replicating the service provided by petrol stations is not without some hindrance. Whilst there are a number of different charging systems available, with varying recharge speed from a few minutes up to several hours, were Manchester to be successful in its aim then it will need to ensure that re-charging is able to take place on demand and within a reasonable period of time.

Central Government plans to ban the sale of new petrol and diesel cars by 2030 are well under way, but by contrast the uptake of electric vehicles remains sluggish. For example, by the end of March 2022 there were still less than 2,000 plug-in cars registered in Manchester, equating with around only 1% of the total number of cars registered. This is below the UK average of 2.4%.  Whilst the transition will not happen overnight, to enable individuals to move freely, efficiently and at low-cost, whilst also being environmentally friendly, there needs to be a viable alternative to current combustion engines.

Hydrogen is being considered as an alternative fuel source although the enabling technology still requires refinement and, in addition, there are very obvious safety risks arising from the storage and use of this fuel. Current plans for hydrogen fuel appear to be restricted to the haulage sector, and do not extend to domestic and residential travel. Therefore, this is not something which will necessarily help to achieve objectives in the shorter term.

Barriers to implementation

The aims are laudable and are to be welcomed.  However, despite their increasing presence, electric vehicles are far from the predominant mode of transport and the impact of the Government’s intended ban on the sale of fossil fuel vehicles will not be fully appreciated for many decades yet. Likewise, the transition to a net zero transport network is likely to be many years away.  The fact that success will not be achieved overnight is not a reason for the objectives not to be pursued in the interim, but implementation must be mindful of the very real logistical problems that need to be overcome.

There are also concerns as to how ‘green’ electric vehicles actually are, and the level of ‘carbon debt’ created during their manufacture. For example, at present not only are electric vehicles generally more expensive to buy, but their production requires the input of significant volumes of fossil fuels. In addition, questions remain as to how electric vehicles, specifically their batteries, are to be stored and disposed of at end of life.

The electricity required to power electric vehicles also needs to be sourced from within the national grid, and the mass charging of vehicles at peak times is likely to put a strain on the system. Although wind and solar and renewable energy sources are currently active within the network, the proportion of energy generated by them is not only intermittent but also lags far behind the energy generated through fossil fuel usage.

What can businesses do to assist?

There are no statutory requirements at present for businesses to contribute to net zero through assisting and enabling a greener transport network.  Whilst grants are available, the transition to green and sustainable alternative fuels remains a costly option, which is also accompanied by logistical issues and numerous other considerations.

That being said, the objectives have been stated loud and clear and, in order to position themselves, businesses may want to consider the feasibility of alternative fuel and transport. For example, car share and cycle to work schemes may be one option, but it is accepted that these may not always be possible or practicable depending on the nature of the work undertaken by an organisation.

Alternatively, business may wish to consider providing electrical charge points and, for those involved in the haulage sector, it may be worthwhile exploring the availability and applicability of hydrogen to their operations, despite technology realistically still being a few years away from wholesale adoption.

As corporate ESG scores increase in importance, especially following the implementation of various sustainability reporting requirements, businesses would be well advised to give careful consideration to actively implementing ‘green’ measures within their day to day operations, including in respect of their transport and travel needs.

Such changes will not come overnight, and will require a concerted effort to achieve them, as well as behavioural and cultural change.

Our next commentary piece will consider how behaviour may be influenced and shaped to assist the transition to green technology. To read our first blog in the series, visit https://pannonecorporate.com/manchesters-move-towards-net-zero/

The results of Pannone Corporate’s 2023 Regulatory survey are in!

Earlier this year we invited responses on a number of issues, to gauge the current concerns and anxieties within businesses as to their compliance obligations and worries for the coming year.

Responses continue to be received, although at this early stage a number of clear trends have already started to emerge.

What EHS issues are currently causing the greatest concerns for businesses?

By far and away the most common concern for recipients of the survey is the issue and impact of sustainability, with 75% of respondents highlighting this as an area of current concern for them and their business.

• Much commentary has already been prepared as to the increasing awareness and presence of sustainability as a concept, and we consider that the focus on re-use, recycling and drive towards a circular economy will continue to pervade all aspects of day-to-day business operations, across sectors.
• We have already started to see claims in the UK against Boards regarding the accuracy of their green credentials, and this area only looks set to further dominate business attention over the coming months and years.

Of almost equal concern amongst respondents to our survey (62%) was their ability to attract and retain quality staff.

• This is an issue which may have its roots in Brexit, but which has likely been exacerbated by global events since 2020. In our experience, employees are now more conscious of issues arising within their working environment and less likely to accept conditions that may be prejudicial to them.

However, somewhat surprisingly, less than 40% of respondents ranked employee wellbeing as a current concern for their business.

• Despite recent emphasis on employee wellbeing within the wider media, and an express intention by the Health and Safety Executive in its current Business Strategy to address workplace stress, on a practical level it does not appear that this external pressure has translated into a significant business priority at this time.
• It is only a matter of time before enforcement action is taken in connection with employee wellbeing, and it is hoped that businesses address their mind to this growing area sooner rather than later.

What has had the biggest impact on EHS?

A clear concern amongst respondents to our survey is confusion caused around the introduction of new legislation, the extent to which new regulations will apply to them and the potentially limited guidance available from central Government in respect of discrete issues, with one respondent stating a desire for, “plain and simple,” language to be used.  For regulations and guidance to be effective, they need to be capable of understanding and comprehension by recipients.

Added to this, the still unknown impact of the Retained EU Law Bill is continuing to cause anxiety for many respondents to our survey, with a number highlighting this as a concern for the immediate future.

The draft Bill continues to work its way through Parliament but, if enacted in its current form, risks removing overnight the majority of EU-derived workplace regulations, including the Working Time Directive, Work at Height Regulations and CDM. Were this to occur, it would have a seismic impact on all businesses and would fundamentally change the nature of workplace regulation.

How can businesses prepare?

The world of workplace and business regulation has been evolving over a number of years, and global events since 2020 have accelerated this change. For example, not only has there been an increase in the number of matters subject to regulation, but the manner and methodology by which regulators discharge their functions has also had to be revised.

These changes look set to continue, and what is clear from the survey responses is that businesses appear to be less concerned with traditional compliance issues and physical health and safety and are currently focused instead on novel issues.

No one can predict the future, but the recent shift in the nature of workplace compliance looks set to continue and businesses should take steps to embrace these changes.

As Lord Robens suggested in his 1972 report, which laid the foundation for the Health and Safety at Work etc Act, what he considered was required was a “greater acceptance of shared responsibility, for more reliance on self-inspection and self-regulation and less on state regulation.”

Going forwards, we consider that rather than businesses addressing their mind to specific risk as they arise – as may have been the case in respect of traditional health and safety concerns and risks to physical safety – what the world of workplace compliance increasingly requires now is a holistic approach.

For example, in respect of employee wellbeing, provision of workplace perks is unlikely to be sufficient on its own. Whilst such measures will usually be appreciated by a workforce, what is of increasing importance is the condition of their entire employment relationship, including in respect of management culture, monotony of daily routines and efficiency of IT systems.