What’s really behind the net-zero zealotry of big businesses?

Boris Johnson’s biggest challenge at COP26 doesn’t lie in avoiding a finger-wagging from Greta Thunberg, who won’t be going. Neither will it be in preventing the party being spoiled by Insulate Britain holding up the limousines of the great and good. Nor will Johnson have to struggle too hard to persuade his fellow world leaders to sign some kind of declaration strong enough to be spun as a triumph but anodyne enough to allow China, Russia and others to ignore it.

No, the PM’s biggest challenge lies in fending off the demands of big businesses, who have latched themselves to the cause of net zero with great gusto, aware of its value to their brands. You can’t have missed McDonald’s lorries, now emblazoned with the boast that the company recycles all its cooking oil for biodiesel. There is Nestlé, which recently tried to burnish its green credentials by launching a vegan ‘shrimp’ made from seaweed, peas and elephant yam. Such greenwashing has been going on for years, but has seen a huge leap in the run-up to COP26. Every day sees another corporation announce another zero-carbon target — such as Amazon, Ikea and Unilever joining forces to commit themselves to using zero emission ships to transport their goods from 2040.

Big business has got its hooks firmly into COP26, offering sponsorship in return for the chance to chirp about its green credentials. We have become used to sports tournaments having an ‘official beer’ and the like, but is it really appropriate for a United Nations conference, held to discuss an issue of great importance to the world, to have 11 ‘principal partners’ — companies which have been given the chance to exploit the occasion to advertise their services? They include Unilever, SSE, Scottish Power, Sky, Microsoft, Sainsbury’s and GSK, which informs us, in the bumf it has been allowed to post on the COP26 website, that it wants to ‘support healthcare systems transition to net zero’. I am sure it would — and how clever of its PR people to find a way of pitching for NHS work without inciting the left into its usual complaint about privatising the health service. Then there is NatWest, which pitches for the business of enlightened folk by telling us how it has stopped lending to companies which have more than 15 per cent of their activities related to coal, unless they have a ‘credible transition plan’. It might cut more ice with some had NatWest (formerly Royal Bank of Scotland) not been a big player in the recent global crisis.

It doesn’t stop with sponsorship. Big business has started lobbying for serious changes in the law — demanding climate regulations that are even tougher than the government is prepared to commit itself to. Earlier this year, the former EY boss Steve Varley called on the government to introduce stiffer carbon taxes, with companies investing in green technology being offered financial rewards. In September, 100 large companies including BT, Coca-Cola, Tesco and the Big Four accounting firms, calling themselves the UK Business Group Alliance for Net Zero, wrote to the Prime Minister demanding firmer action on reaching the government’s 2050 target.

More eye-catching still is campaigning by the Glasgow Financial Alliance for Net Zero, an agglomeration of 300 banks and other financial institutions set up by the former Bank of England governor Mark Carney in April to try to push for stricter climate regulation. One of its central demands is that governments introduce ‘mandatory net zero transition plans and carbon reporting’ from all private and state-owned enterprises by 2024. Last week New Zealand became the first country to partly accede to its request, imposing mandatory carbon reporting by financial firms from 2024.

The rush by big business to leap on the net-zero bandwagon is to some degree for presentational reasons. Listed companies can no longer ignore the pressure being put on them by many shareholders. What started as a campaign by small groups of activists to divest from fossil fuel companies has gone on to infect major investment houses. Ever since Blackrock CEO Larry Fink announced in January last year that his company would begin to exit the fossil fuel business, there has been a sense of fear in boardrooms.

The mining giant BHP recently suffered a rebellion over its own climate plan from investors who thought it didn’t go far enough. The company is now looking to offload its oil, gas and coal interests for good. Even Shell, whose whole raison d’être is oil, recently announced the sale of its largest US oilfield, Permian Basin, as part of a strategy to try to reach its self-imposed target of reducing its carbon footprint by 45 per cent by 2030. It is not hard to imagine a time, quite soon, when no listed company in Britain will dare to involve itself in fossil fuels.

The hedge fund manager Crispin Odey recently said that one of his main tasks this year has been raising finance for unlisted companies to buy, at bargain prices, fossil fuel assets being discarded by listed companies. With oil and gas prices soaring in recent weeks, it has proved a hugely profitable strategy. Needless to say, the offloading of fossil fuel assets by western corporations has done nothing to suppress demand for coal, oil and gas, which has rebounded spectacularly as the global economy recovers from Covid. The world will still have an oil and gas industry in ten, 20 and very likely 30 years’ time — but it will operate largely offshore, with no branded offices in Britain.

There is another reason big business is demanding enhanced environmental legislation. It is the same reason it has always been far keener on heavy regulations than governments appreciate: that while regulations might make life a bit more awkward for large companies, it is nothing compared with the burden they impose on their smaller competitors. Heavy regulation works to the relative advantage of big business. It was a phenomenon noted by Lord Haskins, Tony Blair’s red-tape tsar, who gave up on his mission to trim regulations on business after expressing surprise at how little interest large companies showed in the project.

The current CBI director-general, Tony Danker, told a recent Spectator event that small businesses are struggling to engage with the government’s net-zero agenda because they lack ‘bandwidth’, by which he meant that they didn’t have dedicated sustainability officers and the like whose entire jobs, from dawn to dusk, revolve around environmental issues. If you are Unilever or Nestlé you can afford to employ a global sustainability team charged with tracing the provenance and calculating the carbon footprint of every last coffee bean and every ingredient of a vegan ‘shrimp’. If, on the other hand, you are a small company manufacturing pork pies in the Midlands, it could prove prohibitively expensive to generate the data that will be required for a company carbon audit. Result: multinational food producer gobbles more of the market.

On top of that, of course, are the interests of businesses which have spied direct opportunities. There will be ‘green jobs’, all right. Someone is going to be making a killing from installing all those heat pumps, whether they work properly in old houses or not. If, as the Climate Change Committee has recommended, home-owners are mandated to bring their homes up to the standard of an EPC rating of ‘C’ before they can sell them, and are obliged to bear most of the cost of this themselves, there will be a big business in financing loans to achieve this. There will be fortunes to be made, too, in installing electric vehicle charging points, in decommissioning gas power stations, in conducting carbon audits — accountancy firms should certainly be in favour of regulations to achieve net zero, given that they can power their offices on green electricity tariffs while extracting millions in fees to help steelmakers and the like comply with mandatory carbon reporting, carbon taxes and so on.

It is inevitable that government is going to find itself lobbied by businesses that think they have spied a way to profit from net zero. But just because some companies will benefit doesn’t mean the economy will benefit as a whole. There will be nothing to celebrate about the creation of 3,000 jobs for sustainability officers if simultaneously we lose 30,000 jobs in the steel industry because furnaces have been forced abroad. The government is going to have to be extremely careful not to listen exclusively to businesses that stand to gain, while the quieter voices of others which stand to lose go unheard.

Net zero favours businesses with the biggest and best lobbying operations — those that can afford to spend the reported £500,000 cost of erecting a large corporate pavilion at COP26. It disfavours smaller companies and those whose business models cannot so easily be adjusted to take advantage. I wouldn’t bet on things working out well for all the companies currently showing great enthusiasm for net zero, though. Among the signatories to the letter from the UK Business Group Alliance for Net Zero was Heathrow Airport. The company perhaps feels it doesn’t have any other option than to demonstrate such enthusiasm. Its plans for a third runway have already been blocked once by the High Court, on the grounds that the government’s decision to approve them was not compatible with the Paris agreement — a decision later overruled by the Supreme Court.

Yet Britain’s legally binding net-zero target is really a huge gamble that the required technologies can be invented, or upscaled, over the next 29 years. If they can’t (and there is no guarantee that they can) then we are in serious trouble, no industry more so than aviation. Will hydrogen-powered planes be taking off from Heathrow’s two — or three — runways in 2050, or will they be full of tumbleweed, Britain effectively having excluded itself from rapid international travel? No one really knows. All we do know is that, for the moment at least, climate policy is being driven by big businesses with an even greater zealotry than the new-found enthusiasm shown by the Prime Minister.