Friday Five
10th Feb 2023
Climate Change Numbers from CDP Show Less Than 4% Of Companies Are Prepared
Recent reports from CDP show that despite an increasing number of companies reporting on climate change, only 0.4% have disclosed credible climate transition plans. This is a tiny percentage and reflects that many corporations still have a long way to go to make their operations more sustainable.
The number of organisations reporting has been rising rapidly, with more than a 40% increase in 2022; however, 81 out of 18,606 companies disclosed against all 21 indicators for a credible plan according to their definition.
Further analysis shows that the power generation and financial services sectors were found to have the strongest disclosure rates at 38% and 35%, respectively; apparel, fossil fuels and hospitality sector had the lowest disclosure rates at 3%.
The Economy Ministers of France and Germany, Bruno Le Maire and Robert Habeck, have been in Washington discussing the proposed Inflation Reduction Act (IRA), a $370bn support programme to support US clean tech.
With concerns raised by the EU that this focused assistance could encourage businesses to shift their attention away from Europe to America, the high-level talks resulted in assurances over full disclosure as to precisely what level of subsidies are being provided under the act, so that any necessary adjustments can be made available by Europe to maintain an even playing field between regions.
At the meeting, the parties agreed to enhance transparency in awarding subsidies and tax credits to private companies, primarily focusing on electric vehicles built outside North America, gaining access to tax credits if leased by consumers; it seems a breakthrough is still far away for both sides. While EU officials have asserted that Washington has agreed to offer these benefits in the massive American market, US officials have claimed that this would merely be following the existing law. Nonetheless, it appears as though further negotiations will be needed in order for any significant progress to be made on the subject.
Furthermore, they discussed forming a “critical minerals club” that would reduce countries’ dependence on certain members like China for essential raw materials and diversify supply chains. To exemplify this, these guidelines have not outlined detailed regulations concerning valuable minerals. Within these realms of interpretation, the EU hopes it can gain traction on gaining advantages for its companies while staying within the legal parameters set forth by the act.
The European Union (EU) recognises that realistically speaking, there is no hope of a commission to reopen the IRA. With this in mind and in pursuit of furthering their interests, the EU hopes to influence the drafting of “guidelines” that define how the act is implemented. Hoping this strategy can gain some privileges for European companies regarding certain benefits previously unavailable through the act.
It will be interesting to watch this scenario develop and how things may proceed if alterations need to be made on the European side once further details regarding the American subsidies have been released.
The US Inflation Reduction Act climate law is having a major impact on the development of projects throughout the country, from electric car plants to green hydrogen refineries.
But this has sparked a range of new incentives and subsidies being offered by state and local governments to attract more investment in these kinds of projects.
For instance, Georgia has provided property tax breaks to Norwegian battery company Freyr, while Michigan has awarded $715 million in incentives for a Chinese battery plant. Illinois has also passed extra credits specifically designed for cleantech developers.
The demand for clean energy projects is on the rise and many investors are seeing this as an opportunity, with Paris-based fund Hy24 receiving numerous “serious conversations” about clean energy investment. Companies such as Enel, Honda and LG Energy Solution have also taken advantage of these new subsidies, securing large investments for their projects.
The IRAs climate law is positively influencing the development of clean energy projects in the US, with state and local governments offering attractive incentives to attract more investment. This is sure to have a long-term effect on the industry as more companies are likely to be attracted by these new opportunities.
It’s clear that clean energy projects are becoming increasingly viable investments and this will continue to drive growth in the US in the years ahead. The IRAs climate law is laying the foundations for a new era of green energy development and it will be exciting to see the positive impact this has on the economy.
The findings of the Designit study demonstrate a considerable gap between companies taking action on sustainability and those lagging behind.
While 11% of businesses only address the issue at the board level annually, 78% of ‘leaders’ in sustainability always include it in their quarterly agenda.
The difference appears to be largely down to leadership, with CEOs at leading companies being 50% more likely to take ultimate responsibility for sustainability than those at laggard companies.
Additionally, the study revealed that rising costs, unclear government guidelines and geopolitical instability are external barriers businesses must be aware of when incorporating sustainability practices.
It is clear from this research that working together across industries is essential to tackle issues related to sustainability and carbon emissions.
What’s coming down the road!
The current shift towards green technology is driving a significant change in the dynamic between the US and Europe. While the US has been able to capitalize on this shift with generous subsidies and targeted investments, Europe is finding it difficult to develop an effective state-driven investment model due to restrictions in state aid and competition law. As such, the EU must find innovative ways to promote the green transition and respond to the US' investment binge.
France and Germany have proposed different approaches to achieving this goal. Germany's industrial-political complex may be powerful, but it has been slow in producing electric vehicles.
France, meanwhile, has traditionally focused on backing individual companies with little success. To better compete in this arena, France has shifted towards broader approaches such as proposing an EU-wide fund to support strategic industries; however, this idea faces resistance from economically conservative countries like Germany.
Designing an effective EU-wide industrial policy will require cooperation across member states, given existing political tensions and economic interests at play. Still, it is essential for Europe to find a way forward if it wants to remain competitive with the US in terms of green technology investments. Governments must work together and develop innovative solutions that will ensure sufficient funding for projects related to renewable energy sources, electric vehicles, sustainable development goals, and more.
Ultimately, what is needed is a concerted effort from all European countries to work together within a unified framework that can regulate state aid while still providing enough resources for businesses competing in the global market. This task requires careful analysis of existing policies and a willingness from all governments involved to take bold steps toward a greener future and drive progress forward in breaking new ground for cross-border supply chains.