Targeting the Social in ESG

Dr Caroline Burt


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What is ESG?


ESG is often misunderstood or not understood in depth. It is commonly associated with ‘business and the environment’ (as well as being a growing concern in financial investment and the public sector) and is sometimes considered as meaning the same as ‘sustainability’ or ‘net zero’. These terms are sometimes used interchangeably (even though they differ in very important ways). 


But while the three parts of ESG—Environmental, Social, and Governance—are distinct from one another, they are also interdependent.


In simple terms, ESG is a framework that is embedded into an organisation to create a paradigmatic shift towards a stakeholder-centric approach. The fundamental belief it represents is that ‘environment’ is only one pillar of three that determine the overall commitment of an organisation to sustainable outcomes that influence individuals, society and the planet. 


Some examples of the issues that fall under each ESG pillar are given below:


Environmental


• Climate Change

• Decarbonisation

• Water pollution, wastage and scarcity

• Air pollution

• Deforestation


Social


• Mental health at work

• Diversity and Inclusion

• Relation to local communities

• Workplace culture

• Supply chain management


Governance


• Makeup of the board

• Strategy and goals

• Political ties and lobbying

• Choice of companies for tender

• Ethics and values


In this introductory article (the first part of a series) we focus on the ‘Social’ pillar.

The impact of ESG on our perception of 'good' companies

A British Exploring Society expedition in Iceland
The three pillars of ESG: ENVIRONMENT, SOCIAL & GOVERNANCE

Over the last two decades, climate change, environmental concerns and sustainability have become major issues in public and corporate discourse. The imperative is clear: climate change is already upon us and having a major and growing impact on the lives we lead, so we must do something urgently.


Everyone—individuals, government and all organisations, private or public—has an obligation to try to mitigate, and in some cases reverse, developing problems. This is not just a ‘nice to have’ or the right thing for the planet and the people on it, it is fundamental to business success. 


In his 2022 ‘Letter to CEOs’, which has become a keenly anticipated annual event, Larry Fink of Blackrock wrote,


“Most stakeholders—from shareholders, to employees, to customers, to communities, and regulators—now expect companies to play a role in decarbonizing the global economy. Few things will impact capital allocation decisions—and thereby the long-term value of your company—more than how effectively you navigate the global energy transition in the years ahead.” [1]


As head of a global investment management and financial services business, Fink has had one succinct message since 2020: "climate risk is investment risk". But of course, it is not just investment risk. All organisations, of whatever type, must make changes to what they are doing if they are to survive, and if we are to survive. The biggest risks do not therefore come from acting on sustainability, but from a failure to act. When a business chooses to ignore climate and sustainability or fails to adapt, its future is in peril. In this way, the environmental importance of ESG has broken like a wave over all of us. 


The focus on environmental concerns has coincided with, and helped to drive, another fundamental change: in the same way as most would acknowledge that government should be a force for good rather than a necessary evil, so now the expectation is that all organisations act as forces for good and demonstrate how exactly they are doing that. 


In other words, the tectonic plates of cultural expectations have shifted. This is partly generational: data currently available suggests that GenX are much more likely to remain liberal as they age than their forbears, and that they and their successors (Millennials, GenZ, etc.) want business to have a function beyond profit. [2] 


Leaders and boards can find themselves caught in the crossfire of societal and employee expectations, and the need to achieve the fundamental objectives of the organisation, whether that is profit or something else. 


How can they square the circle of succeeding on one without sacrificing the other, while at the same time remaining compliant with the law, regulations, KPIs and the fundamentals of good governance?


The good news is that it is becoming increasingly clear that a well-devised, focussed sustainability strategy and delivery plan can greatly improve profitability and create market advantage compared to competitors. 


In this series of articles, we focus on how businesses can successfully address the key aspects of the ‘S’ in ESG, and how we at Cambridge Management Consulting can help you do this.

How to focus on the S in ESG

The changes to public expectations, and the challenge and opportunity of squaring the circle, extend inevitably to the ‘social’ side of ESG, which has previously received less comprehensive attention than its ‘E’ counterpart. 


Notable examples of the ‘social’ side of ESG in action are the growing emphasis on the importance of diversity hiring and employee wellbeing, as well as on things like social impact. As with the ‘E’ side of ESG and the increase in appointments relating to sustainability, this has led to the creation in many organisations of the role of Head of Diversity, Equity & Inclusion (DE&I), or of ESG more broadly, and to the production of annual DE&I reports. It is a world in which no one wants to be left behind, and in which businesses and other organisations must display their credentials.


It is important to note that things are moving fast, and we have already seen significant progress on the social side of ESG. For example, many organisations have invested heavily in employee wellbeing programmes (including mental health), in mentoring, and in creating supportive platforms for traditionally under-represented groups. Furthermore, many are aware that greater diversity is good for profits. 


This has led to some positive results, with many DE&I reports indicating rising ethnic and gender diversity. For example, organisations are also beginning to think harder about inclusive recruitment and selection processes: does this role really require a university degree; does the test we set disadvantage certain groups of applicants, etc.? 


And, with some notable exceptions, conversations are being had with workforces about the balance between online, hybrid and in-office work. Similarly, in another direction, supply chains are being increasingly scrutinised for things like child labour, exploitation and poor working conditions. 


Organisations are recognising that they need to have a positive impact on society and are taking action to realise that goal.


However, at the same time, there continue to be many significant issues. If we look as an example at the DE&I side of the ‘S’, DE&I officers regularly report feeling peripheral to their organisation and speak of a failure truly to embed DE&I, feeling almost as though the appointment of a DE&I officer tells management that it has discharged its duty. [3] 


At the same time, Scott Keller’s work indicates that only 18% of executives in Fortune 500 companies believe their company gets recruitment of the most talented people right, and a recent survey found that two in five UK businesses do not collect data on the demographic composition of their workforce. [4] In another survey, only just over a half of respondents rated their recruitment and selection processes as ‘effective’ or ‘very effective’ in positively affecting diversity and inclusivity in their company’. [5] 


Moreover, there is limited reporting on things like age and disability/SPLD (often difficult to do within legislative frameworks, but not impossible), and workplace returners (e.g., those who have taken time out of the workplace to fulfil caring/parenting roles). Even in relation to the commonly reported characteristics, data is rarely especially granular, or cross-segmented (e.g., class and gender), which is a further weakness. More female managers and CEOs is progress, but if they come predominantly from one socio-economic background or are mainly white and heterosexual, other cross-cutting aspects of diversity remain unaddressed. 


This is only one aspect of the ‘S’ and demonstrates how quickly things are moving and how much of a challenge organisations face. It may not be long before ‘diversity-washing’ becomes as common a term as ‘greenwashing’ to signal real failures to achieve anything more than superficial change. [6] 


No one wants to have to bring a damaged brand back from the brink, so many boards are beginning to share concerns about their performance in this area, and they are now trying to step up efforts.


How Cambridge MC can help your organisation with DE&I

Leaders and boards trying to grapple with all this would be forgiven for thinking that they are caught in a storm trying to get to an unclear destination with a spinning compass. But this does not need to be the case. At Cambridge Management Consulting we have developed a model that enables both a clear and holistic definition of the ‘S’ in ESG, and an effective and systematic approach to each element. 

As the diagram indicates, at the core is organisational culture:


  • How does the organisation see itself? 
  • What aspects of its culture need overhaul? 
  • What behaviours and attitudes does it embody? 
  • What is prioritised and how is that decided? 
  • How would someone describe the organisation (and brand) from within and outside? 
  • Where does it sit in its context – how does it differ culturally and reputationally from others in the same business area? 
  • Has any change occurred and, if so, what was its impact? 


Redefining organisational culture from the inside out is a difficult, costly and not immediately impactful way for those organisations to make progress on the social side of ESG. What organisations can and must do is embed this into the wider strategy at C-Suite level, before looking at specific ways to implement the strategy.


What the sections in the diagram indicate is that a series of practical, individual and, to some extent compartmentalised, steps that can be taken initially to work towards specific goals. Each can be defined one at a time, keeping a watchful eye on the overall coherence and alignment with strategy. 


It is crucial throughout to pay attention to what the data indicates in terms of strengths and weaknesses in relation to priorities. You cannot improve your diversity recruitment, for example, without understanding where specifically your talent pipeline is blocked and taking targeted action to address that. You can adopt any number of wellbeing schemes to address stress, burnout and retention issues, but if your office culture at a local level is toxic, you are destined to fail. 


You can specify rules for your suppliers to follow, but if there is no formal scrutiny, you cannot be sure that the vision is being realised in practice. That does not mean that you cannot make a very positive and impactful start in these areas—it is key that you do this. In due course, though, it will need to be accompanied by other actions to deliver its maximum benefit. And you need to have a plan for that.


Key Takeaways


  • There are few quick fixes, but taking a stepwise approach is likely to generate real results. 


  • Having a keen sense of the overall picture in relation to the wider organisational strategy is also key to begin to remove the silos that tend to prevail in many businesses. 


  • Such an approach is also much more likely to open the door to greater profitability/value creation, squaring that elusive circle, and allowing you to set the standard and pace for your peers.


  • In the following series of articles, we will discuss each of the major categories and suggest some of the actions that are likely to be effective, based on an ever-growing body of research.

edenseven

If you are struggling with the ‘E’ in ESG, edenseven, Cambridge Management Consulting’s sustainability sister company, works with a range of organisations across differing sectors to support in the rapid decarbonisation of their operations and the services they provide to their customers.


Their proven record of delivery in the space shows that ESG offers a wealth of opportunities for companies to realise.

About the author


Dr Caroline Burt has worked in business, higher education and the public sector, and has many years of experience in recruitment and selection. She is an expert on diversity recruitment. She has transformed admissions at Pembroke College as Director of Admissions and produced the most diverse intake in the College’s history. This has been based on a data-driven approach and a collaborative working model. She also has executive education and experience in mentoring and leadership development and has developed an innovative leadership development programme for undergraduates.


As a non-executive director on two boards, she has been a member of Regulation and ARAC committees and chaired the Remuneration Committee of Qualifications Wales where she made reforms to the CEO succession plan and the Board Chair’s appraisal process. She currently serves on the Independent Welsh Pay Review Body (IWPRB), which is responsible for making recommendations on schoolteachers’ pay and conditions to the Welsh Government. She is an Associate Partner at Cambridge Management Consulting, with expertise on the people, recruitment and diversity side, and on higher education.


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In fact, young children deal with this task without issue. AI should also be able to handle this concept. Both human and artificial intelligence will sometimes make things up when the facts to support an answer aren’t known, but that should not be an insurmountable problem to solve. As Rumsfeld was trying to convey, it is the final category of 'unknown unknowns' that tends to pose a threat. These are missing facts that you cannot easily deduce as missing. This includes situations where you have no reason to believe that 'something' (in Rumsfeld's case, a threat) might exist. It is an area of huge misunderstandings in human logic and reasoning; such as accepting that the world is flat because nobody has yet considered that it might be spherical. It is expecting Isaac Newton to understand the concept of particle physics and the existence of the Higgs boson when he theorises about gravity. Or following one course of action because there was no reason to believe that there might be another available: all evidence in my known universe points to Plan A, so Plan A must be the only viable option. In experiments with ChatGPT, there is good reason to believe that it can be humble; that it recognises it doesn’t know everything. But the models seem far more focused on coping with 'known unknowns' than recognising the existence of 'unknown unknowns'. When asked how it handles unknown unknowns, it explained that it would ask clarifying questions or acknowledge when something is beyond its knowledge. These appear to be techniques for dealing with known unknowns and not unknown unknowns. The More we Learn, the More we Understand How Much we Don’t Know Through early life, in our progression from childhood to adulthood, we are taught that the more you know and understand, the more successful you will be. Not knowing a fact or principle was not something to be proud of, and should be addressed by learning the missing knowledge and followed by learning even more to avoid failure in the future. In education we are encouraged to value knowledge more than anything else. But as we get older, we learn with hindsight from the mistakes we have made from ill-informed decisions. In the process, we become more conscious of how little we actually know. If AI in its current form does not appreciate or respect this fundamental concept of ignorance, then we should ask what flaws might exist in its decision-making and reasoning? The Peril of Hubris To feel that we can understand all aspects of a complex system is hubris. Rory Stewart touches on this from his experience in government. It is a fallacy to believe that we should be able to solve really difficult systemic problems just by understanding more detail and storing more facts about the characteristics of society. As Stewart notes, this leads to brittle, deterministic solutions based on the known facts with only a measure of tolerance for the 'known unknowns'. Their vulnerability to the 'law of unintended consequences' is proven repeatedly when the solution is found fundamentally flawed because of facts that were never, and probably could never be, anticipated. These unknown unknowns might be known elsewhere, but remain out of sight to the person making the decision. Some unknown unknowns might be revealed, by speaking to the right experts or with the right lines of enquiry. However, many things are universally unknown at any moment in time. There are laws of physics today that were unknown unknowns to scientists only few decades previously. The Basis of True Creativity Stewart dedicates an entire episode to ignorance’s contribution to creativity, bringing in the views and testaments of great artists of our time, like Antony Gormley. If creativity is more than the incremental improvement of what has existed before, how can it be possible without being mindful of the expanse of everything you don’t know? This is not a new theory. If you search for “the contribution that ignorance makes to human thinking and creativity” you will find numerous sources that discuss it, with references ranging from Buddhism to Charles Dickens. Stewart describes Gormley’s process of trying to empty his mind of everything in order to set the conditions for creativity. Creativity is vital to more than creating works of art. It is an essential part of complex decision-making. We use metaphors like 'brainstorming or blue sky thinking' to describe the state of opening your mind and not being constrained by bias, preconception or past experience. This is useful, not just to come up with new solutions, but also to 'war game' previously unforeseen scenarios that might present hazards to those solutions. What would you Entrust to a Super-Genius? So, if respecting and appreciating our undefined and unbounded ignorance is vital to making good and responsible decisions as humans, where does this leave AI? Is AI currently able to learn from hindsight – not just learn the corrected fact, but learn from the very act of being wrong? In turn, from this learning, can it be more conscious of its shortcomings when considering things with foresight? Or are we creating an arrogant super-genius unscarred by its mistakes of the past and unable to think outside the box? How will this hubris affect the advice it offers and the decisions it takes? What if we lived in a village where the candidates for leader were a wise, humble elder and a know-it-all? The wise elder had experienced many different situations, including war, famine, joy and happiness; they have improvised solutions to problems that they have faced in the past, and have learnt in the process that a closed mind stifles creativity; they knew the mistakes they had made, and therefore knew their eternal limitations. The village 'genius' was young and highly educated, having been to the finest university in the land. They knew everything ever written in a book, and they were not conscious of making a bad decision. Who would you vote for to be your leader? Conclusion The concepts described here are almost certainly being dealt with by teams at Google DeepMind and the other AI companies. They shouldn’t be insurmountable. The current models may have a degree of caution built into them to damp the more extreme enthusiasm. But I’d argue that caution when making decisions based on what you know is not the same as creatively exploring the 'what if' scenarios in the vast expanse of what you don’t know. We should be cautious of the advice we take from these models and what we empower them to do—until we are satisfied that they are wise and creative as well as intelligent. Some tasks don’t require wisdom or creativity, and we can and should exploit the benefits that these technologies bring in this context. But does it take both qualities to decide which ones do? We leave you with that little circular conundrum to ponder.
by Doug McCauley 14 February 2025
In 2023, the UK Government announced plans to introduce a carbon border tax from 2027, known as the UK Carbon Border Adjustment Mechanism (UK CBAM). This policy aims to prevent carbon leakage (the practice of shifting emissions-intensive production to countries with weaker climate policies) by ensuring that imported goods are subject to a comparable carbon price as those produced domestically under the UK Emissions Trading Scheme (UK ETS). Ultimately, the goal is to drive global reductions in industrial emissions and support the transition to a low-carbon economy. What is the UK CBAM? The UK CBAM will apply to imported goods in emissions-intensive industries. Starting in 2027, businesses importing iron, steel, aluminium, ceramics, cement, fertilisers, glass and hydrogen into the UK will be required to: Mandatory Disclosures: Submit reports detailing the carbon emissions embedded in their products (embodied carbon). The UK CBAM will require reporting to detail the Scope 1 (direct emissions from production), Scope 2 (indirect emissions from purchased electricity), and select precursor product emissions embodied in imported products. Levy Payments: Pay a levy based on the carbon pricing of the exporting country. If the exporting country has little to no carbon pricing, UK importers will be subject to a higher tax rate. This initiative encourages businesses to source materials from suppliers with strong carbon policies, incentivising sustainable production methods. How Will it Work? The UK CBAM will require importers to report and pay for the emissions embedded in their products at the UK ETS carbon price. If a foreign producer has already paid a carbon price in the country of manufacture, this may be deducted from the payment charge under UK CBAM to avoid double taxation. The UK Government has proposed to have four accounting periods per year to align with the standard practices used by other taxes. How Does the UK CBAM Differ from the EU CBAM? While both mechanisms share the same overarching objectives, there are key differences: Scope of Products : The EU CBAM applies to cement, iron, steel, aluminium, fertilisers, electricity, and hydrogen, whereas the UK CBAM excludes electricity imports but also applies to additional products, such as ceramics and glass. Implementation Timeline : The EU CBAM has already begun its transitional phase (October 1, 2023), requiring emissions reporting, with full financial enforcement starting in 2026. The UK CBAM, however, will take effect in 2027. What Can Businesses Do to Prepare? To limit exposure and ensure compliance with UK CBAM, businesses should take the following steps: Assess Supply Chains: Assess your exposure to UK CBAM by reviewing your suppliers to understand where imported products and materials are being manufactured and their carbon intensity. Identify other suppliers with lower-carbon intensities. Engage Key Suppliers: Work with your suppliers to encourage the adoption of low-carbon technologies and practices that will reduce the carbon intensity of manufactured materials. Consider switching suppliers and sourcing materials from UK-based companies that already comply with UK ETS, to reduce exposure. Comprehensive Emissions Reporting: Ensure you have sufficient emissions accounting and reporting practices in place, to minimise disruption caused by mandatory reporting. We recommend businesses understand their Scope 1, 2 & 3 emissions to identify high-impact activities and inefficiencies within their operations and their supply-chain. How We Can Help Cambridge Management Consulting is equipped with in-house sustainability experts through our sister-comp any, edenseven . edenseven is a sustainability consultancy with a proven track record in designing and delivering data-driven sustainability strategies. Our cloud-based carbon accounting and management platform, cero.earth , si mplifies compliance and reporting for businesses of all sizes. Why Choose cero.earth? Regulatory Compliance: Aligns with the Greenhouse Gas Protocol (Scope 1, 2 & 3) to ensure accurate and compliant carbon reporting. Expert Support: Backed by a team of analysts who guide you through the process, making compliance straightforward. Seamless Data Integration: Easily upload and export data in required formats with our integrated report building tools, for effortless reporting and disclosure. Enhanced Credibility: Track and disclose detailed emissions data to investors and stakeholders with confidence, ensuring enhanced credibility. Reduce Costs: cero.earth identi fies high emissions sources and inefficiencies within your operations and supply chain, enabling you to make informed decisions about where to implement impactful change, saving you cost with CBAM and ongoing operations. Net Zero Project Tracking: Design, implement and track your carbon-reduction projects and leverage our Net Zero Carbon (NZC) dashboard to visualise your pathway to Net Zero and set strategic carbon reduction targets. Flexible Packages: cero.earth of fers tailored packages to suit all businesses. For businesses seeking a hands-off experience, our Strategic package allows us to handle the entire carbon accounting and compliance process on your behalf, ensuring a seamless and fully managed approach, allowing you to focus on what you do best. Prepare Your Business for the Future With the UK CBAM on the horizon, businesses must take proactive steps to manage their carbon impact and ensure compliance. cero.earth by edenseven, on of the Cambridge Management Consulting family of companies, provides the tools and expertise needed to navigate these changes with ease. Click here to learn about Cambridge Management Consulting's full suite of sustainability services, and here to get in contact with edenseven to learn more about cero.earth .
Close up of public buildings with neon overlay
by Craig Cheney 12 February 2025
The UK’s Devolution White Paper represents a significant milestone in the evolution of local governance. By transferring greater powers and funding to regions, devolution has the potential to rebalance the economy, drive local innovation, and improve public services in ways that reflect regional needs. However, while the policy direction is clear, ensuring that devolution delivers on its promise will require focus, leadership, and a commitment to making it work in practice. The opportunity ahead is vast. With both new Combined Strategic Authorities (CSAs) and new Unitary Authorities (UAs) set to emerge, the challenge is not just about establishing new structures but about delivering real outcomes for people, businesses, and communities. To do this, leaders must prioritise three key areas: getting early decisions right, establishing strong partnerships, and moving beyond governance to delivery. The First 100 Days: Setting a Clear Direction For newly devolved regions, the early months are crucial. The way new Combined Authorities and Unitary Authorities establish themselves will determine their credibility and effectiveness in the years to come. Experience from existing devolution settlements suggests that success depends on: A strong, unified vision that aligns political, business, and community interests. Early investment in strategic priorities such as transport, skills, and business support. Clear governance and decision-making structures that enable action rather than bureaucracy. For new Combined Strategic Authorities, which will bring together multiple local councils under a regional governance model, the key challenge will be to establish strong relationships between constituent authorities and ensure that devolution delivers meaningful economic and social benefits. These authorities must act as catalysts for regional growth, shaping investment strategies and infrastructure development. Meanwhile, new Unitary Authorities, which will replace existing two-tier local government structures in some areas, face a different challenge: ensuring a smooth transition from district and county councils while maintaining service delivery. Early decisions on financial sustainability, workforce integration, and community engagement will be critical to their success. When these new authorities get these fundamentals right, they build public confidence, attract investment, and demonstrate the real benefits of devolution. The alternative—slow decision-making, fragmented priorities, or uncertainty—risks undermining the potential benefits before they can be realised. Beyond Structures: Delivering Growth and Public Value For devolution to succeed, it must be measured not by the governance arrangements it creates but by the impact it delivers. At its best, devolution can: Support economic rebalancing – allowing regions to shape their own growth strategies and attract investment tailored to local strengths. Improve public services – integrating health, transport, and housing policies in ways that work for local communities. Drive innovation and sustainability – empowering regions to lead on green growth, digital transformation, and new models of service delivery. However, turning these ambitions into reality requires expertise, collaboration, and a focus on delivery. It is essential to recognise that devolution is not a one-size-fits-all solution. Challenges and Pitfalls to Avoid Devolution must be tailored to local needs rather than driven by central government’s preferred model. As Councillor John Merry, Chair of Key Cities and Deputy Mayor of Salford, has noted, the government’s current approach to devolution, which often emphasises large unitary authorities as a prerequisite for greater powers, does not suit all areas. While a move towards larger authorities may improve efficiency in some regions, it risks overlooking the distinct economic and social needs of smaller urban areas. Local leaders must be actively involved in shaping devolution settlements to ensure they work in practice, not just on paper. Similarly, the County Councils Network (CCN) has warned that while local government reorganisation may be necessary in some areas to unlock more ambitious devolution deals, it must be evidence-based. They have raised concerns that breaking up county councils into smaller unitary authorities could create structures that lack the scale to drive economic growth or deliver major infrastructure projects effectively. This highlights the need for carefully considered and locally led approaches to reform.  Another critical risk is funding uncertainty. Many local leaders have welcomed devolution in principle but remain concerned that new authorities will be given responsibility without the long-term financial certainty needed to deliver real change. Without multi-year funding settlements and greater fiscal autonomy, there is a danger that new authorities will find themselves constrained by short-term financial pressures rather than empowered to drive transformation. The National Opportunity While much of the focus has been on how local areas can use devolution to their advantage, the opportunity is equally significant for the UK as a whole. A successful devolution agenda would mean: A stronger, more balanced economy where growth is not concentrated in London and the South East but driven by thriving regional economies. A more responsive state, with policies shaped closer to the people and businesses they affect. Greater trust in government, as local leaders demonstrate the ability to deliver tangible improvements. The next phase of devolution must be a shared national effort—where central government, regional leaders, businesses, and communities work together to ensure that this is not just a shift in structures but a real shift in power, funding, and impact. The UK stands at a crossroads. If devolution is done well, it has the potential to unlock one of the most significant economic and social transformations in a generation. The question is whether we will seize this opportunity or allow it to become another layer of bureaucracy. The choice, and the challenge, lies ahead.
A dense forest with a clearing and blue pool in the middle
by Pete Nisbet 5 February 2025
Why Strong Policy Matters When we look back over the first few years of this decade, there have been numerous environmental pledges, policies, and targets announced with great fanfare around the world. In the media, we constantly see images that affirm that history is being made: world leaders in rare agreement and lofty speeches behind podiums. In the meantime, the business sector has taken a deep, quiet breath. In most cases, companies have acted: starting their net-zero journey by recalibrating their operating models. It is clear that policy should lead to direct action. But legislation isn’t always contractual; sometimes policy can simply be guidance. Even then, under the influence of public pressure and media scrutiny, it can effectively steer customers and businesses in the right direction. Awareness of policy and the effects of ignoring it are also significant factors. If businesses respond slowly to this shift, it can have a material impact on the products and services that they provide, and even destabilise their long-term financial security. How to Create Momentum To create momentum, a policy needs to provide clear targets for all market participants to work toward. Secondly, depending on the market, a subsidy/support mechanism should be considered to stimulate customer participation and provide the right conditions for investors. We will look at both elements in a bit more detail: Targets and Plans Every target needs a business plan. However, you will struggle to make a realistic plan without knowing what the rules are—picking up the ball and throwing it in the net won’t get you very far in football. In this analogy, when I say ‘rules’ I am referring specifically to policy. Policy creates structure and gives the market guidance. This in turn creates the ability to grow from a solid foundation through investment. What makes a good or bad policy? With the introduction of each new policy there will be those who support it, those who hate it, and those who are in between. The simple key to a good policy is that it is clearly defined with a set of well-considered actions to complete. To achieve this outcome, policymakers should: Engage with the market : This is critical. The market participants, suppliers, consumers and relevant stakeholders live and breathe it on a daily basis. It is important to do more than just listen when creating the policy: make sure you are constantly responding to the market throughout its implementation to better understand when sensible adjustments are required. Timing and certainty : For any market and its participants, having a clear view of when polices will be introduced or changed gives the sector time to plan. Markets and investors hate surprises and uncertainty. If a policy creates shockwaves and continues to be short-term (due to ministerial change etc.), then investors will flee and find another market to work in. Larger participants, who can bring volume and real change to a market, need a clear reason to change. In some instances, these market leaders have been established for decades. Changing the rules creates uncertainty, and uncertainty reduces investment. Subsidy or Transitional Support In any new market ( such as green hydrogen ) or a new version of a market (such as the transition from ICE to EVs and boiler degasification ), there is a need to create momentum. In a nascent market, companies don't have a bottomless pit of finances to run R&D programmes, invest in potentially expensive equipment, or employ technical expertise. In a changing market, customers don’t have the ability to jump into a new environment when disposable income isn’t available. A lack of subsidy creates a huge barrier to entry for small dynamic and innovative businesses, who are often the ones who really challenge tradition and drive the necessary change into a market. Without subsidies, progress is difficult or impossible, as contracts are often short in duration. This means that businesses start on the back foot from day one. In short, cash flow is key. Transitional support is also instrumental for customers who need to make the ‘leap of faith’. It has become clear from recent experience that we need this support to create a national shift. Without it, only the wealthy can afford to make the necessary changes and not the wider population—and a large chunk of this demographic is necessary to move the needle in a material way. This has been evidenced in the renewables market in the UK over the last decade, where we have seen the benefit of subsidy-support in developing a market. This gave investors the confidence to invest, and businesses the confidence to build, amounting to a huge success. We should also expect some bumps in the road, as we saw with the Solar PV Feed in Tariff which was initially set too high and therefore too attractive to ignore. It led to a greater take up than envisaged by the government, which resulted in unplanned charges having to be absorbed by suppliers or passed onto end users. The silver lining, however, is that it put momentum into installation and has boosted the UK to rapidly decarbonise its grid ahead of a number of leading global nations. Stability and Support will Bring Change It is clear that the journey to net zero will be challenging for companies of all sizes, but it is also clear that we as a nation and global community will need to do this at pace. If we don’t create challenging timelines, then only a small proportion of the population will decarbonise. This means governments will need to make firm, long-term decisions which not all of the population will agree with. But, if the policies are good, and subsidy/transitional support mechanisms are put in place, momentum will increase and public perception will amplify those effects as more and more households and businesses report progress. Given these statements, it is clear that both consumers and markets need stable targets and continued support to reach ambitious and legally-binding net-zero goals. Our 4-Point Plan to Protect your Business against Policy Change In a politically unstable world, we must expect twists and turns on the route to net zero. As a supplier, innovator, or anyone who is trying to develop products, deliver services or enter new or evolving markets, there is need to prepare for sudden changes. To help, we have set out four steps that can be followed to navigate volatile policy: Be aware : Make sure as a business you are clearly aware of the detail behind any policy or subsidy that has an impact on you and your business. If you are short on knowledge, this is a clear risk to your business. As an individual responsible for policy or subsidy you will need to know these details to reassure senior stakeholders. As a business you will need to know these details for long-term planning and presenting to customers and investors. Engage with policy makers and industry think tanks : One of the key points we made above is that a good policy is one that has been developed by listening to the market. This doesn’t always happen; so, sometimes this means that the market itself needs to be proactive and talk to the policy makers in a coordinated manner. This might be through direct contact as an individual business, a group within the industry, or through a consultation process. Create a Plan B : If your business is solely dependent on the current policy or subsidy in place, then you clearly need to ask ‘What if’? A business plan needs to factor in changes to subsidy, term, and government, etc. By doing this you will be able to weather the storms and react quickly to change. Surprises can immediately derail a business and permanently damage its long-term viability. Having a Plan B may also produce opportunities that your competitors haven’t seen and are slow to react to. Continuously evaluate : Businesses are continually evolving and, as we’ve discussed, so are policies and subsidies. This means that continually reassessing scenarios, and the impact these changes can have, gives your business a first-mover advantage. We advise companies all the time about maintaining up-to-date management reporting to deploy net-zero strategies. This should be no different to your assessment of the impact of policy and subsidy changes. Summary We have outlined the role of policy in establishing clear goals and subsidising new markets, which encourages both the business sector and consumers to take critical decarbonisation actions. The journey to net-zero emissions is undeniably challenging, but with the right policy framework, both businesses and consumers can benefit in both the short- and long-term. The importance of continued support and stable targets to meet ambitious and legally binding net-zero objectives is vital to the future resilience of our economy and the confidence of our markets. A proactive and resilient approach to policy will allow businesses to adapt, react swiftly to changes and potentially discover opportunities missed by competitors. About edenseven edenseven is the sustainability-focussed sister-company of Cambridge Management Consulting. We work with businesses across all sectors in multiple regions to deliver robust and deliverable net-zero strategies. A cornerstone of any strategy’s success is an awareness of how changes in policy and subsidies can create both risks and opportunities for a business. If you are a business trying to enter a new market or evolving in an existing market and would like to learn more about how edenseven can support you, please get in touch with the team at edenseven at info@edenseven.co.uk or use the contact form below. Find out more about edenseven on their website: edenseven.co.uk
by Pete Nisbet 3 February 2025
In their 2020 report, the Climate Change Committee emphasised the importance of local authorities in national decarbonisation efforts and the UK’s journey to net zero. Quoting the capacity to impact roughly one third of UK emissions, the report highlighted the significant remit of local authorities, including local transport, social housing, and waste, as well as their influence over local businesses and communities. Unlike private entities and businesses – which also contribute significantly to UK emissions yet often exhibit limited willingness to respond* – local authorities have demonstrated a clear commitment to addressing climate change. Out of 394 local authorities, 327 have declared a climate emergency, with 114 setting net-zero targets and 280 developing actionable plans. This highlights the readiness of local authorities to act; however, translating this enthusiasm into meaningful outcomes requires clearer direction and support from central government. While the new government has shown a willingness to address these challenges, the reality is that news policies and funding mechanisms take time to develop and implement. Bridging this gap between ambition and action will be crucial to unlocking the full potential of local authorities in driving the UK’s net-zero agenda. One stand-out and wide-reaching solution to this is climate technology . With the ability to process data more effectively, identify problems faster, and test solutions virtually, technology provides an efficient, transformative vessel for decarbonisation and net zero strategies. In a recent survey, 40% of senior executives said they believe that digital technologies are already having a positive impact on their sustainability goals. And, with the ability to initiate significant carbon reductions across energy, materials, and mobility, and save money at the same time, climate tech has the potential to provide the public sector with the resources it needs toward net zero. *According to a recent analysis of the FTSE 250 conducted by our sustainability sister-company, edenseven, 41% of the FTSE 250 do not have a net zero target, and those who do have delayed it by an average of 13 months. Climate Technology According to a study by ICG, decarbonisation is accelerated in heavily digital economies, but with no risk or loss to finances. Between 2003 and 2019, the most digitalised economies in the EU reduced their greenhouse gases (GHGs) by 25%, while continuing to grow their economies by 30%. For comparison, the least digital economies reduced their GHGs by only 18%, and grew their economies by the same amount. Climate technology can be categorised under three main areas: Decision Making Technologies (such as Digital Twin, Artificial Intelligence, and Machine Learning) Enabling Technologies (Cloud, 5G, Blockchain, Augmented/Virtual Reality, etc.) And Sensing & Control Technologies (eg. Internet of Things, Drones & Imaging, and Automation & Robotics) In this article, we will discuss how each technology can be, and is being, specifically applied to climate strategies, and ultimately how these practices can be leveraged to benefit the Public Sector. Enabling Technologies By increasing efficiency, Enabling Technologies have the potential to accelerate decarbonisation with specific applications in the energy sector. For example, in a study by the World Economic Forum which placed the impact of digital technologies at a reduction of 8% on GHGs by 2050, they named 5G as a boost to energy efficiency in highly networked environments. Similarly, blockchain technologies promote circularity, transparency, and security, all of which can be used to track carbon emissions within an organisation. This is particularly unique for its ability to measure Scope 3 emissions including the supply chain, which are notoriously difficult to monitor as they are indirect emissions, as opposed to Scopes 1 and 2 which are associated directly with an organisation’s operations. Cloud technology also has numerous applications in climate endeavours, including grid management, smart meters, asset planning tools, solar propensity modelling, and methane tracking. Sensing Technologies Sensing technologies such as Internet of Things (IoT)-enabled sensors, imaging, and geolocation have the capacity to support climate strategies through their ability to gather real-time data and drive decision-making. Specifically, this has applications in the transport industry, improving route optimisation and decreasing emissions across both rail and road. Decision Making Technologies As useful and beneficial as all of these technologies are for accelerating sustainability strategies, their efficacy is predicated on beginning with a strong foundation. One particularly prevalent technology which can provide this comes in the form of the decision-making technology, Artificial Intelligence (AI). According to a collaborative study by the World Economic Forum and Accenture, AI alone has the potential the reduce global GHG emissions by 4% by 2030. Even greater, CapGemini places the figure at 16% for AI’s climate potential across multiple sectors. This is due to the substantial boost in efficiency that AI provides when integrated into a business or organisation. This is universal regardless of sector or industry, however it poses the most significant environmental benefit to energy-intensive systems, allowing them to limit their emissions by reducing the energy required to complete their operations. The most pressing example of this is the manufacturing industry, which can employ AI in order to propel the efficacy of their process optimisation and model production lines, as well as using Machine Learning (ML) to streamline demand forecasting. However, the efficacy of AI, ML, and other decision-making technology depends upon robust data. Between identifying and tracing source materials, optimising routes, and enhancing efficiency, access to clear and solid data is crucial for building streamlined solutions and a direct path to net zero. Though not wholly reliant on AI, one example of this data-intuiting technology is cero.earth, the in-house carbon accounting and management platform from edenseven which is been funded by InnovateUK as one of their seven flagship ‘net zero living programmes’. Dynamic and intuitive, and designed to work specifically in the public sector, cero.earth gathers holistic data across all three Scopes of emissions in order to provide an organisation with actionable outcomes to propel them toward net zero. This provides the entity with the ability to track their progress and easily report developments to stakeholders, providing complete control over their climate journey. Thus, cero.earth is the optimal starting point for organisations to understand their current position, future opportunities, and roadmap to net zero. Decarbonising the Public Sector Through the combined benefits outlined in this article of transparency, efficiency, and clarity, climate technology has the potential to provide the direction toward net zero that the public sector could benefit from. In particular, climate tech has attractive applications across major emission areas including transport, waste, and infrastructure: Transport: As well as the aforementioned ability of sensing technologies to benefit route optimisation in local rail and road networks, there are already numerous examples of transport technology with sustainable benefits such as electric vehicle charging and energy management. Buildings: In buildings, it is easy to initiate decarbonisation through better controls such as thermostats, air quality monitoring, and smart parking. Waste: Forecasting technologies like AI and ML can support public sector bodies to reduce waste by providing an overview of resources and accurately projecting their usage. Furthermore, technology can improve the energy efficiency of other public sector organisations such as healthcare. In a survey conducted by Bain & Company, healthcare companies were asked which technological application they had trialled in the previous three years (as of 2022). Innovative solutions included the use of big data to improve medical R&D, digital interfaces for electronic records and telecare, and integrating centralised information on healthcare providers, drugs, and treatments. All of these improve efficiency, and ergo reduce emissions. The Responsibility of the Public Sector The public sector also has a part to play itself in improving access and innovation to these technologies, in order to increase their availability and applications to its industries and operations. The World Economic Forum highlighted three ways in which the public sector can bolster climate investment, namely the use of incentives to drive activity from technology suppliers and financial investors; create longer-term certainty through regulatory support, providing security for technology companies to develop their solutions; and set better standards to credentialise green products and services. These objectives are particularly prescient for those technologies which present a double-edged sword to sustainable initiatives. For example, though Enabling Technologies such as data centres, as explained earlier in this article, have the potential to boost efficiency within highly networked areas of the public sector, they also come with their own climate considerations. As of 2022, data centres account for 1% of the world’s electricity consumption, and 0.5% of CO2 emissions, figures which are more concentrated when analysing Europe in isolation, where a 2020 EU Commission Study revealed that data centres use 2.7% of the continent’s electricity demand, expected to reach 3.2% by the end of 2030 if they continue at the current rate. This is not the end of the story, however, as technological innovations are being accelerated to offset this carbon contribution. Namely, the replacement of liquid cooling with air cooling provides a much more sustainable alternative to maintaining the efficiency of data centres, which relies on them not overheating. Air cooling leverages variable-speed fans which can run at reduced speeds to match a reduced cooling requirement; paired with strategic containment, this can create ‘hot’ and ‘cold’ aisles that produce a tailored thermal profile and ensure efficient cooling. Though the growth and application of technologies such as these is largely dependent on bigger organisations, the public sector can still play its part by spurring and motivating the momentum of their development. Financial Benefits to the Public Sector The public sector itself also has numerous financial benefits to expect from increased sustainable investment, particularly in climate tech. As aforementioned, a study by ICG revealed that digital economies are able to reduce their GHGs by 25%, while increasing their economies by 30%. A report from the Institute of Local Government provided insight into these benefits, highlighting the role of technology as a crucial component: Energy Efficiency: The Institute listed the replacement of outdated lighting fixtures in streetlights with more energy efficient LED bulbs as a quick way to save money, as well as improving street safety. This is heightened in combination with sensing technologies, such as motion detectors and dimmers. The City of Sacramento, for example, has been able to save an average of $302,800 annually through this change. Transportation: Encouraging and facilitating the use of sustainable transport options comes with the economic benefits of conserving fuel and cutting fuel costs, reducing the health impacts of air and water pollution – and ergo saving on healthcare costs – and reducing traffic congestion, making streets safer for pedestrians and transit users alike. Overall, increasing efficiency and sustainability through climate tech means that less funding has to be allocated to considerations such as the cost of water, energy, and infrastructure development and maintenance. These savings can then be reinvested into more targeted initiatives which in themselves can spur economic and environmental development, as well as increasing financial stability. An increased priority and emphasis on sustainability also has the economic benefit of producing green jobs. Defined as any job which ‘contribute[s] to preserving or restoring the environment and our planet’, green jobs go hand-in-hand with the introduction of climate tech, including environmental technicians, wind turbine or solar panel technicians, green construction managers, and nuclear engineers, to name a few. The Role of Cities In particular, cities are public sector bodies equipped with the potential to create an immense environmental impact. In a TedTalk from Marvin Rees, on the Board of Directors for Cambridge Management Consulting, he explains that, despite occupying less than 3% of the earth’s land surface, cities are home to around 55% of the world’s population, are responsible for around 75% of CO2 emissions, as well as being prodigious emitters of nitrogen dioxide and methane, and consume 80% of the world’s energy. However, Marvin explains, due to their reach, size, density, close proximity to leadership, adaptability, and capacity for reinvention, they have a vast capacity to manage those statistics. Attributing much of this potential directly to technological innovation, Marvin lists several of the technologies outlined in this article as being particularly accessible to cities: their population density makes public transport more accessible and cost effective, renewable investment is more financially attractive in large-scale markets, and the heightened presence of a circular economy brings greater benefits to waste management and recycling, in which goods are reused, and unavoidable waste such as food waste can be processed, for example as fertiliser. Providing inspiration from a global perspective, Marvin names technological examples from around the world: Malmö: Malmö has developed a heat network that is fed by heat generated by processed waste; they intend to be 100% powered by renewable or recycled heat by 2030. Oslo: Oslo is subsidising electric vehicles and charging points, as well as introducing a circular waste management system and the purchase of a biogas plant. Bogota: Bogota has introduced a bus rapid transit system and have one of the largest fleets of electric buses in Latin America. Innovations such as these are especially concentrated in Smart Cities, defined as cities which leverage information and communication technology to improve operational efficiency with the twin aims of improving economic growth and quality of life. As such, one of their most prescient objectives is environmental and sustainable development. Conclusion As this article has outlined, the only thing decelerating the public sector on its journey to net zero is a lack of direction, clarity, and security – technology has the potential to bridge this gap by providing transparency and efficiency. Through the differing and wide-reaching applications of foundational, decision making, enabling, and sensing and control technologies, the public sector can decarbonise across numerous emission-contributing factors. While it is worth noting that the technologies listed throughout this article do not in themselves offer a one-size-fits-all approach, their numerous benefits and uses at least contribute greatly to developing the framework for a coordinated approach. Furthermore, they also possess incredibly financial and economic benefits to public sector entities, increasing employment through the availability of green jobs, as well as saving money through efficiency which can be reallocated to other initiatives. For more information on the power of climate technologies such as cero.earth, visit the website for our sister-company, edenseven, here: https://www.edenseven.co.uk/cero-earth For guidance on how to navigate the public sector, contact Craig Cheney, Managing Partner, here: https://www.cambridgemc.com/people/craig-cheney
A futuristic eco-city set into a cliff
by Jon Wilton 31 January 2025
There were only 2 megacities globally in 1950. Currently, there are 34, and this number is projected to reach 43 by 2030. Megacities are expected to house 70% of the world's population by 2050. According to the World Bank, 56% of the world's population, about 4.4 billion people, currently reside in urban areas. By mid-century, this number is expected to increase to 7 in 10 people. As a result, cities are responsible for 70% of global energy consumption and 67-72% of carbon dioxide emissions. In addition, this ongoing shift toward urbanisation has led to the creation of megacities, which, due to their size, create both distinct environmental problems and solutions. Cities and NDCs Despite the number of climate-related disasters tripling in the last 30 years, causing rising death tolls, mass migrations and billions of dollars in damages, the majority of governments continue to miss the crucial role that cities play in achieving a net-zero future. Many Nationally Determined Contributions (NDCs) explicitly reference urban strategies for both mitigation (e.g., reducing emissions from energy and transport) and adaptation (e.g., enhancing resilience to climate hazards like flooding). As the role of cities comes under renewed scrutiny, we have taken the opportunity explore the relationship between megacities and climate change, and the potential for mitigating these impacts through sustainable urban planning and technological innovations. We also discuss the importance of addressing social inequalities and promoting community participation in addressing urban challenges. What is a Megacity? Megacities, defined as urban areas with populations exceeding ten million, are increasingly common, particularly in developing countries. They offer economic opportunities but also pose significant environmental challenges, such as air and water pollution, resource scarcity, and rising temperatures. The Top Five Megacities As you can see from the table below, the top five megacities, ranked by population size, differ significantly in terms of GDP per capita and technological maturity (as per the Digital Cities Index):
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