6 in 10 UK businesses cutting environment-related investment due to coronavirus, survey shows

A survey of 200 UK-based businesses has found that 60% have either decreased their investment in sustainability initiatives as a result of Covid-19, or are planning to do so.

The UK economy will contract by 8% in 2020, EY has predicted

The UK economy will contract by 8% in 2020, EY has predicted

Conducted by cloud finance firm Ivalua, the survey asked 200 professionals within the procurement, supply chain and finance professions for an overview of how their priorities and remits had changed since the start of March.

Of this cohort, 95% said their business had developed short-term plans to address environmental concerns in their direct operations and supply chains pre-pandemic. But the majority voiced concerns that these plans now face delays or downscaling as a result of the economic impacts of Covid-19.

Moreover, while almost nine in ten (87%) agreed that greening the supply chain can deliver a “key” competitive advantage – both in terms of resilience and reputation – just 15% said environmental factors are their top priority when working with suppliers. Instead, the most commonly cited top priorities were quality and cost.

When asked to detail their challenges in engaging suppliers on sustainability initiatives and providing adequate environment-related investment, respondents repeatedly cited poor visibility due to a lack of data – an issue which worsens as deeper tiers of suppliers are considered.

Respondents were also frequently (38% of the time) instructed to prioritise cost considerations over environmental considerations by more senior colleagues.

“Covid-19 has forced many companies to change their priorities to focus on ‘business as usual’ and ensuring their survival, creating further barriers when it comes to implementing sustainability initiatives,” Ivalua’s chief marketing officer Alex Saric said.

“However, in the coming months and years, businesses must return their focus to improving sustainability and contributing to global efforts to reduce our impact on the environment. Whilst it is a barrier today… Covid-19 could be a tipping point for a sustainability revolution and businesses that don’t take action to tackle environmental concerns could risk losing market share to greener competitors.”

Investment snapshot

In a survey by edie of 101 UK-based energy and sustainability professionals, conducted in late March, 70% said their organisation had either confirmed plans to pause or postpone investment into sustainability and energy solutions or were considering such a move.

More broadly, the IEA has tracked falling investment against the majority of cleantech sectors since the start of 2020. The Agency claims that stalled action from central governments and private investors means that just six of the 46 green technologies it believes are key to reaching the Paris Agreement’s targets are on track to scale up.

Economist Dimitri Zenghelis was asked to provide insight into this trend at a briefing held by the Aldersgate Group earlier this week.

“In the short-term, the economy faces a classic paradox of thrift,” he argued, "This is what happens when fear of a downturn leads business to cut investment and shed labour. Banks retrench on credit; consumers succumb on spending.

“When everybody responds in this way, the expectation becomes self-fulfilling; the behaviour generates the very downturn that was feared.

“The primary task of Government is to offset this and stimulate lending and hiring in the short-term. In the long-run, we have a slightly different objective; to overcome some of the secular trends and to stimulate investment in complementary, productive assets. In other words, we need to crowd in capacity using the spare resources that we have.”

Zenghelis said that leveraging the level of finance needed to create a truly green recovery would require organisations across the public and private sectors to “frame a compelling vision of the benefits of Government action”, and to respond rapidly to positive policy signals.

BEIS Minister Kwasi Kwarteng agreed, stating that the Government “cannot spend its way to net-zero alone”.

The pair were speaking at a digital event held to mark the publication of the Group's policy briefing on creating an inclusive, resilient and sustainable growth strategy post-pandemic. 

Building on its recent briefing to the Treasury, the new report warns that there is a risk of the UK being locked into a high-carbon, socially unequal "old normal", depsite the Government's repeated verbal commitment to a green recovery. It provides a string of recommendations designed to boost region-specific investment in low-carbon sectors, increase productivity and energy efficiency, and improve access to technologies like electric vehicles (EVs) and low-carbon heating. 

Sarah George



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