Sadiq Khan: Savvy UK businesses will stay focused on net-zero despite current crises

Khan addressed the event at Aviva's offices, near The Gherkin in Central London

Khan was at the launch event for London Climate Action Week (LCAW) this morning (27 June), shortly after City Hall announced its signing of the Fossil Fuel Non-Proliferation Treaty and confirmed a new power purchase agreement (PPA) tender to increase the use of renewable electricity in powering London’s public transport network.

LCAW, organized by think-tank E3G, has taken place annually since 2019 and is designed to bring together all parts of the capital to raise awareness of the urgency of climate action and to co-create and implement solutions. Businesses, policymakers, local authorities, academics, civil society groups and activists are in attendance, among other key groups. This year, after two years of virtual events only, face-to-face meetings are back. But, while Covid-19 restrictions are now lifted in England, attendees are facing a myriad of other interconnected challenges. Chief among them is the rising cost of living, driven by significant increases in food and energy prices that have been steepest since Russia’s invasion of Ukraine.

Khan used his platform to urge all parts of society to view the solutions which will create peace, food security and energy security as one and the same as those which can tackle climate change and social inequalities. He argued that “there has never been a more compelling case” to accelerate the energy transition, prioritizing renewable energy and the related storage and distribution infrastructure.

In his speech, he said: “Not only is this necessary to ensure that the planet remains liveable and inhabitable, but investing in renewables can also reduce our dependence on autocratic regimes like Russia; help us to tackle the spiralling cost of living caused by soaring fossil fuel prices; enable us to address many of the inequalities and injustices exposed by the pandemic through a just transition; and unleash a new era of spending, growth and high-quality jobs on offer for our citizens.”

Speaking exclusively with edie after his speech, Khan gave his view on the role that UK Plc can play in delivering a rapid transition away from fossil fuels – and how City Hall can promote the benefits they may reap by doing so.

He said: “I think that, if you’re an investor or a business, surely you’ll realise that there is no future in fossil fuels – environmentally, financially, and for a variety of other reasons.

“London, around the world, is seen as a green financial centre – so there’s an opportunity there to invest more in good businesses, like those here to be celebrated at London Climate Action Week. And, actually, we want these businesses to be at COP27 as well, leading the way. In Glasgow, the energy wasn’t inside the conference rooms where national governments [were negotiating]; it was outside, with the private sector, Mayors and civil society.”

edie pointed out, however, that there is still a gap between business ambition and business action on net-zero. Challenges include developing and funding plans which are science-based and tackle the business’s most material sources of emissions and climate-related risks.

Research has repeatedly shown that this gap is perceived to be hardest to close for SMEs, which often lack the funding or the in-house expertise to create and deliver credible net-zero plans. As of 2019, London played host to more than 1.1 million SMEs. As with the UK as a whole, SMEs account for the vast majority of the total number of businesses in the capital. In national terms, the emissions accounted for by SMEs vs large firms is around a 50:50 split.

Khan said: “The opportunity [City Hall has] to influence businesses is really important. Ideally, we want the big boys and girls to get on board, which will have an impact in relation to the spread in the agreement that ‘yes, we need to get on board, because they’re doing it, so I probably should as well’.

“In the absence of them getting on board, we’ve got to reach out directly to SMEs to explain to them not just the science, not just that there are environmental reasons to act, but that there are economic reasons. These are in relation to the certainty of prices of [clean] energy, for example, or that London businesses are less likely to be flooded due to the consequences of climate change. There are also health reasons, like air quality improvements resulting in staff taking less time off work and so on.

“We’re trying to explain to businesses that, yes, there are altruistic reasons to get involved in this. But there are self-serving reasons also. [Net-zero] isn’t just an issue of businesses needing to act in and for Sub-Saharan Africa or the Pacific Ocean. It affects all of us.”

‘Falling for the fossil fuel spin’

edie also asked Khan about businesses which may see the potential benefits of making net-zero commitments, but be reluctant to act due to the pervasive narrative which posits decarbonisation as expensive and bad for business. While the narrative around seeing low-carbon transitions as cost-saving measures has grown recently, the start of 2022 saw some parts of the UK Government urging for a rollback on long-term net-zero commitments to save on upfront costs.

Khan acknowledged that much of this rhetoric is, under the surface, pushed by those with personal and commercial interests in fossil fuels. He also said he believes the responsibility for dampening these sentiments ultimately lies with national governments.

He said: “This issue about making [the net-zero] transition more complicated by buying into the spin in relation to fossil fuels is one of the reasons we are calling on national governments to show leadership, as backed by UN Secretary-General Antonio Guterres. They also need to provide Mayors with new powers and resources. We need them to step up.”

Khan noted in his speech that, while the UK spearheads the powering past coal alliance, it did not declare an end to oil and gas at COP26 despite having the opportunity. Since then, the UK has been very supportive of new oil and gas extraction through the Energy Security Strategy. The UK’s argument is that, even in its net-zero scenario, some fossil fuels will be used. BEIS has also been talking up the importance of using domestic fossil fuels to reduce transport-related emissions, but this argument does not account for the fact that gas is currently an internationally traded commodity. In other words, the UK has no right to keep gas it drills in the North Sea – it is simply sold internationally to the highest bidders.