How is your Board dealing with sustainability right now? Is it discussing the Industrial Strategy? Are you going faster or slower than before on Net Zero?
The regulatory and political risks associated with sustainability have moved markedly in the last three years. It was only in late 2021 at the UN-led COP26 global gathering of policymakers and business leaders that the direction of travel seemed set.
Since then, geopolitical risk has driven global energy prices for businesses and consumers into a place where commitments made by policymakers and investors look ever more complex.
To guide Boards through these complex challenges, we need predictable policy and a regulatory and political environment that drives rather than hinders change. But when most middle-income voters across Western democracies feel their incomes squeezed - this is no longer a linear journey.
In the autumn of 2023, I was asked by the Labour Party in the UK to write an independent report looking to create a new more stable, and predictable pathway between business, investors and Government. I published this paper in February 2024 at Labour’s pre-election business conference and called for a “New Partnership’.
Speaking to over 300 business leaders (large and small as well as entrepreneurs, trade unions and civil society players), I wanted to set out some core principles to make the UK more investible and for the Labour Party’s political priority of creating a ‘just’ energy transition to become an economic catapult for growth and jobs.
I was privileged to be supported by an advisory group (including Lord Gus O’Donnell, Lord Gerry Grimstone, Natalie Ceeney and Juergen Maier) to test my theory: a belief that constantly changing political priorities and constantly changing Ministers (we have had 7 Chancellors and nine Business Secretaries in the last 14 years under the previous administration) has hampered growth.
Take the example of the screeching U-turn on incentives for businesses and consumers on electric vehicles in September 2023. The signal this sent to domestic and global Boards clearly deterred investment into the UK.
So I proposed an approach in my paper which I am pleased to see the new Government has been rapidly implementing. Firstly, long-term policies including an industrial strategy where sustainability is at its heart. The commanding heights of that strategy include growing the hydrogen economy and advanced manufacturing, as well as tech, life sciences and other catalysts from the higher education sector.
The strategy - to be finalised in the early part of 2025 - will also have ‘place’ and economic cluster agglomeration impact at its core. Think Aberdeen for the hydrogen economy and the Oxford-Cambridge supercluster for tech and life sciences.
Boards should be asking their executive teams to intensively engage with the Government in the next six months on the development of the strategy. Now is not the time to be shy on this – the Government wants to hear your ideas and practical advice.
Plans for a National Wealth Fund and the launch of GB Energy (led by Juergen Maier) have also been given a boost at the recent global investment summit in October 2024. This was another core recommendation of my review: to bring business, investors and Government together.
A further element of my paper called for the Government to introduce a new regulatory dialogue between Ministers, businesses and both the systemic and competition regulators, to ensure the ‘landscape’ for investing in the UK can be boosted. I was delighted when the Prime Minister made this recommendation a key part of his speech to investors at the Summit [https://www.gov.uk/government/speeches/pm-international-investment-summit-speech-14-october-2024]
A new Regulatory Innovation Office has been launched which all high-growth scale-up Boards should be directly engaging with. It is shaping the future of the UK regulatory architecture for the transition economy and is already moving fast.
Finally, there is geopolitical change ahead in other Western Markets which may drive future sustainability investment into the UK from both sovereign investors and large pension schemes. If the UK is going set out a strategy that the UK is the place to invest in sustainable economies while other territories draw back, there is an opportunity for Boards to be at the heart of driving that partnership ahead.
Right now businesses wanting to be at the heart of a ‘modern’ Industrial Strategy need to make sure they have a seat at the table.