There are now less than three months to go until the next United Nations COP27 summit. Taking place in Sharm El-Sheikh, Egypt, and following the landmark COP26 summit in Glasgow, the focus is expected to be squarely on implementation, to turn individual country pledges into tangible action.

With this in mind, H/Advisors Cicero’s sustainability team have prepared a COP27 briefing, highlighting the goals of the Egyptian Presidency, the full programme for the summit, the key national and international individuals who will shape the agenda, and how corporates can engage.

Enter your details below to access H/Advisors Cicero’s briefing:

The unprecedented burden on the NHS in the past two years has made us all aware of the precarity of our healthcare system. A recent parliamentary debate about a National Strategy for Self-Care signals a potential shift in the direction of health policy in the UK post-COVID-19 – something which both sides of the house see as needed. With nationwide delays in access to treatments and severe staff shortages, new, patient-led models of healthcare are now being taken more seriously. 74 years ago, the NHS was created with the vision of providing “cradle to grave” medical care – but what that support involves might look and feel completely different in a few years’ time. 

The latest debate explored some key questions around how a greater emphasis on self-care in health policy would affect the healthcare system and patients across the country. Promoting self-care involves allowing patients to take on a more active role in managing their own health, and providing the information and tools to prevent problems occurring, take care of self-treatable issues and manage the symptoms of chronic conditions. Eventually, patients becoming less reliant on GP services should alleviate the pressure on the NHS and make healthcare provision more sustainable.  

While this may sound like a win-win situation for both patients and the health system, the true winner of a transition to a self-care-based health policy would be the pharma and life sciences sector. In other markets that have adopted a similar model, the industry has been quick to step into the role previously filled by health professionals. With patients seeking to manage their health issues independently, over-the-counter drug sales have skyrocketed, and the demand for better self-management tools has led to flourishing innovation in the medical device and digital health space.  

But can these self-care solutions really replace traditional healthcare services in the UK? While MPs in favour of the proposed reform emphasised that “self-care is not no care,” the criticism levelled by more sceptical voices is that it will be a deflection of responsibility by the Government for taking care of the wellbeing of the population. This is particularly pertinent in a country that tends to pride itself on the quality and accessibility of its public healthcare system, with the Prime Minister referring to the NHS as the UK’s “greatest national asset.” 

What the parliamentary debate on self-care has shown is that policymakers understand that a balance must be struck between taking advantage of the opportunities offered by digital health technology, empowering patients to self-manage their health issues, while also maintaining a well-functioning, well-resourced public health service that is available to those who need it, whenever they need it. The Minister for Health emphasised that while self-care is an integral element of the Department’s objectives for the future of the NHS, it is not a one-size-fits-all solution for the many challenges currently facing the healthcare system in the UK. 

Indeed, the dialogue on self-care segues into other key facets of health policy. Closely relevant are the issues of health literacy and health inequality. Any self-care strategy can only be successful if the population has access to high-quality, accurate medical information, as well as the knowledge and confidence to act on that information. This requires doubling down on nationwide health education efforts. As for health inequality, there is much to do for the Government in terms of removing the structural barriers that prevent marginalised groups from accessing quality healthcare. As the findings in Cicero/amo’s latest update of the Rebuilding Britain Index (RBI) show, health inequalities must be understood – and addressed – within the broader context of socio-economic disparities that are prevalent across the population. 

With the Government’s Health Inequality White Paper due to be published soon, we can expect further policy proposals and parliamentary discussions about pathways for sustainable and equitable healthcare provision in the UK. Clearly, there is a need to move away from the status quo and adapt the healthcare system to the evolving needs of our society. The question remains whether reforms and innovation will put at risk the spirit and ethos of the NHS. 

With the dust having settled on the UK Government’s Energy Security Strategy and the first substantial piece of legislation affecting the energy sector since the Energy Act 2013 being put forward in this week’s Queen’s Speech, now is an opportune moment to review a fuller gamut of UK energy policy.

It is first important to note that without the backdrop of the war in Ukraine, it is unlikely that the Energy Security Strategy would have been published this year. The Government had intended that the raft of Net Zero policies post-COP 26 would provide the coherent roadmap and long-term vision to deliver Net Zero by 2050.

However, as ever – “events, dear boy, events”. 

The original aims of the Strategy were laudable: to confront rocketing energy bills and transition away from Russian fossil fuels after the invasion of Ukraine. Though significantly at this stage in the electoral cycle, judged against these metrics, the strategy is unlikely to deliver in the short term.

The winners: nuclear, offshore wind, and hydrogen

• The Government is betting big on nuclear – with an ambition to deliver up to 24GW of capacity by 2050. This proved a major point of contention between No 10 and the Treasury, who were resistant to the costs associated with producing new sites. A recent Intergovernmental Panel on Climate Change’s (IPCC) report seems to support this conclusion, only citing nuclear once, as an example of a technology with high upfront costs.

• The real centrepiece of the Strategy is increased ambition for the scaling up of offshore wind capacity and reforms to the planning system to cut approval times for new projects. The sector has become a national success story in the UK and is proof of the concept that with the right level of Government support, renewable technologies can experience rapid periods of growth.

• The Strategy cements hydrogen as the Government’s long-term technology of choice to decarbonise industry and transport, as it set out an ambition to double hydrogen production capacity by 2030. The Government has delayed the decision on whether hydrogen is safe to use for heating homes until 2026.

The losers: onshore wind and fracking

• The Business Secretary, Kwasi Kwarteng, failed to push through radical reform of the planning system to allow more onshore wind in the face of backbench opposition, one of the quickest and cheapest short-term salvos to high energy bills. The fact that one of the only options that could plausibly be effective in the short term died a death in the face of nimbyism is symptomatic of the inherent tensions between traditional Tory orthodoxy and the sort of fundamental change required to deliver Net Zero.

• Notably, the Strategy does not mention fracking, the panacea offered by a small number of right-wing Tory backbenchers as well as Nigel Farage, and though the Government has asked scientific advisers to reassess the safety of fracking, few in Whitehall see any real future for fracking in the UK.

The glaring omission: a demand-side strategy 

The Strategy is silent on one fundamental issue – reducing energy demand. The first step for any energy security plan should be to reduce demand, by retrofitting homes or using energy more efficiently, but these measures are said to have been vetoed by the Treasury.

A national retrofit strategy may not be as glamorous as wind turbines or hydrogen, but it would be an essential piece of the energy security puzzle that has again been overlooked.

The Government urgently needs to strike a balance between increasing supply and reducing demand – it is vital that we swiftly see policy turn into action or there will be no change.

A missed opportunity

In the near term, the Strategy does little to assuage the concerns of the electorate about soaring energy prices. In the longer term, it sets ambitious targets for green technologies, yet fails to provide a coherent plan for delivery.  

The result is a strategy that fundamentally does not address what it was created for in the first place: to confront rocketing energy bills and transition away from Russian fossil fuels.

Recent polling from the centre-right think tank Onward reveals that despite the ongoing cost of living crunch, voters still overwhelmingly support the Government’s Net Zero policies, finding that two-thirds of voters (67%) think the Government is not being bold enough in tackling climate change.

This should empower the Government to go faster and further, and the pursuit of both goals need not be mutually exclusive. The rapid roll-out of renewable infrastructure is our best course of action to future-proof the UK against external shocks to the energy market. There may be political benefits for the Tories as well as economic ones for voters if they act on this.

Today, the European Commission published its first ‘Circular Economy Package’. Part of the European Green Deal, it will streamline sustainability across all physical goods, boost circular business models, and increase Europe’s resource independence.

This package will affect all manufacturers based in Europe as well as anyone importing products to Europe and covers construction products, consumer electronics, household appliances, and textiles, to name a few.

With this in mind, the Cicero/amo team have produced an overview of the new rules which may help in assessing their potential impact on your business. The proposals will need to be amended and agreed on by the European Parliament and the Council before they can enter into force, offering concerned stakeholders an opportunity to potentially influence the final legislation.

Please enter your details below to access Cicero/amo’s overview:

Last week, the European Commission published a draft Directive on Corporate Sustainability Due Diligence introducing minimum due diligence obligations in the EU-27. It follows French and German supply chain legislation and is based on international standards and conventions obliging, companies to embed sustainability and human rights standards in their own operations and to establish due diligence throughout their value chains.

The proposal covers actual and potential adverse impacts on human rights and the environment stemming from international conventions set out in an Annex. This includes for instance the International Labour Organization conventions, the Paris Agreement, and violations of prohibitions to unlawfully evict or to cause pollution of soil or drinking water. It covers companies’ own activities, those of their subsidiaries, and most significantly, companies involved in their value chain operations with whom they have an “established business relationship”.

Which companies will be in scope?

The proposal applies to both EU and non-EU companies. For those established in the EU, the thresholds are:

• Group 1: With over 500 employees and a worldwide net turnover of over €150 million in the last financial year; or
• Group 2: With over 250 employees and a worldwide net turnover of over €40 million in the last financial year if over 50% of this turnover was generated in a specific sector (manufacturing and wholesale of textiles, leather and footwear; agriculture, forestry and fisheries, including raw materials, live animals, beverages; and mineral resources including fossil fuels, quarry products, construction materials, fuels and chemicals).

For those companies established outside the EU, the thresholds are:

• Group 1: Generated a net turnover of over €150 million in the EU in the last financial year; or
• Group 2: Generated over €40 million net turnover in the EU in the last financial year, 50% or more of which in one of the abovementioned sectors.

When will companies have to comply?

As it stands, the new rules would apply to Group 1 companies after two years once the law is in force and to Group 2 companies operating in the specific sectors after four years. These dates may still be adjusted as the draft law is amended.

What are the obligations?

The obligations are numerous, incurring significant compliance costs for most businesses. Selected key points include:

• Including due diligence into all company policies: Companies will need to integrate due diligence across the board and regularly publish and update a due diligence policy that meets the Directive’s specific criteria;
• Identifying potential and actual adverse impacts: This can be done through Environmental, Social and Governance (ESG) audits, independent reports, stakeholder consultations, and more. It is left to each Member State to provide further guidance. Financial services companies will face special obligations in that they will have to carry out an impact assessment before providing a credit, loan or other financial service.
• Preventing or mitigating potential and actual adverse impacts: This will require companies to take actions including developing prevention action plans, seeking contractual assurances from their business partners, investing into management of production processes, etc. They will also have to verify whether their business partners adhere to their contractual obligations and suspend or end the business relationship where this is not the case.
• Establishing a complaints procedure: Companies will be required to establish a complaints procedure for those who may reasonably be affected by the company’s activities, including individuals, trade unions, and civil society organisations.
• Reporting: Companies must monitor the effectiveness of their due diligence policy, publishing an annual statement in line with the Corporate Sustainability Reporting Directive.
• Civil liability: Member States are required to establish civil liability for failure to prevent or end adverse impacts which have led to damage.

The Directive also imposes a duty of care on company directors. The setup and implementation of any due diligence strategy will be the responsibility of the company director, with this individual being tasked with ensuring it remains embedded in corporate strategies. When taking decisions on behalf of the company, all directors will be required to take human rights, environmental, and climate considerations into account when assessing consequences. Any variable remuneration should also take the contribution of the business model and strategy towards achieving the Paris climate targets into account.  

Supervision and sanctions

The proposal is a Directive, which means that each EU-27 Member State will have some flexibility when adapting the text into their own law. Supervision will be in the hands of national authorities, who are also tasked with imposing sanctions. Pecuniary sanctions should be based on turnover, though no more guidance is given. For comparison, German national law currently allows for a 2% annual global turnover fine for severe non-compliance. This set up is already raising concerns over a patchwork of 27 different sets of rules and a race-to-the bottom for sanctions.

Next, the proposed text will be discussed and amended by the European institutions.

For questions on the above or the EU’s approach to ESG, please get in touch. Our experienced sustainability team will be happy to help. 

Having a net-zero pledge has become the norm rather than the exception and is something investors are increasingly looking at for their portfolios. In practice, companies will reach their net-zero goals using a variety of measures and approaches, such as buying clean energy, redesigning buildings and plants, optimising supply chains and – last but not least – removing residual carbon emissions.

The Institute of International Finance has recognised the potential of the voluntary carbon market and its task force on scaling voluntary carbon markets is a who’s who of global actors across sectors. Seeing a need for harmonised certification to begin with, the EU is proposing a framework and is looking for input on its plans. These mandatory rules would set out specific criteria across the bloc for identifying, monitoring, reporting, and verifying carbon removal practices. In establishing a framework, the European Commission seeks to ensure high-quality and sustainable carbon removal practices, increasing investor, industry, and consumer confidence.

Currently, there are various public and private certification schemes for carbon removals. One example is voluntary carbon markets, where carbon removal projects can issue ‘carbon credits’, which certify that a certain amount of CO2 has been removed. Buyers, such as companies, can purchase these carbon credits to offset their emissions. Thanks to this interest to date, carbon removal methods have been rapidly evolving, ranging from land management techniques to innovative technological solutions.

By developing binding EU-wide rules on carbon removal certification, the Commission looks to increase confidence in this new asset class and support a growing market. With a harmonised approach to assessments, public and private investors should be more confident that carbon removal schemes bring the environmental benefits they claim while enhancing their public credibility. In turn, this would unlock more funding for business models and technologies designed around carbon removals, ultimately leading to more CO2 being removed from the atmosphere.

Businesses and investors are advised to input into the EU’s plans, as these will likely inspire other jurisdictions and international initiatives. A call for evidence feeding into an impact assessment and a separate public consultation are open until 2 May 2022, with a legislative proposal due in Q4 2022.

If you are curious to learn more about the above or the EU’s approach to ESG, please get in touch. Our experienced sustainability team will be happy to help.