Who needs to lead the Net Zero agenda: Government or businesses?

2. The green skills gap

Shifting to greener processes typically requires businesses to hire or upskill employees. This comes at a cost, potentially with a short-term dip in productivity as staff adapt to new processes and technologies – and there is a wider problem that finding talent with the skills required can be difficult.

Recent research from the Prince’s Trust and Public First found only 27% of young people have heard of the term ‘green jobs’ and could explain what it means, highlighting the shortage of workers able to fill incoming jobs created by the green transition.

Larger businesses are also tasked with factoring in the local impact of their sustainability efforts. While new jobs may be created, others may be lost, potentially disrupting local economies.

3. High upfront costs

The Business Outlook Tracker, our bi-monthly survey of 600 business leaders, has seen a steady decline in mid-market business leaders’ confidence regarding their funding position, along with a -30-percentage-point drop in those expecting profit growth, from February to October 2024.

This financial strain complicates businesses' decision to invest in the technology, infrastructure, and skills required to achieve Net Zero. Without a clear regulatory obligation, these investments may be viewed by businesses as optional rather than essential.

What role does the Government need to play?

The Labour Government has announced several new initiatives where the public sector will be directly investing in the Net Zero economy, including Great British Energy and the new National Wealth Fund. However, it’s clear that the bulk of the investment for businesses will still need to come from the private sector. 
 
In the current fiscal environment, it is unlikely that the Government will introduce any new business grant schemes in the short term - for Net Zero or any other priorities. Such initiatives are difficult to justify to the Treasury even under more favourable fiscal conditions.

However, there are ways the Government can play their part in supporting businesses to pursue Net Zero without direct funding.

Provide firm leadership  

During his speech at the 2024 Labour Party Conference, Ed Miliband MP, Secretary of State for Energy Security and Net Zero, stated that clean energy is “the biggest economic opportunity of our time”, and emphasised Labour’s commitment to getting “serious about shifting away from fossil fuels".

However, there was a palpable frustration from business leaders who were eager to hear more concrete plans on how businesses will be required to comply with Net Zero legislation, which Labour has yet to share.

Enable green financing

The Labour Government has shared its ambition to transform the financial system into an enabler of greater ESG responsibility. The recent publication of the Transition Finance Market Review, commissioned by both the UK Treasury and the Department for Energy Security and Net Zero, sets out a plan and a pathway which the Government has accepted.