Introduction
In today's world, sustainable development has become a crucial aspect for governments and corporations alike. This blog post will take a closer look at the current ESG (Environmental, Social, and Governance) issues in the United Kingdom and the efforts being made to ensure sustainable development.
Mandatory ESG Disclosure Laws
In April 2022, the UK enacted two mandatory ESG disclosure laws: The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022. These regulations require public companies and limited liability partnerships to disclose their climate-related financial information to potential stakeholders and consumers. By implementing these laws, the UK aims to increase transparency and accountability regarding environmental impact and sustainability.
The Delayed Ban on Fossil Fuel Vehicle Sales
One of the significant steps towards achieving sustainable development is the transition to clean energy and reducing carbon emissions. The United Kingdom has set a goal to reach net-zero emissions by 2050, as per the Paris Agreement. As part of this commitment, the UK announced a ban on fossil fuel vehicle sales. Whilst the ban was delayed by 5 years for affordability reasons, the recent economic downturn is merely a temporary hindrance in the UK’s commitment to honour the Paris Agreement. Evidently, when the prime minister was asked how he could achieve the 2050 target after watering down earlier ones, he reiterated the government’s devotion. “We believe we are absolutely on track to deliver our commitments,” he said. This demonstrates the government's commitment to prioritize sustainable development and combat climate change despite facing challenges on the way. Moreover, Sunak said “There was room for manoeuvre because the country had over-delivered in the past, industry costs were falling faster than expected, and the public's uptake of climate measures had been better than predicted”, referring to the falling EV industry costs and the British public’s positive reception of climate measures. Nevertheless, governments will have to consider that affordability issues may return in the long run if effective ESG is not implemented today.
The Importance of Sustainable Development
The monetary consequences of poor Environmental and Social Governance have become increasingly apparent, highlighting the urgency of acting now. On the 5th of September 2023, the Birmingham city council declared itself effectively bankrupt with equal pay fines totalling around £750 million. This is yet another example of poor social governance in the past, a mistake other local governments cannot afford to repeat today. Moreover, since December 2021, most members of the European Union have experienced an unprecedented increase in gas and energy prices. The energy shortage is a result of Russia discontinuing the supply of gas into most of Europe due to the geopolitical disagreement regarding the Ukraine war. From this incident, world leaders had the opportunity to reflect on their energy supply infrastructure and reliance on fossil fuels. Soon, countries that do not effectively secure renewable energy will undoubtedly fall victim to paying heightened energy costs to their rivals.
Figure 1: World Leaders running away from COVID and into an Energy Crisis (Source: China Daily)
Conclusion
Now more than ever before, people understand the need for sustainable development. Society will continue to raise the bar for sustainable practices amongst corporations and governments. Sustainable development is not just an option; but will become a measure of competence amongst countries in the future. Both corporations and governments must recognize this and integrate sustainable practices into their operations and policies.
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Author: Mr. Alden Wong - Student ambassador of ICSD UK