The current lobbying scandal is shining a light on the interaction between business, politicians and the civil service. When the behaviour of public office holders fails to meet the high standards required, and individual interests are put before the public good, public trust in institutions and systems suffers. All sides can be tarnished and the social contract between citizens and rule makers can be eroded. A ‘one rule for us and another for them’ approach seldom ends well and does not create a healthy environment for individuals, and good businesses, to thrive. 

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There is a growing recognition that a focus on corporate purpose can align government, company, investor and other stakeholder interests around long-term goals such as net zero and help ensure that these are delivered in a fair way.  On 30^th March Sustainability First hosted its ‘Fairness in utilities’ conference to explore this issue and what the purpose agenda means for both companies and government in sectors such as energy, water and communications.

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Hosting COP26 is creating a strong focus on climate issues at home.  What does making the most of this opportunity look like?  Technological change is vital for UK delivery of net zero.  But if our national action on climate doesn’t also deliver a socially ‘just’ transition, its success risks being undermined at home, and abroad.  The Energy White Paper has recognised this, highlighting the importance of fairness and affordability in energy policy.  But why is this important and what can be done to turn rhetoric into reality?

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The extent to which short term shareholder returns should be the main focus of corporate strategy has been questioned increasingly over the past few years. Even mainstream players such as Larry Fink – chair of Blackrock, the major investment fund – now accept that a wider focus on purpose, and specifically on Environment, Social and Governance factors, is a long-term driver of shareholder value. Nowhere is this truer than in public utilities. These sectors deliver ‘essentials of life’: water, energy and digital access. They are core to answering the long-term challenges of net zero, climate resilience and protecting nature.

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2020 ended in a blizzard of policy. There’s a lot to be stimulated by and optimistic about. Amongst the detailed research on cost of capital, on routes to net zero, on infrastructure and through innovation there’s room for people too. The Energy White Paper, the Committee on Climate Change, Ofgem’s RIIO-2 settlement and the Ten Point Plan all envisage a radically different energy sector. And quickly.

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The last few weeks have seen important moves in the financial community to improve and increase reporting in terms of climate issues. Whilst the work of the Task Force on Climate-related Financial Disclosures[i] is to be warmly welcomed in terms of helping to tackle climate risk, on its own, this will not lead to resilience in UK utilities.

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The underlying principles that policy makers and regulators use to guide their every-day decisions need to be transformed if we are to survive and thrive through Covid-19 and the biodiversity and climate crises.

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Price-control design is both complex and 'mission-critical'. At stake is how the £billions of funding allowed by the regulator for DNO investment and operations will be shaped for the coming five years and beyond. Rightly, there is a strong focus on cost-efficiency. But concern about past returns shouldn't wholly dictate the future.

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