Last week, the Climate Change Committee estimated that the United Kingdom's transition to net zero will create between 135,000 and 725,000 new jobs by 2030 and they will be in a wide range of sectors, including agriculture, the built environment, energy, manufacturing, transport and; professional services. In this article, we examine the challenges ahead for certain business sectors and how employers should start to address them.

The UK's workforce and climate commitments

In October 2022, the Government published statistics estimating that there were 5.5 million private sector businesses in the UK, employing just over 27 million people. The vast majority of businesses (99.2% by number) employ just under half of the total number of employees, with large businesses (those with 250 employees or more) employing just shy of 40% of the UK's private sector-employees.

However, despite having over 10 million employees and a turnover exceeding £2 trillion, many large businesses are not well-prepared for climate change with research published by Ernst & Young in April 2023, noting that whilst over 80% of UK listed businesses have committed to net zero carbon emissions by 2050, the vast majority (95%) have not published detailed transition plans. It remains to be seen whether businesses redouble their climate efforts or be compelled to push back their net zero target dates.

Carbon emissions continue to increase

It is widely accepted that the Earth is in a climate and biodiversity crisis and time for action is rapidly running-out as we race towards our international 2050 climate goals. That sense of urgency feels all the more immediate when we realise that global carbon emissions will not even peak until 2025.

"A Net Zero Workforce"

With climate change an ever-present and unforgiving threat, and with some businesses now beginning to realise the difficulty of climate adaptation and mitigation, despite having the skills and experience of over 27 million people behind it, the Climate Change Committee's report "A Net Zero Workforce" (the Report) is well-timed.

Sectors and opportunities

The Report notes that only 20% of the UK's workforce will see major impacts to their work, which amounts to over five million workers who will 'have a core role to play in delivering net zero'. Sectors such as building retrofit, renewable energy generation and electric vehicle manufacturing will likely see the biggest growth in workers in the next seven years.

Growth sectors identified by the Report include:

  • Forestry, silviculture and logging;
  • Peatland restoration;
  • Building construction and retrofit (insulation/energy efficiency);
  • Power generation, transmission and distribution;
  • Construction of industrial facilities; and
  • Rail operation and construction of transport infrastructure.

The risks

The Report identifies a number of risks associated with the net zero economy, most notably a phase down of certain sectors. The Report considers that 1% of the UK's workforce are currently in sectors that need to phase down as a result of the green transition (coal, oil and gas, and retail sale of automotive fuel); and 7% of workers are in sectors that will need to redirect their products and services (cement, steel, aviation, meat and dairy processing etc.). Employers in sectors likely to see a reduction in the demand for their products and services should be urgently considering their transition plans, and developing training programmes for affected employees.

What to do?

Climate issues will continue to impact workers. For example:

  • Outdoor workers will need additional protection and support as global temperatures rise;
  • Indoor workers will need to work in temperature-controlled environments or else productivity may be reduced; and
  • Employees with health conditions will be increasingly vulnerable to climate change, preventing them from working.

So what can businesses and employers do to prepare for the net zero transition?

  • Audit your business and workforce skills to understand how able you are to transition to net zero. How do your products and services need to change? Does your workforce have the skills necessary for change? Are you dependent upon a carbon-heavy supply chain - for example, do you rely on carbon-intensive raw materials?
  • Are there net zero alternatives? Can your business transition to net zero alternatives (products or services) and if so, do your workers have the skills needed to adapt to the risks and opportunities in the market?
  • Consider retraining and upskilling your workforce. Does your workforce have the skills to support net zero growth, or indeed to continue existing operations as usual? If alternative net zero raw materials are needed for your business, do your workers have the skills to use them safely? If you operate in an industry that will be subject to substantial and rapid change in the coming years, for example property management and maintenance, how will you procure that expertise - will you need outside support?
  • Are there new opportunities for you in the net zero and climate positive economy? For example, if you own suitable land, are there opportunities in the UK's emerging nature markets? Does your workforce have the skills and experience necessary to maximise those benefits, if not how and when do you need to address that? Does a focus on new opportunities support greater employee engagement and loyalty?
  • Develop training and skills programmes to ensure that your business is able to move quickly in the net zero transition. There are likely to be skills shortages in future, so planning ahead to develop or bring those skills in-house could help reduce your exposure to critical gaps.
  • Consider the geographies you operate in. Where you have growth plans, could you benefit from establishing facilities in areas where there is a concentration of skilled workers in sectors most at risk from the net zero transition?
  • For smaller businesses, who we know employ 60% of all of the UK's employees and who lack the financial resource that large businesses have, developing new skills will be challenging. Engaging with trade associations and securing public sources of funding will be critical to keep pace with large businesses. These businesses may also have the potential to engage in a more personal way with their workers which will influence where efforts are focused.
  • What are the climate messages you are giving to current and prospective employees? In our report Tomorrow's World, we found that Generation Z put Environmental, Social and Governance (ESG) performance high on the list of factors they would consider in choosing where to work. If your climate messaging is not right, will your existing workforce remain engaged, or are your workers at risk of leaving and will you be able to compete in order to attract and recruit the best candidates?
  • Consider your policies, rewards and incentives. With an increasingly climate-literate workforce, businesses will need to consider their relationships with their workers in terms of setting clear sustainability targets, offering sustainable pensions, work from home policies, health and wellbeing programmes designed to support those likely to be vulnerable to climate change, zero-emission vehicle incentives, supporting climate-focussed charities and Non-governmental organisations (NGOs), and for some roles, linking remuneration to climate performance. The Chancery Lane Project has some excellent ideas for consideration. In addition, businesses will increasingly need to think about how to approach the management of activist employees outside of work, whether reviewing disciplinary policies, or indeed offering support and encouragement for non-violent protest which does not risk bringing employers into disrepute.

If you wish to discuss the subjects raised in this Insight, please contact Ben Stansfield (Sustainability Partner), Anna Fletcher (Employment Partner), or Vivienne Reeve (Principal Associate, Employment), all members of our ESG team.