The Higher Education (HE) sector is at the coal face for the race to net zero. Resources, knowledge and technology mean that Higher Education Institutions (HEIs) are seen as world leaders in helping to reduce our carbon footprint and protect the environment.
Cleaner energy sources, electric vehicles and sustainable building materials are all ways in which we are collectively decarbonising and preventing further damage to the environment. Whilst this is important and arguably essential work however, it does come at a price. For the HE sector, this cost is now quantifiable and the extent of the work shows we have much further to go.
As HEIs start to implement their net zero plans, consideration should be given to other factors which may affect the overall strategy. This includes reviewing existing fixed assets for impairment and increasing depreciation (such as fleet vehicles not powered by green energy, or non-carbon-neutral heating systems) and examination of climate related covenants in new or existing loan agreements.
In this article we explore some key themes for the sector. Firstly, considerations for meeting net zero targets, how to fund the work and how to report on progress. Unfortunately, definitive answers are difficult to pull together but we provide some insight into best practise as a guide to support HEIs.
Whilst there is little doubt that all individuals and businesses understand that the climate emergency is a very real threat, and net zero targets are both essential and admirable, the question of ‘how to begin’ is valid. Unfortunately, recycling bins on every corner and a ban on plastic bags is simply not enough. But what should HEIs be doing to make sure their targets are met?
Although there is no ‘one-size-fits-all’ model for reaching net zero, the Royal Anniversary Trust published a report in January 2023 outlining a sector-specific reporting framework and the need for an accurate and comprehensive emissions measurement method. HEIs must understand their scope 1, 2 and 3 emissions1 in order to develop strategies to reduce the carbon footprint, in the right areas. The report created a footprint of estimated emissions, using HE and FE data from the 2020/2021 academic year. The footprint shows that scope 3 emissions are by far the most problematic, accounting for 88% of all emissions. Supply chain (36.3%), student accommodation (19%) and student flights (12%) were identified as the largest emission areas. Although this is only an indicator and will vary between institutions (HEIs with few international students are unlikely to have a high flight emission percentage, for example), the report provides a helpful baseline for the sector and highlights the importance of the research phase prior to projects beginning.
The Royal Anniversary Trust report then highlights 5 priority areas for the sector. These are areas of focus to build on in order to reach net zero:
Practical projects will vary between institutions, depending on the size of the estate and the level of scope 1,2 and 3 emissions. UK universities are progressing with various projects including:
It is important to remember that there is no single ‘right answer.’ Each HEI will have their own unique challenges and areas of particular emission focus and sharing best practices is important in allowing the sector as a whole to reach net zero.
It is a fact that decarbonisation, replacement of traditional boilers with heat pumps, and construction using environmentally friendly materials (to name a few) will have a price tag. Whilst the HE sector is considered to be wealthy, the effects of the pandemic, cost increases and rising staff wages has taken a toll on available reserves and the ability to freely embark on development work. For some HEIs in particular, the ability to continue normal operations is becoming more and more difficult due to external factors.
Nevertheless, with the clock ticking to 2050, HEIs must begin their net zero work if they hope to achieve these targets. But at what cost?
The British Universities Finance Directors Group (BUFDG), in partnership with the Association of Higher Education Directors of Estates (AUDE) and the Alliance for Sustainability Leadership in Education (EAUC) have launched a ‘cost of net zero calculator’ and corresponding report. Providers can use the tool to estimate their costs for the transition to net zero. Although this cannot be exact, it will give individual HEIs a good indicator of expected costs, allowing them to seek investment and financing as appropriate.
Key findings in the report for the HE sector include:
Clearly the first step for any organisation is to determine the current level of emissions and ensure that there is a clear individual / team allocated to lead this work forward. It is unlikely that the net zero work can simply be an ‘add-on’ to a pre-existing role. The actual cost to each HEI will vary but robust financial planning and procurement policies are required.
There is increasing momentum within the not-for-profit sector for organisations to be choosier in their investment strategies. A 2022 legal ruling paved the way for charities to prioritise ethical investments, even at the expense of financial return. Whilst HEIs, (often) as exempt charities, do not need to adhere to Chrity Commission guidance, the implications of the updated CC14 investment guidance may be helpful for HEIs to develop an investment policy which focuses on environmentally sustainable shareholdings, rather than those linked to fossil fuels or other industries detrimental to the climate.
As the majority of HEIs are not registered companies, many of the reporting requirements do not apply. Increasingly, however, we are seeing more and more HEIs making voluntary disclosures in line with the Streamlined Energy and Carbon Reporting (SECR) requirements. The environmental impact of a single university, with accommodation, transport and day-to-day operations, could be significant, so it is pleasing to see to see the sector increase its reporting in this area.
SECR requires large companies to report on:
The Department for Education has confirmed that universities and colleges will be reporting their carbon emissions by 2024 as per their Sustainability & Climate Change Strategy and as we enter the 2023/4 academic year, HEIs should consider reporting on climate matters.
As well as SECR, the Royal Anniversary Trust report detailed the Standardised Carbon Emissions Framework (SCEF) which has been designed exclusively for use by the education sector and allows for three levels of reporting - basic, intermediate and advanced - to allow for a range of reporting, appropriate for different sized organisations. The SCEF will allow for better comparisons across the sector and increase transparency and accuracy of reporting. It is expected that the SCEF (or a framework very similar to SCEF) will be implemented by the Department for Education from 2024. SCEF is similar to SECR in some ways so those HEIs voluntarily reporting under SECR should see a straightforward transfer.
There is no question that climate change is an important issue for the education sector, as shown by the momentum to develop new reporting strategies and sharing of good practice. The road to net zero bring some stumbling blocks, both cost-related and practical, and the countdown to 2050 is on. The HE sector in the UK is world-leading and the expectation to rise to the environmental challenge is high. With a streamlined and joined-up approach being driven by the EAUC and key partners, achieving net zero is possible.
For more insight and guidance, get in touch with Stephen Dean and Harriet Raine
