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The changing sentiment surrounding coal production in the UK

The sentiment surrounding coal in the UK is changing – while the government had set a target of zero use of coal for generating electricity by 2024, the impact of the Russia-Ukraine war on energy security has changed perceptions and resulted in the scaling up of coal production. Companies need to consider the reputational impact of this shift and could benefit from climate risk modelling to manage the reputational impact.

Coal has long been considered an outdated form of energy production due to its detrimental impact on the environment. Increasingly, countries have favoured natural gas, and, more recently, renewable energy. Both are generally seen as cheaper and cleaner than fossil fuels.

Similarly, public perceptions of climate change have influenced public policy and the phasing out of coal. According to the Government’s latest public attitudes tracker, 84 per cent are concerned about climate change and 41 per cent are “very concerned”. Until recently, the Government has taken a hard-line approach and made a commitment to phase out coal during COP26.

But since COP26, the war in Ukraine has resulted in an unprecedent energy crisis in Europe, with countries returning to coal as a viable option. The urgency in the energy crisis will undoubtedly lead to increased production in coal, but energy companies will need to navigate stakeholder perceptions very carefully with the help of climate risk modelling.

The unwarranted return of coal

In November 2021, Boris Johnson proclaimed that COP26 was the ‘death knell’ for coal. Yet months later, ministers were publicly saying that a new coal mine in Cumbria might go ahead. Similarly, business secretary Kwasi Kwarteng ordered the Electricity System Operator (ESO), the manager of the grid, to ask three energy companies— EDF, Drax and Uniper — to temporarily extend their capacity for using coal to “bolster” energy security this winter.

Indeed, the energy crisis as a result of the war in Ukraine has changed the way governments across the world view coal. In Germany, economy minister Robert Habeck said “from now on, gas is a scarce commodity”. He added that there were “no taboos” in the hunt for energy security, suggesting Germany’s phase-out of coal by 2030 could be delayed.

It is clear that the impact of the war has changed some perceptions of coal usage, but many stakeholders are still vehemently opposed to the return of coal. Earlier this year, a senior climate adviser to the Government called the proposal for the Cumbria coal mine “indefensible”. Environmental activists such as Friends of the Earth have also challenged the plans and warned against the reintroduction of coal, instead advising the Government to invest in green jobs and develop renewable resources.

The change in the Government’s policy towards coal has left energy companies in a problematic situation. Until now, the major energy providers in the UK such as EDF and Drax have been phasing out coal use and taking a strong stance on decarbonisation. But Government intervention has forced many energy companies to temporarily abandon their plans to phase out coal. For instance, EDF recently announced that it would delay the closure of a coal plant in Nottinghamshire by six months, to March 2023. Other energy companies will follow suit.

Coal has generally been an issue that has caused negative stakeholder sentiment for energy companies. Indeed, alva’s stakeholder intelligence has shown that coal has been a persistent negative issue for energy companies, due to its environmental impact. However, in recent years companies such as Drax have been taking proactive steps to improve their environmental stance, thereby improving stakeholder sentiment. For instance, Drax’s commitment to phasing out coal and putting a stronger emphasis on decarbonisation has actually generated positive sentiment amongst stakeholders.

Despite the return of coal and its negative perceptions, this is an opportunity for energy companies to use climate risk modelling to mitigate the reputational impact of coal on their businesses.

Navigating negativity using climate risk modelling

Climate change and the environment is the biggest issue faced by global organisations, and despite the urgency in the energy crisis and Government policy, energy companies will need to navigate their increase in coal use very carefully with stakeholders.

Energy companies should expect to see negative sentiment scores amongst their stakeholders in the coming months as they ramp up coal use but this doesn’t mean businesses cannot successfully manage stakeholder relations.

Energy companies need to engage with stakeholders and use climate risk modelling to assess the material impact of the shifting narrative. Climate risk modelling can offer real insights to businesses on how to engage with stakeholders. The necessity for coal should not result in companies abandoning carbon targets and environmental initiatives – if anything, it should embolden businesses to do more.

Now is the time for energy companies to be assertive and vocal about the need to balance carbon targets with energy security issues. Businesses should also take this time to invest in green jobs and renewable sources of energy, whilst also engaging with their key stakeholders on these issues to reassure them about commitments to ESG initiatives. For instance, Drax recently announced its plans to build the world’s largest carbon capture and storage project.

Looking to COP27

The unpredictability of the war in Ukraine and rising energy prices throughout the winter will mean that governments will want to continue using coal as an energy source in the short term. Energy companies should brace themselves for reputational repercussions. With the right intelligence and data, businesses can identify and anticipate reputational issues and create a comprehensive stakeholder engagement plan to mitigate the impact of these issues.

With COP27 months away, energy companies should use this time to regroup and be very clear about their climate commitments, while freshening up their ESG initiatives.

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