EY’s Global Vice Chair on Sustainability, Steve Varley, speaks to LUX’s Leaders and Philanthropists Editor, Samantha Welsh, about EY’s approach to sustainable investing, the future of sustainability and the steps that need to be taken to fight the climate crisis

LUX: What do you consider to be the principal drivers behind the EY approach to sustainable investment?
Steve Varley: Sustainability is right at the top of the agenda at EY. We announced in October last year that EY has become carbon negative, which means we have reached our target to reduce our absolute emissions, and then offset or remove more than the remaining amount of our emissions, every year. It’s a crucial step forward in our sustainability journey and a key milestone as we work towards reaching net zero in 2025.

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Steve Varley

EY people share our commitment to the environment and to driving long-term, sustainable growth. We want to not only transform EY to become more sustainable, but also help EY clients do the same. This means reframing how business approaches sustainability and putting it right at the centre of how value is created and protected.

Creating a sustainable future requires all of us to be at the table. It demands involvement across borders, services, and teams, across all business functions. It requires alliances between governments, enterprises, and industries. As we like to say: It’s everybody’s business.

LUX: How does a sustainable approach foster growth and add value?
SV: EY clients are increasingly seeking ways to drive value from sustainability. Our Value-Led Sustainability approach focuses on helping clients capitalise on the commercial opportunities presented by sustainability and decarbonisation, but it is motivated by much more than just financial gain. It is central to how we will safeguard and generate new sources of value for everyone on the planet – our people, the society we serve, and the world in which we live.

This means leading a wide range of projects, from helping consumer goods companies drive more growth by developing new business models for greener products to collaborating with financial institutions to calculate carbon emissions from the companies they finance, and from this develop new financing solutions to help these companies decarbonise. We want to keep building on this kind of work and continue to develop services that help our clients find value in becoming more sustainable.

LUX: What is the role of the next generation/Gen Z – what are they looking for when it comes to ESG?
SV: The next generation is driven by purpose and expects more from ESG. This is hardly surprising given that both generations Y and Z have lived through a variety of systemic crises, including the 2008 global financial crisis, climate change, and the COVID-19 pandemic. While previous generations may have seen comparable crises, members of these new cohorts are more sceptical of traditional financial services than older generations and they have higher expectations of authentic and ethical behaviour from the organisations for which they work, buy from, and invest.

Gen Z is emerging as the sustainability generation. They want to work for companies that have a positive impact on society and the environment, and they want to see increased transparency and greater corporate accountability for ESG ratings. At EY, a large percentage of our workforce come from this generation, and we are really encouraged by their high standards and expectations. They are certainly holding us accountable, as well as holding clients accountable, and we are all the better for it. We need the next generation’s innovation and solutions if we are to solve the climate crisis and deliver future growth that’s truly sustainable.

LUX: Which leaders are the winning in the time of the climate crisis?
SV: Denmark, in my opinion, is a world leader in wind and solar power generation. Most of its energy is presently derived from renewable sources, with the goal of reaching 100% renewable power by 2030 and becoming carbon neutral by 2050. Similarly, the United States has a sizable venture capital ecosystem that funds renewable energy and electric vehicles, and the United Kingdom has enshrined its 2050 net zero aim in law, placing us second in the world in terms of influence.

While this is extremely encouraging, there is a ‘Green Power Gap’ that has been emerging, with only a small group of developed markets leading the way in terms of climate research, innovation, and public funding, and not enough ‘green money’ flowing to the emerging markets, where the effects of climate change are felt most acutely. EY’s Green Money Report outlines clear recommendations for action to help accelerate a green transition that is truly global and where all countries can take part. I really can’t stress the importance of this enough – the opportunity to avert climate catastrophe must be seized by everyone now, not just by a small handful of countries.

LUX: Can you tell me about the S30 forum?
SV: The S30 is part of the Sustainable Markets Initiative (SMI) led by HRH The Prince of Wales and it comprises Chief Sustainability Officers from some of the world’s most influential companies, all with the joint aim of accelerating business action on sustainability. The forum was launched in 2020 and I proudly serve as co-chair of the group, alongside the CEO of freuds, Arlo Brady.

Members have been drawn from the most influential businesses in the world covering a wide range of sectors, including consumer and industrial products, energy, financial services, life sciences and technology. At its core, the S30 is a space for members to come together, share learnings and best practices, and explore the successes and challenges they are experiencing in their roles. Most importantly, we are focused on outputs and driving collective action that will benefit not only the business community but protect the world at large.

LUX: What can public policymakers learn from business when it comes to sustainability?
SV: Governments cannot address the climate crisis alone; business must play an important role, and public-private partnerships are crucial. Businesses can help the world accomplish its climate change targets by doing three things: mobilising resources to finance the green transition, leveraging clean technology and innovation, and effectively measuring and reporting on sustainability.

In particular, the financial services sector, in collaboration with governments and regulators, can identify legislative and regulatory adjustments to facilitate financial product and service innovation, simplify rules, standardise taxonomies, and track green money flows to guarantee that transition needs are fulfilled globally.

Governments are providing much-needed policy momentum as we approach COP27, but business will play an incredibly important role in the green transition. The private sector can play an even bigger role at COP and companies across different sectors will need to continue to work hard to help achieve the world’s climate goals. In doing so, they will position themselves for green growth in the years to come.

Read more: Coming Together To Save Our Coral

LUX: How optimistic are you about the progress made at COP?
SV: I’m an optimist, but an optimist that seems to worry a lot. Sustainability has gone mainstream, and after COP26 it really does feel like everybody’s business. We are seeing a lot of CEOs now putting the planet at the heart of their business strategy and looking for ways to create value from becoming more sustainable. What is exciting to see is business applying its skills at innovation, embracing disruption and problem-solving to tackle the biggest issues we face, and doing so while creating value for their stakeholders.

The COP26 debates raised the issue of keeping companies accountable to the climate pledges they make, and the current frameworks in place not being subject to the same level of rigour as financial reporting. It was fantastic to see this topic on the agenda, and the establishment of the International Sustainability Standards Board was widely welcomed. We all know it will be a challenging road ahead, but leading organisations are already reaping the benefits of implementing clear and transparent sustainability targets into their corporate strategies.

The COP27 climate summit is fast approaching in November and it’s clear that major changes must happen quickly right across business and society. We’re ready to help lead the charge.

Find out more: ey.com

Octopus is one of the largest owners and managers of renewable energy assets in Europe

As the International Energy Agency warns that the worst of the energy crisis may be yet to come, governments around the world are stressing the importance of accelerating the move to renewable energy. We speak to Greg Jackson, CEO of Octopus Energy Group, the technology-to-investment energy platform, about the importance of government intervention in energy policy, the role of technology, and how a greener future could be nearer than we think

Greg Jackson founded Octopus Energy in 2015 with a view to using technology to make the green energy revolution faster and cheaper for consumers. Now worth approximately $5bn, the privately held company supplies renewable energy to three million households worldwide. It is also one of the largest owners and managers of renewable energy assets in Europe, with more than £4bn under management. Jackson credits the company’s success to what he calls the “en-tech” model whereby proprietary technology plays a leading role in the company’s value offering. Here, he speaks to Ella Johnson about why there can be no alternative to radically updating the power grid and large-scale investment in renewable energy.

LUX: How will Octopus innovate the energy sector in the long term?

Greg Jackson: Octopus’ long-term goal is to generate roughly as much as its users use, with Kraken, our proprietary technology platform, matching generation and consumption at any time and location to make the most efficient renewable energy company possible.

A decentralised workforce allows us to greatly increase the pace of innovation and learn from many people with many different perspectives. We are a cloud-native company and have had a very successful remote customer operations team for over four years now. This allowed us to ensure we had processes and communication platforms in place when lockdown hit, and it has been absolutely vital as we’ve grown internationally, building successful Octopus Energy hubs in several countries around the globe.

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So far, we deliberately haven’t made a profit. Instead, we’ve focused on scaling the business, investing in new green technologies and making sure there is enough support available to our customers who are struggling. We are lucky to have investors that believe in our long-term goal and are absolutely committed to help us achieve this, so we don’t have to worry about short term profits to achieve our number one purpose, making green energy cheap energy around the world.

Octopus is working to digitalise the power grid through its proprietary Kraken technology

LUX: When did you realise the energy sector was ripe for a tech revolution?

GJ: I had built digital platforms for e-commerce and other sectors before to digitise and increase efficiency, and I quickly realised that applying the same technology to energy would greatly improve the way things are done in the sector.

LUX: What makes Octopus’ operating business model unique?

GJ: Our operating model is unique thanks to Kraken, our technology platform which we built from scratch. Where other suppliers rely on convoluted solutions for different functions, Kraken integrates them all into one giant robot, offering efficiency, better customer service and end-to-end management of the whole supply chain to allow us and our licensees to save costs, take better care of customers and drive the green energy revolution.

But we know we can’t drive change quickly enough if we’re on our own. So we’re licensing Kraken to other large energy companies across the globe who share our vision of a cleaner, better energy future, including E.ON, EDF and Origin Energy.

Octopus has licensed its Kraken technology to support over 20 million customer accounts worldwide

LUX: How must existing infrastructure be adapted to accelerate this shift?

GJ: We need to digitise the power grid so that we can use it more efficiently, cutting bills and making the most of green electrons when they are abundant. The current grid was built to manage a few hundred fossil fuel power plants. We need to make it fit for a decentralised energy world in which millions of electric cars, rooftop solar panels and home batteries will be connected to it, importing and exporting energy from the grid.

LUX: How does Octopus overcome the unreliability of wind and solar sources?

GJ: The key to unlocking a cheap green energy future is to build a digital system that is interconnected and flexible. The sun doesn’t always shine and the wind doesn’t always blow where we are – but they always do somewhere in the world.

Read more: Dimitri Zenghelis on Investing in the Green Transition

Working with other countries and layering different sources of green energy and ways of storing it (like batteries) will allow us to create a system in which we can make the most of solar and wind energy where they are abundant. For example, we invested in Xlinks, the company building the world’s largest subsea power cable. Once built, it will deliver 3.6 GW of green power from Morocco to the UK for an average of 20 hours a day – enough energy to power about 7 million homes. We need more large-scale renewables projects like this.

Renewable energy is the only way to increase our energy security and stop climate change, says Jackson

LUX: One of your tariffs provides carbon neutral gas. What do you say to those who argue carbon offsets are not a real substitute for climate action?

GJ: We have carbon offset our Super Green customers’ gas usage in a few different ways over the years: helping reforest and conserve vast areas of the Amazon, and working with our main offsetting partner, Renewable World, to bring innovative renewable energy technology to fuel-poor communities worldwide.

But while it has very worthwhile applications and can help a lot of people, carbon offsetting is only part of the puzzle in helping fight climate change. It cannot decarbonise the whole energy system and move us away from fossil fuels. For that we need more innovative technology to make energy greener and cheaper for everyone.

LUX: Is natural gas an adequate transition fuel?

GJ: In the short and mid-term, we still need natural gas as a backup energy source for renewables. But in the long term, we will have to wean ourselves off gas completely if we want to increase our energy security and stop climate change – and we can only do that if we go hell for leather for renewables now.

Greg Jackson, Founder and CEO of Octopus Energy Group

LUX: How can policy speed up the mass uptake of renewable energy?

GJ: Historically, the creation, testing and licensing of a vaccine took around 15 years. With Covid, we managed to get the 15-year process of developing a vaccine down to one year. We need to do the same with wind energy. Due to planning approvals and grid connections, it currently takes on average 5-7 years to build and connect a wind farm. This could be done in one year. Do that now and we will literally start seeing bills come down next winter.

Read more: Inside Konstantin Sidorov’s London Technology Club

LUX: What role can renewable energy procurements play in corporations’ broader net zero goals?

GJ: Through our Renewables investment arm, we sign a number of agreements with large energy users to switch to green energy. Those making the choice to go green are taking massive steps forward for decarbonisation agendas across Europe – they are the trailblazers of their industries, and soon the rest will follow their lead.

Greg Jackson is founder and CEO of Octopus Energy Group

Find out more: octopusenergy.group