Net Zero Heroes – Lloyds Banking Group

EcoAct CEO Northern Europe, Stuart Lemmon speaks to Olivia Cropper, Senior Sustainability Manager at Lloyds Banking Group to find out about the bank’s net zero journey, what’s behind its ambitious sustainability drive and what are the main challenges of transitioning to net zero.

lloyds banking group

Can you tell us about your role at Lloyds Banking Group?

I work at Lloyds Banking Group leading the Sustainability Design Team within the Group’s property department. My role is very operationally focused. My team is responsible for reducing the Group’s own environmental impact in terms of our direct carbon footprint, energy consumption, waste water – basically all buildings-focused elements, but also the emissions related to our staff activities, like commuting, business travel, and their home working related emissions. Overall, it’s an internally focused role to reduce our own environmental impact as an organisation.

Can you give us a summary of where Lloyds Banking Group is on its net zero journey, including the targets you’ve set, the milestones you’re meeting and achievements you’ve made?

As for the broader Group, we announced to last year to reduce the emissions we financed by 50% by 2030. So that’s working to get to net zero by 2050, if not sooner, and we’ve baselined those emissions. And we’re setting sector-level targets now on different elements of those financed emissions. We are a founding member of the Net Zero Banking Alliance, which is part of the Race to Zero, focusing on transitioning the finance sector and the global economy to net zero. So overall, lots of activity going on lots of ambition, but we’ve got a lot of work to do.

From an operational perspective, we’ve been working on reducing our carbon emissions operationally for many years now.  We have reduced our direct carbon emissions by about 85% over the last five years. And we were really pleased that we came in sixth place in the Financial Times list of European Climate Leaders recently, that was good to see. Where we are now though there’s still so much more to be done as we really want to accelerate those ambitions. Earlier on this year, we launched a new operationally focused goal to get to net zero operations by 2030. Now, to achieve that, we’ll be reducing our direct emissions by three quarters by 2030. We’ve also got some supporting pledges to half our energy consumption during that period, and also to maintain a 50% reduction in our travel related emissions as we return back to new ways of working after COVID.

What would you say is the real driver sustainability at Lloyds Banking Group? You’ve clearly got very big ambitions for the future. What’s really sort of driving that continued momentum and continued ambition?

There’s a whole range of drivers for us as an organisation to act. There’s the moral duty, but also our customers and our shareholders are expecting us to act with increasing levels of ambition. Plus, there are also important economic reasons, given the risks that climate change poses to our business as indeed to the UK economy more generally. We are the largest financial services group in the UK, so with that scale and that reach, we can make a real difference. The transition to the net zero economy is really a core part of our strategy to help Britain recover from the pandemic. It is a really important, strategic aim, but there’s a range of drivers really impacting that. In terms of our operational climate ambitions, we see it as an important foundational element of our strategy. Getting our own house in order underpins those broader ambitions, it gives us the credibility to talk to our customers about the net zero transition that they’ll be making too.

Presumably, that involves a lot of internal engagement because clearly, in your role, you can’t make all of that change yourself. How do you go about that? How do you identify who to work with, get them on board, get them motivated?

We started a few years ago, focusing on the sustainability knowledge and capability in our immediate team. This is in the property team, the people that are actually responsible for running the buildings and delivering the change in the buildings. We worked with Cambridge University Institute of Sustainable Leadership, doing a lot of training and development to get the whole team on the same page. We then spent time engaging with our property supply chain, really sending a strong signal to them around our increased levels of ambition in this area. The message focused on what we intended to achieve, and that we were going to need help from our supply chain to reach our targets.

More broadly, we also worked with our colleagues across the organisation. The  strategy that we developed, is really challenging and involves really quite an accelerated level of investment in our properties. The travel elements of our strategy, really need all of our colleagues to get on board with different ways of working and travelling. To be successful, we needed to get support right across the organisation and really take the conversation out of property, and into the group as a whole.  We spent quite a lot of time working on the detail of what that would look like, and building out our full 10 year plan. We worked with stakeholders in our property teams, our finance teams, our risk teams, and got some of our senior team on board. They really embraced that challenge and really wanted to drive that change and that engagement across the leadership team of the whole organisation.

To what extent do the numbers and the data drive your strategy?

We’ve put ourselves in good stead because we’ve been disclosing our carbon emissions for years and years, with EcoAct’s help. These are robust measurements, they’re audited, they’re a really strong foundation upon which to build our plan. The data was incredibly helpful when we were taking our plan to some of the senior stakeholders that perhaps we hadn’t engaged with on this subject before. And, of course, they are all over the detail, and they want to make sure that the numbers are robust, and that they have been generated in the right way. And, we were able to give them that confidence that we really understand what the levers are for our emissions, we understand what’s driving this and what we need to do. And the reason we understand that is because we have almost a decade’s worth of emissions reporting to work from.

Through all of that good work and engagement and that target setting and provision of data, what what have been the main challenges you’ve had to overcome?

The initial challenge was to get the conversation out of property and really get group-wide consensus on reaching net zero operations. I think the other challenge for us was around funding and getting the money to actually deliver the change. And for us, this involves taking out all of our gas boilers, replacing lighting across all of our 1,500 buildings. So, this is not insignificant in terms of a challenge for us. To overcome those challenges, there were a couple of things that have been game changers for us.

First, getting our operational carbon emissions, as a metric in our objectives of our executive team really helped. It meant all of a sudden people took an interest, in a more detailed and supportive way. And secondly, it was about articulating the risk of not acting. We know we’re facing rising energy prices, more stringent legislation is on the horizon, changes in carbon pricing – We had to ensure that climate action was embedded into the processes and the language of the business rather than a separate side issue. When we talk about risks to our business, climate risk is one of them.

The other thing we’re doing much more to help our clients around this funding challenge is a range of products. We have a new green commercial mortgage; we’re expanding our discounted green lending to our commercial clients across all sectors.

It always strikes me that there’s an integration of the work right across all of the activities of the bank and seems to be based on a genuine desire to do and to do it properly. You have energy targets as well as a carbon target, so as well as decarbonising your electricity supply you are also driving down energy consumption as well. Why have you taken this approach and was it difficult to get others on board?

We been sourcing renewable electricity for some time. So that one was already in the bag. We wanted to set a goal that reflected the fact that we both source renewable electricity and also want to be as energy efficient as we can. The business case for that is easier to make, particularly with rising energy prices and the sums of money involved were significant.  However, some of the decarbonisation work that we’re doing, for example, removing the gas boilers, where there’s not such a compelling financial reason for doing that was much more challenging. We really had to make the case on grounds of it’s the right thing to do and that it’s going to protect us from future risk around gas prices.

Lloyds Banking Group
Lloyds Banking Group work closely with The Climate Group and their campaign RE100 that focuses on renewable electricity

You mentioned that Lloyds Banking Group was an early signatory of Race to Zero. Tell us a little bit more about the collaboration that you do beyond the boundary of the bank, with other industry colleagues or boards.

We work very closely with The Climate Group and the campaigns that they have – RE100 around renewable electricity, and the EP100 energy productivity campaign, and also their EV 100 campaign around electric vehicles and our fleet leasing business Lex, does significant work there. We felt that joining all three of those campaigns was really important. And, RE100, in particular has been great because when we switched to renewable electricity, we achieved our RE100 goal. We made that commitment publicly, that cements that work and there’s no going back. That was really good as an initial catalyst, for some of those actions. We also work with UK Green Buildings Council, joining their net zero building commitments earlier this year. And that commits us to deliver net zero buildings across our entire estate. That’s a great one, because it means we can’t just pick off the easy buildings, we actually have to go through and do it everywhere. We found their support and resources to be really useful. There is also plenty of informal collaboration. For example, the work that we did with EcoAct last year, around home working emissions, and developing the white paper on how we calculate and measure home working emissions. It was actually very useful to get together with a number of other corporates and establish a way to tackle this challenge and define best practice. We can now share our findings, so others can benefit from the work that we did on it. The question I was asked most in the last year was, are you measuring all the emissions of everybody working from home? And how are you doing it? And how do you know that’s the right way to measure it? It was great to be able to reference the homeworking emissions whitepaper and have a response all ready to go whenever I’m asked.

So yes, formal campaigns and also more informal collaboration is really key for this.

Thinking about Lloyds Banking Group’s net zero journey which clearly has very big ambitions around decarbonisation and reduction of energy use. What about the residual emissions and any offsetting programmes?

When it comes to our operational emissions, and when we were developing our strategy, the priority and focus was to go as far as we could around emissions reduction, before we considered offsetting. Our operational goal is to get to net zero by 2030 and we intend and expect to deliver at least a 75% reduction in those direct carbon emissions. But we do expect to have some emissions remaining at the end of that plan in 2030, for example refrigerant gases relating to our air conditioning systems. We do intend to engage in some offsetting activity at that stage, but we very much see it as the final tool in the toolbox. We see it as better for the overall plan if we’re really focusing that energy and that investment into actual emissions reduction.

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