WIREDGOV

Companies who form part of the UK’s wider net zero ecosystem contribute £60bn a year to the economy and support 766,000 jobs – yet outdated official sector classifications risk hampering decarbonisation efforts by failing to provide the insight that’s needed.

New research by Leeds-based data consultancy The Data City with CBI Economics has mapped the impact and activity of 16 key sectors which play a role within the whole UK net-zero economy. By developing new RTICs (Real-Time Industrial Classifications), a snapshot of 16,000 companies was identified within these 16 sectors, alongside unique scorecards which evaluate the transition of 374 local authority areas in eight metrics around energy, economy and emissions.

The Data City and CBI Economics believe this analysis can better inform UK climate action goals by offering an improved level of insight not given by the current Standard Industrial Classification (SIC) system, which has not been updated since 2007.

The data shows that regions that seize the growth opportunities of the net zero transition are more likely to see a rise in prosperity. This is reflected through the report’s wage analysis which demonstrates a wage premium for these jobs compared to many other sectors. This has profound implications for the Levelling Up agenda, as the report finds that net zero economic activity is more regionally distributed compared to the historic concentrations around London seen in other sectors.

The report also shows that the amount of venture funding, in the part of the net zero ecosystem the analysis covers, has shown tremendous growth in recent years which stood at around £1.1bn. This highlights the investment opportunities available in net zero transition and complements the UK’s track record in seeing investment growth across many different sectors.

Alex Craven, CEO of The Data City, recently said:

“The road to net zero is dependent on the rapid growth of the industrial sectors that allow us to transition our carbon consumption and production habits to carbon neutral alternatives.

“However, the Standard Industrial Classification system for these sectors does not take into account new and growing industries. Using our Real-Time industrial Classifications, we have managed to identify 16 industry sectors within the wider net zero ecosystem capturing almost 16,000 companies. This level of detail will give our policymakers improved data to ensure the sector can be better supported to lead us all on the road to net zero.”

Rain Newton-Smith, CBI Chief Economist, recently said:

“The UK’s transition to net zero greenhouse gas emissions will be the defining change over the next decade. In addition to protecting the planet we share, net zero presents opportunities for businesses across the country to innovate and grow. To make the right investments and actions, we need a better understanding of the net zero ecosystem, and the work we have undertaken with The Data City is a step forward in helping the UK better place itself to deliver our transition to a net zero economy.”

The Data City’s methodology

Real-Time Industrial Classifications, or RTICs, are a data product developed by The Data City. They are an alternative to SICs as means for industrial classification based on how companies describe themselves on their website text.

The Data City has matched company data (company number, financials, location-based information...) to the company’s URL for more than 1.6 million companies. Besides, they capture the companies’ website text, data that allows companies to be classified according to common language. In short, The Data City has developed a machine learning platform that can be trained to find companies that use the same keywords. On one hand, they create a list of companies that represent the sector they want to map. On the other hand, they create a second list of companies outside of the sector. This allows the platform to identify relevant keywords that describe the sector, and group all the companies that use them on their website.

Hence, The Data City’s technology and methodology make it possible to create custom industrial classifications. This means that the public and private sectors, and research institutions, can now overcome some of the limitations of SICs for data collection and shed light on the UK’s emergent economy.