Rolls-Royce, which makes engines for planes and ships, plans to achieve net zero emissions by 2050 by ensuring all of its aircraft engines can run on sustainable aviation fuels (SAFs) and by decarbonising all new products.
The British engineering company outlined its green goals on Thursday, pledging that all new products will be compatible with net zero targets by 2030, and that its whole business will be net zero by 2050 at the latest.
In the aviation sector, its biggest business, the company said all of its engines will be able to operate with 100 per cent sustainable aviation fuels by 2023, which produce less carbon than traditional jet fuel.
Warren East, chief executive of Rolls-Royce, said achieving net zero was imperative for its customers and communities and while it presented a big challenge for the company, it also offered commercial opportunities.
“It’s challenging because our customers use our products and services in sectors where demand for power is actually increasing over the next several years. These are the sectors that are among the hardest, to actually get to net zero. So a double challenge", said Mr East.
“Because these sectors are hard to decarbonise our innovation to help our customers succeed and achieve net zero is essential. It's essential now, but when it works, it's also going to enable and even accelerate the overall global transition.”
Mr East said few companies have the same breadth of technologies as Rolls-Royce.
While the energy output from the company’s products and services was approximately 300,000 gigawatt hours at the end of 2020, Mr East said as the business transitions into new areas, he expects that output to rise to more than 1.8 million gigawatt hours by 2050, with all of that sourced from net zero solutions.
Rolls-Royce plunged into the red last year with a loss of £4 billion ($5.57bn) after the company suffered a "severe" blow from the Covid-19 pandemic when airlines stopped flying.
The underlying pre-tax loss, which compares with a profit of £583 million in 2019, was driven by the company's “power by the hour” model of charging some airlines for the amount of time its engines fly.
While the company's plane engines spent 60 per cent less time in the air in the first four months of this year than pre-pandemic levels seen in 2019, it remains more upbeat about the outlook as airlines ramp up routes to meet increasing demand in the post-pandemic era.
Mr East said on Thursday that the company still believes that “air travel is a good thing” because of the benefits that travelling around the world brings to international business.
“The reason that we're putting a lot of emphasis on decarbonising flight, rather than simply stopping flying, is because we think flying is a good thing,” he said.
“Covid-19 has definitely taught people that some of the mad, regular dashes across the Atlantic perhaps aren't necessary. But people were doing it, because they thought that it delivered real benefit to them and typically it does, in terms of competitive benefit."
Mr East said he expects business travel to return to the post-pandemic world with technology able to offer executives “the benefits of both worlds”, as flying is possible but in a net zero way.
“We're going to be practising what we preach and using carbon-free travel as much as we possibly can”, he said.
Under Rolls-Royce’s road map to net zero, the company commits to only selling products that are net-zero by the end of the decade, a move that requires 75 per cent of Research & Development funding to be spent on low-carbon technologies by 2025, with that rising to 100 per cent by 2030 – much higher than the current proportion of about 50 per cent.
By 2023, all of its civil aircraft engines will be compatible with 100 per cent SAFs, which means two-thirds of its Trent large jet engines and three-fifths of its business jet engines will use SAFs within three years.
The company said it was working closely with major oil and gas companies, such as Shell, to help scale up the production of SAFs. While Shell is supplying the fuel to do ground tests on the Trent 1000 engine, in the future Rolls-Royce is looking at developing its own SAFs.
Another way it plans to “accelerate” the transition to net zero is by introducing new low- or zero-emission products – such as fuel cells, micro-grids, hybrid-electric and all-electric systems.
Earlier this week Mr East said Rolls-Royce was pinning its net-zero carbon ambitions on "smashing" the electric aircraft speed record.
Warren East said the stunt was a "marketing ploy to win hearts and minds" in the aviation industry that electric flight is possible.
The company said on Thursday that its first tie-up in urban mobility, Vertical Aerospace, intends to be flying passengers in 2024, while a separate collaboration will introduce a larger fixed-wing aircraft into revenue service in 2026.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Petrarch: Everywhere a Wanderer
Christopher Celenza,
Reaktion Books
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What drives subscription retailing?
Once the domain of newspaper home deliveries, subscription model retailing has combined with e-commerce to permeate myriad products and services.
The concept has grown tremendously around the world and is forecast to thrive further, according to UnivDatos Market Insights’ report on recent and predicted trends in the sector.
The global subscription e-commerce market was valued at $13.2 billion (Dh48.5bn) in 2018. It is forecast to touch $478.2bn in 2025, and include the entertainment, fitness, food, cosmetics, baby care and fashion sectors.
The report says subscription-based services currently constitute “a small trend within e-commerce”. The US hosts almost 70 per cent of recurring plan firms, including leaders Dollar Shave Club, Hello Fresh and Netflix. Walmart and Sephora are among longer established retailers entering the space.
UnivDatos cites younger and affluent urbanites as prime subscription targets, with women currently the largest share of end-users.
That’s expected to remain unchanged until 2025, when women will represent a $246.6bn market share, owing to increasing numbers of start-ups targeting women.
Personal care and beauty occupy the largest chunk of the worldwide subscription e-commerce market, with changing lifestyles, work schedules, customisation and convenience among the chief future drivers.
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
