Driving change: How climate change presents an opportunity for businesses

UN EG 2018 Blog Photo5

Recently the United Nation Environment, (UNE) produced their emissions gap report, centred around the performance of signatories to the Paris accord in meeting their commitments to reducing global emissions. The results on that front are overwhelmingly negative. Far from moving toward the 1.5 degree cap outlined under Paris, we are currently on track to hit 3-3.5 degrees above pre-industrial levels, by 2100. To put that in perspective, the average maximum summer temperature of Sydney over December would close in on 30 degrees every day by the end of the century. 

The withdrawal of the U.S, and improved economic activity, (GDP) particularly amongst emerging economies, were among the primary reasons given for this lack of movement. To round out, the report cited those countries who were performing the worst. Among the top five was Australia, making it a double embarrassment given we have also been cited has having among the least ambitious targets of any signatory. A lack of any federal policy on climate change due to entrenched ideological divisions in the current ruling party has been highlighted as our biggest handbrake on action and for creating a high degree of uncertainty in the business community.  

This lack of clarity or leadership has contributed to a growing cohort of business leaders from around the country calling for action. Increasingly this is coming from industries traditionally against notions of carbon pricing and legislation to reduce emissions. Most recently the CEO of Australia’s largest oil & gas producer, Woodside Petroleum, and current chair of the Business Council, Peter Coleman, publicly announced his support for a carbon pricing scheme to bring Australia’s operating environment in line with other major economies. He joins BHP and Rio Tinto, Australia’s largest operating resources companies, in demanding a clear policy to drive sustainable investment in the right areas. 

The UNE report recognised this decision-making vacuum and specified the unprecedented and exponential increase in the role of what they label non-state actors. State and regional governments, corporations and communities, unbound by the Parris accords stipulations, yet following them all the same. It is these groups that, for many nations, are pulling much of the weight in curbing emissions. These are the players who recognise the risks, as well as the opportunities to acting on climate change in a timely and cost-effective manner. 

In the US, states like California, with a larger GDP then France, are implementing world leading legislation and providing long-term financial stability as they transition their economy away from fossil fuel dependence. In Australia, homeowner’s adoption of roof-mounted solar PV has played a significant role in reducing emissions from energy generation. The benefits, both environmental and economical, have been substantial.  

 Other examples include: 

  • North East US states engaging in a regional Energy-based emissions trading scheme, (RGGI) have provided $1.4 billion in value add across 9 states as a result of pricing carbon over the last 3 years. The proceeds have gone to lowering energy prices, improving reliability of the supply and reducing emissions. 

 In June 2018, there were isolated moments where the wholesale price of energy in Queensland dropped below $0. A result of massive uptake in roof mounted solar PV by homes and business, reducing daytime demand for grid power and optimisation of increased, private industrial-scale solar parks. We should expect to see this more often as more solar capacity comes online throughout the state. 

  •  Carbon farming is forecast to create 21,000 jobs across Australia by 2030 under the current policy trajectory. 

 The subject of climate change and responsibility to act ultimately falls to every nation, every organisation, and every person. While we do not contribute equally to the problem, we are all impacted by the outcome. Federal governance has so far been shown to be a poor vehicle for changeleaving the onus of risk mitigation and resilience building to be actualised by the community. Queensland Businesses have been identified as some of the most at risk entities in Australia to the impacts of climate change.  

Our financial institutions are now able to work off observable data trends, as opposed to predictions, that point to increased risk in investing in Queensland industry. A recent report from one of the country’s largest insurers, IAG, spoke on the use of climate risk indices to score organisations on their activities and exposure relating to climate change. Suncorp have all but ruled out providing flood insurance to communities such as Emerald and Roma if they do not begin to actively adapt to the increased risk of damaging floods. Ernst & Young consultants recently found that private equity groups are consistently reporting a higher dependence on Environmental & Social Governance, (ESG) reporting to determine the health or prospect of investments. 

Businesses that proactively monitor their risks resulting from, frequent extreme weather events, changes in consumer perceptions, reduced financial stability, and develop strategic planning to respond to these issues if/ when they arise, are far better placed to take advantage of the opportunities of a fundamentally different playing field. 

As far back as 2010 reports on the benefits of energy efficiency were being found to have enormous financial benefits to businesses at little to no capital expenditure across all global economies. More recently in ecoBiz, we have focused heavily on the same, limited financial or labour investment activities that can bring businesses 10% or greater reductions in their energy, water and waste intensity.  

This focus on the financial benefits of an efficient operating space for any business have multiple co-benefits including reduced reliance on an increasingly strained energy grid/ water network, reduced emissions from activities, which at a macro scale help reduce our collective impact, and on a micro scale are positive ESG outcomes for both investors and consumers.  

As well as this, resource efficient businesses are better placed to handle economic shocks. Case in point are businesses who were able to open faster, continue operating, or offset losses during events such as the 2011 Brisbane floods, which cost Brisbane almost $500 million with significant business disruption due to damaged roads. Or 2017’s Cyclone Debbie which exacted an enormous cost on the Whitsundays regions tourism operators to the tune of $120-$180 million from lost productivity and damaged assets. 

Queensland’s business sector has rarely seen such a dynamic or fast-paced operating environment. Risk of exposure related to climate impacts, whether on their supply chain reliability, operating site costs, or increased regulatory costs, will inevitably be best placed to adapt and thrive. Being climate ready is about being resource efficient and cost effective, time-honoured ingredients to a successful business. The call has been put out at a global level, non-state actors are the driving force for changeand those who heed the call will reap the benefits. 

 For more information click on the link below!