The South African business sector is moving ahead with emission and energy reduction strategies, despite little legislative guidance on targets, penalties or policies.
The pivotal United Nations Climate Change Conference, held in Denmark last month, failed to produce a decisive binding agreement on global action to combat climate change.
Jonathon Hanks, MD of local consultancy Incite Sustainability, says the lack of legally binding international mitigation targets for SA means there will be no significant increase in mitigation-related pressure.
“Business will continue to operate in the context of a lack of regulatory certainty, which unfortunately impedes the potential for significant investment in more innovative solutions.”
He adds, however, that - while the future climate change regulatory environment remains uncertain - companies can still take steps to prepare for expected requirements. “At a general level, companies can expect that carbon will be increasingly more expensive. Reducing both direct and indirect emissions and reducing energy use will increasingly provide a premium.”
Professor Mark Swilling, division head of sustainable development at Stellenbosch University's School of Public Management and Planning, says several companies have realised low-carbon solutions are in their financial interest.
“Even without regulation, a lot of companies are looking at the benefits of low-carbon solutions, not only in terms of green, but as a means of creating more efficient production systems. They're introducing measures to reduce the amount of energy used in production processes, offices, and factories, as well as monitoring electricity.”
He adds that solutions typically have three-to-five-year payback periods, with the savings in efficiency paying for the cost of employing greener strategies.
Carbon-cut countdown
“Although there's no regulatory framework now, anyone who can put two and two together knows it's a matter of time,” says Swilling. “While there was no legally binding agreement on climate change at Copenhagen, there was a political agreement, and it's only a matter of time before you start seeing a price on carbon.“
“That on its own sends a clear signal to business that this is the government's intention in terms of a national climate change policy going forward.”
Kgope says companies are realising climate change issues are important and that they need to do something. One response is for organisations to measure and disclose their greenhouse gas (GHG) emissions through initiatives like the Carbon Disclosure Project (CDP), which the NBI, in partnership with Incite Sustainability, brought to SA in 2007.
Local CDP reports see the top JSE-listed companies report on their emissions and climate change strategies, and Kgope says the response is growing.
“From the first CDP report to the third, we have seen a significant improvement and expect it to improve again this year. We've been getting calls from many JSE-listed companies not in the Top 100 showing interest. They will be catered for, not in the main report, but on the CDP Web site.”
He adds that recent CDP findings reveal companies are increasingly aware of the likely climate change regulations. “Many of SA's biggest companies have taken action, such as voluntarily adopting emissions reduction targets, and will continue to do so with the aim of reducing the risks posed by current and future regulation relating to climate change.
“Ideally, we will soon start to see greater clarity by government on its national policy on climate change, as this will facilitate some of the longer-term investment that is needed,” notes Kgope.
Government is in the process of formulating a national Climate Change Response Policy, with plans to release a green paper for public comment in April.
Measure for measure
An important development, says Hanks, is that many companies are starting to focus more attention on indirect risks and opportunities through, for example, their supply chains. “This means positive climate change action is likely to spread beyond just SA's biggest companies.” He adds, however, that there is still a lot more local businesses need to do and will be expected to do, in 2010.
“Measuring a company's carbon footprint is the first step to managing its climate change risks and opportunities, and many of SA's biggest companies have made great strides in measuring their carbon footprints,” says Hanks.
But, while GHG emissions accounting has improved, most businesses still fall short when it comes to setting ambitious targets and engaging with customers and suppliers to reduce their emissions, he adds.
Climate change is a relatively new challenge for companies which have been following a “business as usual” path, explains Kgope. “There's a need for skills in this area - engineers who understand environmental issues, for example - and the question of where they are going to fit in the organisation.”
In November last year, the NBI and Business Unity SA held a workshop to assist business thinking around issues of climate change, including adaptation and mitigation, finance mechanisms, and technology needs. Discussions on these topics will continue this year, says Kgope, as business will have to develop clear roadmap for the future. “It's going to be one of the important debates for SA in 2010.”
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