ICT safe from climate change

By Leon Engelbrecht for KPMG

Johannesburg, 02 Jun 2008

The ICT industry is, on the face of it, safe from the impact of the global climate change that is now upon us, says a new KPMG report on climate change and its effect on business.

The report, "Climate Changes Your Business", investigated 18 industries and concluded three were "safe havens" from climate change, including ICT. The other two are the chemicals industry and foods and beverages.

The six industries in particular danger from climate change risks are aviation, healthcare, tourism, transport, oil and gas and financial services.

Chi Mun Woo, KPMG's associate director for global sustainability services, says - although ICT can be regarded as a "safe haven" - there is no room for complacency. "Climate change will impact all of us," he says. "One of the [study's] key messages... is that climate change risks are taking on forms that need better understanding and responses.

"The IT industry, covered in the report under telecommunications, was categorised as a safe haven sector, partly because of the general perception that IT is not a big carbon emissions culprit and has less brand challenges than those in the retail sector," says Woo. "However, the indirect emissions of the IT industry related to their use of electricity and carbon-intensive production processes is potentially massive.

"The IT industry, therefore, faces significant risks from this perception catching up with reality. There is little doubt that regulations, in the form of energy-efficiency and carbon emissions targets, will filter down to all sectors including IT," Woo adds.

"The British government, for example, is implementing the Carbon Reduction Commitment scheme, which will apply mandatory emissions trading to cut carbon emissions from large commercial and public sector organisations that currently fall outside the EU's emission trading scheme."

On the upside, Woo says, there are huge opportunities for the IT sector to play a major part in helping other sectors and the domestic market move towards less carbon-intensive footprints. "If we are to stabilise greenhouse gas emissions, hundreds of billions will have to be spent in the future on low carbon technologies," he adds.

"Innovations will be required to enable processes, from industrial and domestic activities, to meet strict energy-efficiency and carbon-neutral targets.

"SA's recent electricity crisis has increased awareness among businesses and consumers of the environmental and economic costs of energy-intensive technologies," Woo says. "While we await regulatory and legislative measures on energy efficiencies and carbon emissions, consumer pressure will provide opportunities for the development of low-carbon technologies and the businesses that react the quickest will be the ones to benefit."

Methodology

Woo says the study was based on a review of 50 authoritative published studies addressing the business risks and economic impacts of climate change at sector level.

The published reports have been analysed and a "risk score" for each sector has been assessed. At the same time, the business sectors have been rated according to their preparedness for climate change impacts.

Preparedness was measured using data compiled in the latest completed round of the independent carbon disclosure project.

Risk facing Africa

"Climate change is recognised to be a greater threat to Africa, due to our lower capacity to mitigate and adapt to this challenge in relation to 'richer' nations. We are also more dependent on agricultural industries, which are very exposed to the risks mentioned in this report," Woo explains.

"SA, in particular, will come against strong international pressure due to our high emissions intensity and, as a result, companies need to go through a journey of awareness and learning, and the development of strategic responses that take account of evolving regulations and consumer expectations, carbon footprints and reduction opportunities, and of course physical risks flowing from climate change."

Further analysis of the results by KPMG suggests that even the sectors in the "safe haven" may not be as safe as they would like to think. Woo continues: "Take a sector like food and beverages, for example. This is supposedly a low-risk sector, yet recent events have shown that this industry is highly vulnerable to climate-related risks such as increases in agricultural input costs. The idea, therefore, that this sector is relatively safe from climate change effects is likely to reflect a significant under-estimation of risk."