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Tag Archives: Sustainability

ESG Outlook – What will the Federal election outcome mean for ESG and how should companies be preparing

The extreme weather we have witnessed along the eastern seaboard of Australia, accompanied by wide scale flooding, has once again brought into sharp focus the impact and presence of climate change.  This assuredly means that as we approach the Federal election, all matters environmental can be expected to form a key policy and political battleground between the two major parties.

Many in corporate Australia will no doubt observe this with more than a passing interest, in particular the impact the election outcome will have on so called ESG (Environment, Social, Governance).  The ESG prism presents both risks and opportunities for companies, especially in the way they act to address climate change, most notably what they commit to do and by when, and how they intend to do it.

Specifically, companies are currently grappling with the scale of the commitment they should make with respect to reducing carbon emissions.  Given that both the major political parties support a policy of achieving net zero emissions by 2050, this surely becomes the absolute minimum a company must commit to.  Some have, and will be, more adventurous and it may well be that if Labor wins power, the 2050 date will be reduced even further.  Labor is already committed to a 43% reduction by 2030, (with the Coalition sticking to between 26% to 28%), so emissions reduction and how it is achieved may well become even more ambitious and prescriptive.  Indeed, the Coalition is warning that Labor’s target is just an opening gambit and that if they form government, the figure will be increased.

Regardless of where these targets may eventually end up, some have clearly decided it is beneficial from a business and reputational perspective to make a firm commitment to reducing emissions.  For example, the major retailers appear to be heeding the wishes of their customers and the market () by committing to definite action.  Woolworths says it will deliver a 63 per cent reduction in emissions from its own operations (scope 1 and 2) and a 19 per cent reduction across its supply chain (scope 3) by 2030. Both Woolworths and Coles have also committed to source 100 per cent renewable electricity by 2025.

What is even more important for companies is that they must also decide whether it makes them an attractive investment proposition as a result of building their ESG credentials.  For example, if they undertake significant capital expenditure on renewable energy, which with current low electricity prices can often have a long-term payback, will they be rewarded for their ESG commitment, including greater access to capital at a more competitive rate, so called ‘green financing’.

Australian superannuation funds who between them manage assets totalling $3.4 trillion, have made their intentions clear as to what they are committed to and what they expect companies and significant sectors of the economy to do.  For AustralianSuper, this means reducing their investment portfolio carbon intensity to a net zero level by 2050.  They go on to proclaim that ‘the steps to achieve this include transitioning away from high-carbon investments, such as fossil fuels, and toward renewable investments such as wind and solar. This is consistent with the transition occurring globally.  It also means influencing the way companies operate so they emit less carbon in their business operations.’  This last sentence is telling, and it is effectively a warning to all companies, (not just the energy sector) that they will be expected to take real action to reduce their carbon emissions, regardless of what sector they operate in, and by definition they should also properly assess the financial risks of climate change to their ongoing profitability.

This then raises the question as to how companies will reduce their emissions.  On a macro level, the Coalition has stated that net zero by 2050 will predominantly be achieved through new technology.  If one takes the view that there is eventually a technological solution for everything, then it may well be that technology comes to the fore before or by 2050.  The Coalition also credits recent forecast emissions reductions to Australian households taking up solar energy and other renewables in greater numbers than ever before.  On that basis, it can be assumed the Coalition will seek to make solar energy more affordable, while Labor on the other hand has committed to also boosting electric vehicle numbers, supported by investment in so called ‘green metals’ to enable expanded battery power storage.

Whoever wins the next Federal election, and it may well be that one or two of the so called ‘Climate Action’ independents have a say in the balance of power, it is clear there will be an expectation that corporate Australia play its role in reducing carbon emissions.  In many respects it already is, and the market has spoken, and some companies have undoubtedly taken the lead.  For the others though, both public and private companies, they need to start turning their mind to how they will track, manage and reduce emissions – and the potential costs of doing so.  To be certain, there are many things they could do beyond using renewable energy, such as reduced transport, greater materials efficiency and reducing waste to landfill.

Regardless of what the government may do, taking the easy route such as buying carbon credits or seeking to indirectly reduce emissions through the efforts of others, will simply no longer cut it in the world of ESG.  Companies will be expected to take direct action and although they may not know exactly how they will do it. Government, the market and broader community will only allow them a certain period of grace before they make them act, either through a legal requirement or public pressure.

As an election year, 2022 is shaping up as the year in which ESG becomes mainstream and is no longer just a nice thing to do.  Government policy and decision making will contribute to this as will capital and equity markets which are placing ever greater store in how a company addresses the risks and opportunities presented by climate change.  Utilising reporting frameworks such as the Taskforce on Climate – related Financial Disclosures (TCFD) will grow ever more important, but so will practical action, with companies needing to navigate how they will deal with climate change through their entire supply chain.

Those who fail to act or at the very least fail to start planning, will attract not only the attention of government and policy makers, but they will also potentially become pariahs in the marketplace. Those who do act stand to reap the benefits of not only greater access to capital on more preferential terms, but also the reputational enhancement in the eyes of a public that is increasingly demanding greater ESG action from both governments and companies.

Vote #1 Environment, Promoting Sustainability in Times of Uncertainty

Frequent ‘extreme’ climate disasters, a pandemic and international conflict…the unprecedented has become the precedented. Now more than ever, during times of great uncertainty, governments and businesses must take urgent climate action. This is a wake up call to business, it is startlingly evident that no one is exempt from the impacts of climate change, conflict and Covid. The interconnectedness of commodity markets and global supply chains in our ever-more globalised world, highlighted by the recent energy price shocks and Covid-19 pandemic, will mean flow-on effects will touch every type of business in every location. An intimidating prospect to be sure.

Uncertain times are arguably the best time to change practices and habits. Or better yet, make proactive changes to safeguard and reduce the likelihood of risk before uncertainty. A proactive move now to sustainable practices could minimise the impacts felt by economic disruptions and supply chain collapses due climate disasters, international conflicts and the COVID 19 pandemic. Promoting local manufacturing and trade, incentivising the transition to renewable energy generation and nation-wide targets in line with global leaders of climate action would help to mitigate the inescapable risk of international supply chain collapses, shipping delays, energy uncertainty and economic burden of rising fossil fuel prices.

An opportunity exists, to mitigate these risks, creating a resilient and robust system that is both securing its financial future and remedying past wrong-doings against the environment. The solution to help mitigate climate change is in fact a solution to our future inevitable financial woes. Scientists are still analyzing the correlation of climate change and the severe flooding occurring in New South Wales and Queensland. However we do know that climate change will increase the intensity and frequency of these extreme weather events. There will be huge financial challenges ahead for councils to rebuild their communities, but if we can secure natural assets we can secure markets and future growth. Government and businesses investments in promoting the switch to a cleaner electric vehicle would also mitigate the economic burden felt by rising fuel prices whilst lowering carbon emissions and the use of finite resources. Take a risk lense when looking at sustainability and climate change. For companies,governments and businesses the risk of climate inaction far outweighs the requirements to do something now. What we can see from covid response globally is how easy it can be to adapt.

This time of uncertainty presents some exciting opportunities for all areas of business to make an impact. The sustainability movement is moving beyond the messaging of “please recycle” and “switch off the lights”, to look at core roles within core industries, and how they can impact change. Industry and government need to be change makers and apply a sustainability lense to what they are working through to create benefits that will support business, community and society in these “unprecedented” times. Tangible changes from business and governments such as a switch to renewable energy, creating a carbon management program, changing travel processes, increasing building efficiency, supporting local supply changes can all limit the impacts felt by uncertainty. Funding opportunities and grants are available to businesses, councils and governments to support the progression towards a sustainable economy and society. Our projects at Equilibrium have helped clients deliver impactful changes across a wide range of sectors and service areas. Globalization, industry connections and the broadness of sustainability means impacts are affecting every industry, company and supply chain, everyone has an opportunity to contribute.

Vote #1 Environment

Australians will be submitting their postal votes and heading to the ballot boxes later this year when the polls open for the 2022 federal election. Climate change and environmental policy will feature as a focal point for this election, with major parties seemingly unable to reconcile strong climate action with economic growth.

To keep you up to date with party policies during this election period Equilibrium will launch our Vote #1 Environment blog. Our blog will review the key policy areas impacting the environment, and summarise what each of the major parties are promising in each area. The main environmental policy areas of interest this election are:

>Energy and Carbon
>Waste and Recycling
>Biodiversity
>ESG Reporting
>Transport

This year, the election focus has shifted from the converging positions of the major parties, to the rise of climate friendly independents to lead the clean energy transition and disrupt the balance of power. Australians are seeking representation by politicians across all parties to take the issue of climate change and the environment seriously and act with urgency. Our blog will present and discuss the policy commitments for each area, so that you can make an informed decision and Vote #1 Environment this election.

2050 Modelling Shifts Net Zero Leadership to Industry

The Australian Government commitment to net zero emissions by 2050 could well be the embodiment of former Indian Mahatma Ghandi’s famous quote: “There go my people, I must hurry to catch up with them for I am their leader”.

The market has spoken. Business and the community is already moving ahead of Government on greenhouse emissions. Equilibrium has been fortunate to see this first hand as for a number of years it has worked with progressive companies on reducing emissions – and this activity has accelerated over the last 24 months independent of Government.

The Australian Government has now released “Australia’s Long Term Emissions Reduction Plan”. The plan provides a summary of the modelling and analysis which underpins the emissions target of net zero by 2050.

The modelling focuses on industry and businesses taking a voluntary approach to achieve net zero by 2050, without outlining constraints or incentives. This shift to net zero is to be pushed by “investor expectations” and “consumer preferences”. Fortunately, Australian businesses are well advanced in assessing their carbon outputs and are already working towards contributing to the target.

For example, Equilibrium was engaged by a major food manufacture in 2019-2020 to identify their carbon outputs and a carbon reduction plan. The company is now well advanced on a carbon management program that is aligned to its overall business objectives.

The process involved identifying scope 1 emissions (direct emissions eg. production, manufacturing and transport emissions), scope 2 (indirect emissions, emissions that may be generated at another facility) and scope 3 emissions (indirect emissions, employee travel to work/ transport and disposal of waste). The company set a target to achieve net zero emissions in operations and net-zero climate impact across the value chain by 2040, as well as 2025 interim goals to reduce energy, water and waste.

Equilibrium assists businesses with a wide range of services from carbon accounting to Climate Active accreditation. Please get in touch to develop realistic and measurable approaches to reduce your carbon outputs.

Grant opportunities in New South Wales and Victoria

The NSW government has announced four grants available to improve recycling and waste services.  

> Organics Infrastructure: $6 million is available to support the processing of organic waste. This grant is available to local businesses, councils and projects that upgrade, build and expand organics processing infrastructure. Applications close October 21.

> Organics Collection: $12 million is available to support councils and regional organisations tied to councils to divert FOGO waste from kerbside collection. Applications close October 28.

> Circular Solar Grants: $7 million is available for government organisations councils research organisations, industry and not for profits for the development of innovative schemes that recycle and battery waste and solar panels. Applications close November 4.

> Litter Prevention Grants: $2 million is available for community litter reduction projects and schemes. These initiatives could include cigarette butt bin installations or community clean up days. Applications close November 8.

Round two of Innovation Fund grants open for applications in Victoria

In Victoria funding is available to support collaborative projects that aim to design out waste, improving both economic and environmental outcomes. Applications for both streams are open for projects that emphasize action within all phases of a resources’ lifecycle, promoting circular economy initiatives.

The two streams of funding available are:

>Stream One: Textiles Innovation: Between $75,000 – $150,000 of funding is available per project. Grants are available for projects which have a focus on preventing textile waste. Applications are open to industry groups, businesses, charities and research institutions.

> Stream Two: Collaborative Innovation: Between $150,000 and $250,000 of funding is available for each project. Grants are available to businesses, industry groups, charities and research institutions. Projects must have a collaborative focus on preventing waste from multiple organisations within a specific region, supply chain or sector.

The closing date for both Victorian grants is Monday 15th of November at 11:59pm.

Waste Export License

The Australian Government has implemented the Waste Export Ban, and has begun to regulate the export of Australian of certain wastes.

As of July 2021, glass and mixed plastics “waste” are regulated for export. Baled and whole tyres are set to be regulated from the 1st of December and other materials  including cardboard and mixed paper by July 2022. Separate requirements are required for hazardous waste.

Each type of waste stream will have its own regulation start date and rules. To continue to export waste, organisations will have to:

>Meet the requirements and rules or be exempted
>Declare each consignment
>Hold a waste export license for the waste type

Under this ban, exporters and organisations which meet these specific requirements are able to apply for a license to export regulated waste overseas. Waste export licenses are granted for a period of up to three years for organisations who meet certain criteria.

Equilibrium has developed a guide and can help with the waste export license application. For more information please contact us or visit the Department of Agriculture, Water and the Environment website.

Climate Active

Climate Active certification provides businesses and organisations with the opportunity to demonstrate their commitment to managing their environmental impacts and committing to sustainable outcomes. Climate Active is the Australian Government backed program that enables business to measure, manage and offset carbon emissions from their operations or products and services. Organisations can also apply the certification to events, buildings and precincts that demonstrates their commitment to driving voluntary climate action in the growing face of pressures from customers and investors.

The Climate Active certification is awarded to organisations and businesses that have credibly reached state of carbon neutrality/ net zero emissions. The certification and verification process as well as public reporting requirements ensures that like for like businesses can be compared with respect to assessing, reducing and offsetting carbon emissions. 

The emergence of voluntary schemes such as Climate Active are driven by “social license” and responsible business practice. The scheme presents the opportunity to achieve greater staff engagement and demonstrate to customers you have in place a robust climate strategy commitment. The scheme aims to incentivise voluntary action, with the certification assisting the greater community by making it easier to identify brands, businesses and organisations that are committing to making a real difference.

Addressing barriers to Product Stewardship in Australia

Product stewardship calls for companies, supply chains and retailers to take greater responsibility for their services and products across their whole life cycle, from design to production to use and, finally, disposal. 

Earlier in July the Product Stewardship Centre of Excellence released a white paper report “Addressing the Barriers: A needs assessment of product stewardship in Australia.” The paper aims to explore and understand the barriers to product stewardship in Australia, investigating opportunities for further development and expansion of product stewardship across the nation.

The paper discusses the major challenge such as free-riders; businesses or organisations that may benefit from product stewardship activity without contributing to the implementation or operation. 

Although not discussed in the paper, the voluntary trend of product stewardship in Australia is also an issue to consider. 

This trend is a particularly Australian phenomenon, as most other countries support regulatory approaches. Australian industry leadership towards product stewardship should be congratulated. For example, the recent announcement of the Australian Toy Association partnering with other leading brands to investigate product stewardship of toys, and the recognition of best practice for Tyre Stewardship Australia are positive developments. 

However, similar to the free-riding organisations, companies and industries who use voluntary as a means to defer, delay or avoid responsibility should be brought to account. 

Voluntary approaches cannot be realistically expected to work in a timely manner where there is no industry agreement and coordination, and where the brand owners are diffuse, have little or no local decision-making authority or are no longer trading. In such cases it at best will be a slow process and many years before some sort of voluntary approach is figured out. 

In general, the need for government intervention is generally greater the more complex the products and supply chain.

For product stewardship broadly to meet community expectations, to reach waste and recycling targets, to discourage free-riders and to support genuine leadership efforts, there therefore needs to be clear market signals that government will regulate when and where needed. 

While the Centre’s white paper correctly highlights key barriers, overcoming them will require the government to act where appropriate to put pressure on industry and ensure accountability, and that includes judicious use of regulatory powers.

Toy Industry to collaborate and develop sustainability solutions

The Australian Toy Association (ATA) has been supported with a through the Circular Economy Business Innovation Centre (CEBIC) delivered by Sustainability Victoria. This is a world first for the toy industry and another example of an industry taking responsibility for its products.

In collaboration with leading toy industry brands and retailers, the funding enables the ATA to develop and investigate circular economy options for toys. The project’s first stage will develop a material flows analysis, building an understanding of the movement of toys through the economy. The results of the analysis will link into the overarching project to develop solutions that will reduce the environmental impact of toys. 

Equilibrium congratulates ATA for their leadership and vision and is excited to partner with them on this project in developing circular economy options for toys.

New environmental laws in Victoria from July 1 2021

EPA Victoria will have increased powers from 1 July 2021 to prevent harm to public health and the environment from pollution and waste. 

The laws include sweeping changes which transforms EPA powers and requirements for business owners and operators. It is the responsibility of all business directors and managers to understand the new laws and how to comply. It is also your responsibility to make sure all employees understand requirements under the new laws.

One of the more pivotal and central changes is the introduction of the General Environmental Duty (GED). The GED is all-inclusive, applying to all businesses in Victoria, irrespective of size or type of operation. In short, under the GED, all Victorian businesses and organisations must take action to protect the environment and human health.

For many businesses in Victoria environmental risk management is already embedded into everyday operations, and the GED should require minimal change. However, now is the time to review systems against the new laws and be confident of compliance. It will be important to keep risk registers and risk management plans up to date and:

>Ensure environmental risk of pollution to land, air or water is assessed for all business activities.
>Action plans are in place to eliminate or control risks.
>Actions are implemented in a timely manner, and effectiveness monitored.
>Keep documented records of risk assessments and action plans to demonstrate

EPA Victoria provides guides and tools to help businesses comply with the GED, including:

>EPA Self-Assessment Tool – for supporting small business with action planning
>Assessing and Controlling Risk Business Guide – risk management framework for business
>Managing low risk activities
guidance for businesses with low risk, e.g. offices, cafes, retail.