November 26, 2022

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How smart companies are meeting ESG objectives and maintaining bottom line

4 min read

Environmental, Social, and Governance (ESG) is shaping up to be the corporate mantra of the 2020s, with the majority (83 per cent) of Australians concerned about climate change, according to the annual Ipsos Climate Change Report 2022. 

In Europe, we have seen the introduction of supply chain legislation that will make companies accountable for the behaviour and performance of their suppliers in a way never seen. As is the way of these things, we will no doubt be seeing a similar legislative effort on our own shores in the near future. 

The way we view our responsibilities as corporations, from the board down, is shifting. But this change has been slow. Current measures are not enough, on their own, to push corporate Australia down the necessary path to Net Zero.

Board buy-in is necessary  

Only 18 per cent of businesses have set a Net Zero goal, and of those businesses that have set a goal, only 21 per cent are taking steps to achieve it, according to research at Energy Action. That’s a fraction of the buy-in that we need.

At present, it can seem complicated and expensive for companies to get on board with Net Zero, which we know from just going through the journey ourselves.

There’s a growing demand for not only the cheapest power but the cleanest power. Before anything else, you need board buy-in. Currently, only around three in 10 Australian boards consider the Net Zero strategy a priority. To lift this number, a board-level commitment is non-negotiable.

Sometimes getting to that place can require a cultural shift, but it can be easier to achieve once you realise that solid environmental, social, and corporate governance (ESG) credentials aren’t just a feel-good box to tick off. Done right, ESG can be profitable and drive positive social and financial outcomes.

Steps toward Net Zero 

Net Zero certification doesn’t have to be expensive or difficult; it just requires an organised approach. In many cases, you can distribute the initial costs over time. The key steps to Net Zero energy are simple: measure, reduce, buy green, and offset. 

First, comprehensively measure your emissions. If you don’t measure what you’re currently consuming, you can’t bring that number down, and you won’t know what your offset burden will be. We thoroughly audited our last two financial years to find that number and identify several ways to reduce our energy usage.

Then, you convert your power to as many green sources as possible. Different companies will have different capacities to switch to green sources. Some might be able to install solar panels, upgrade to electric vehicles, and so forth, but everyone can change their purchasing decisions to make greener choices.

In our case, energy consumption was our biggest emissions contributor, so we were able to change our buying to mitigate that. We also switched to make the greenest possible purchasing decisions for all items we might need to run our business.

In some cases, these products may be slightly more expensive, but this is a cost distributed throughout the year, so it doesn’t have to be painful. Long-term, we hope to continue to transition to more and more Net Zero suppliers as those options come to market.

Carbon credits are the last piece of the puzzle. A range of certified credits – both nationally and internationally created – can be purchased to suit different needs and budgets.

But it all starts with board direction and the belief from the board level that Net Zero is important to the future of your business. If you aren’t there yet, you may want to consider it sooner rather than later. With investor mandates becoming more routine and consumers are increasingly interested in the ESG credentials of the products and services they buy.

The future; reporting, strategies, and commitment 

Current mandatory reporting, including National Greenhouse Emissions Reporting (NGERs), has been in place since 2007, but realistically this is a regulatory reporting doorstop with limited ability to change behaviour.

On the other hand, voluntary reporting through the government’s Climate Active program produces quantifiable and auditable emissions reporting but is just that – voluntary – and not without cost.

At a policy level, the challenges are that emissions reductions or, more broadly, ESG outcomes are driven by standards rather than a mandate to “achieve Net Zero”. Those standards have complicated implementations that take years to achieve and will be frustrated by paid lobby groups.

Instead, a strategy that leverages what we have already seen with domestic photovoltaic solar uptake around the country is needed. Incentives introduced in the late 2000s resulted in a vibrant and sustainable PV installation industry to this day, effecting meaningful long-term impacts on improving Australia’s energy security.

Targeted Net Zero could have the same effect. Properly supporting Climate Active certification could result in many more businesses finding innovative and cost-effective ways to reduce emissions and accelerate Australia’s Net Zero economy.

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