Commitment to supporting the goal of achieving Net Zero by 2050

By Bongiwe Mbunge, Partner, Mazars – Business Sustainability

The escalating climate crisis is the defining issue of our lifetime and potential solutions are coming thick and fast – however impractical some may be. Many of these solutions are currently at corporate and business level, but the time is not far when they must affect both small businesses and the individual. That is the hope of Cop26.

Climate change affects everyone – from families worrying about their children’s futures, to retirement funds deciding where to invest. So, it is in the interests of everyone that we see systemic change that averts climate catastrophe and unlocks the potential of green growth.

Cop26 in focus 

Cop26 is the 26th iteration of the Conference of the Parties, currently attended by countries that signed the United Nations Framework Convention on Climate Change (UNFCCC) – a treaty agreed in 1994. 

Green taxes have been proposed but risk hitting the least affluent the hardest, while a more recent suggestion is rationing – seen by some as a fair and universal way to limit consumption. Critics, however, say it sacrifices economic growth.

As far back as 2006, the then UK environment secretary, David Miliband, argued that each citizen should be issued with a carbon ‘credit card’ – to be swiped every time they bought petrol, paid an energy utility bill or booked a plane ticket – under a nationwide rationing scheme.

Talking about, and accepting the need to reduce, one’s carbon footprint has always been the easiest part of the journey to net-zero emissions. In fact, solutions are readily available if governments needed to reduce carbon emissions quickly and dramatically – however, most would be extremely unpalatable. This is why Mazars has developed a roadmap for corporates to gently reduce the carbon footprint of their activities and those of their employees.

Facing the reality of Net Zero 

In reality, net-zero targeting begins with an assessment that helps companies know themselves better, identify high-impact opportunities and learn how they shape up against competitors. Companies can better understand their environmental and social impact when they’re able to benchmark their carbon footprint against competitors or understand their total contribution to emissions in their region.

Net-zero often involves how a company is run. By challenging themselves to think differently about ESG (Environmental, Social and Governance), companies will not only reduce their environmental impact, but also will have a fresh way to look at how they approach their work and discover more efficient ways to operate. By analysing business practices through the lens of ESG, they can gain a better overall understanding of their processes and financials. Net-zero efforts can help realise cost savings by streamlining processes and identifying alternatives to conventional processes and products.

The measurement of an organisation’s carbon footprint, which clarifies the baseline of a corporate’s net zero journey, is within reach. Thereafter, the post-measurement phase, is the detailed internal engagement which challenges the organisation’s ability to commit for the long haul.

To ensure success, the roadmap to net zero has to be well defined, structured, owned and communicated. The single most important aspect is that it has to be a strategic decision made by the board. A company cannot make a lofty decision and then outsource it to an environmentalist firm to be forgotten. It is going to be a roadmap which affects operations compared to how it was done in the past, drives efficiency, changes policies and which may require some investment. For that reason, responsibility sits at an executive level.

Assisting the journey to net-zero is that three levels have been internationally defined in terms of levels of greenhouse emissions, termed Scopes 1-3 (as defined by the GHG Protocol).

• Scope 1 consists of a company’s direct emissions simply from doing business – for instance having a fleet that uses petrol, gas-consuming aircons at the company’s facilities, and also looks at a company’s capacity to generate power.
• Scope 2 consists of a company’s downstream activities: distribution and transportation; processing of products sold; the use of and end-of-life treatment of products sold; leased assets; franchises and investments. It tends to focus on electricity, which is important in South Africa given our reliance on coal-fired power stations, which is the dirtiest form of energy. In any peer group, South Africa ranks poorly in this respect.
• Scope 3 consists of a company’s upstream activities, such as business travel and how their employees commute to work. We find many executives which to exclude this category for reasons of it not being under their control, but this has to be resisted. Company policies can be established discouraging flying and encouraging a carpool system or use of public transport.

Where to now?

Once we have measured a company’s emissions level based on Scopes 1-3, we can draw up a tailored roadmap as to how that company can gain efficiencies and reduce its level of emissions. It is at this point that the risks and opportunities become evident, and it also becomes evident whether changes in company policy will suffice, or whether it will require capital investment.

Once the risks and opportunities have been identified, it becomes feasible to set targets. These targets will be published internally and externally for accountability purposes. In my experience I have not yet seen one company get to net-zero through this mechanism. There is a point they can comfortably achieve, and the difference has to come through carbon offset projects, or reinvesting into nature. However, you cannot start a roadmap there – carbon offsets always have to be the last point.

The goal is not only for the business to do the right thing, but to encourage their employees to also be part of their net-zero strategy.  In most cases, the roadmap therefore begins with an education step. The easiest steps to get staff to align with are waste recycling and water conservation. With water recycling, we have the lessons of Cape Town’s Day Zero experience to call upon with businesses in that city having reduced their water consumption by as much as 70%.

These are the ‘big ticket’ items that can make the most impact on a company’s carbon footprint and require an executive decision.

A carbon reduction strategy should focus on:

• Governance – the organisation’s governance around climate-related risks and opportunities. This requires sufficient board knowledge on the articulation of their oversight responsibility on ESG.
• Strategy – the actual and potential impacts of climate-related risks and opportunities on the organisation’s business, strategy, and financial planning.
• Risk management – the processes used by the organisation to identify, assess, and manage climate-related risks. Ownership of responsibility at an executive level for risk mitigation.
• Metrics and targets – the metrics and targets used to assess and manage relevant climate related risks and opportunities, which includes your net-zero target.
• Measurement – re-measurement of your scope 1, scope 2 and material scope 3 emissions annually to assess progress.
• Reporting – preparing the organisation for Task Force on Climate-related Financial Disclosures (TCFD) reporting and communicating to relevant stakeholders.

For executives of corporates, the first question will inevitably be, what impact will this have on the business’ bottom line? It has been proven in any case study – and endorsed by our own experience at Mazars, as we have done this journey too – that when one reduces one’s carbon footprint through improved efficiencies it generates increased profit from year one. Therefore, net-zero does not simply appeal to people’s consciousness but has a business case which is not well understood – and this has to be part of the initial education step.

This education step at the moment is taking up a lot of space to create the appetite for change management to do things differently and to engage with supply chains to also adopt a net-zero strategy.

The challenge coming out of Cop26 is how to reduce the threshold of responsibility from large corporates to smaller, privately-owned businesses. Without this step, we are not going to make much difference. To change the trajectory of climate change requires a broad-based buy-in.

*Check out the latest edition of the Public Sector Leaders publication here.

For enquiries, regarding being profiled or showcased in the next edition of the Public Sector Leaders publication, please contact National Project Manager, Emlyn Dunn: 

Telephone: 086 000 9590 |  Mobile: 072 126 3962 |  e-Mail: emlyn.dunn@topco.co.za