At the end of last month, a landmark court case in the Hague set a new precedent for climate litigation. A Dutch court ruled that oil giant Shell must reduce its greenhouse gas emissions targets even more aggressively than simply meeting the stipulations of the 2015 Paris Climate Accords.
The Judge concluded: “The court orders Royal Dutch Shell… to reduce its CO2 output and those of its suppliers and buyers by the end of 2030 by a net of 45% based on 2019 levels.”
The case raises interesting questions about the responsibility of climate change management. Historically it’s been widely perceived as a Government mandate, however increasingly corporates are being held to account and their environmental credentials and policies scrutinized by customers, investors, peers and competitors.
Australian attitudes to climate change and global warming
The Lowy Institute Poll 2020 shows that the majority of Australians (59%) continue to view climate change as a critical threat to Australia’s vital interests in the coming decade. Of those surveyed, 56% of Australians said ‘global warming is a serious and pressing problem.
We should begin taking steps now even if this involves significant costs.’ Eight in ten Australians felt that the Australian government should focus on renewables, even if we need to invest more in infrastructure to make the system more reliable.
But is environmental awareness affecting purchasing decisions?
IBM’s research paper ‘Meet the 2020 Consumers Driving Change’ suggests absolutely, and suggests that brands now need to prioritise sustainability in order to remain competitive. The authors of the report argue that sustainability has reached a tipping point:
“As consumers increasingly embrace social causes, they seek products and brands that align with their values. Nearly six in ten consumers surveyed are willing to change their shopping habits to reduce environmental impact.
“Nearly eight in ten respondents indicate sustainability is important for them. And for those who say it is very/extremely important, over 70% would pay a premium of 35%, on average, for brands that are sustainable and environmentally responsible.”
What’s the Australian government doing about climate change?
The Clean Energy Regulator is a Government body responsible for accelerating carbon abatement for Australia through the administration of several environmentally focused schemes.
One of these schemes, the Emissions Reduction Fund, incentivises Australian businesses to cut the number of greenhouse gases they create and to undertake activities that store carbon. The Morrison Government has the policy to help establish a viable carbon market and is spending $2.5 billion (through the ERF) to help establish pricing.
The carbon market in Australia is now a decade old, with 971 carbon farming projects currently registered with the Clean Energy Regulator, while 94 million carbon credit units have been issued, offsetting Australia’s entire output of transport emissions.
Who else is helping Australian businesses become sustainable?
The Carbon Market Institute is a registered charity and industry association, operating with the objective of helping “business manage risks and capitalise on opportunities in the transition to a net-zero emissions economy”.
Over 100 Australian companies are members of the CMI, including Qantas, Coles, Wesfarmers, Westpac, Telstra, Commonwealth Bank, Origin, BP and Energy Australia. Significantly, membership in 2020 grew by 36%.
Bringing together Government representatives and Private industry leaders in Sydney for knowledge sharing and discussion, the Carbon Market Institute last week hosted the Annual Australiasian Emissions Reduction Summit.
John Connor, CEO of the CMI, commented: “The Australian carbon market has great potential with the Safeguard Mechanism requiring bigger companies to measure and manage their emissions. It also has a taxpayer driven Emissions Reduction Fund managing a well-regulated system of creating carbon credits.
“What’s missing is a strengthening of these carbon market instruments to guide investments on the transition to net-zero emissions. The private business community is now responding to customer and investor calls for this transition and in many ways is leading government efforts.
“An evolved safeguard mechanism with robust carbon trading is the most effective means to help achieve net-zero emissions. What’s now required to move forward is effective Federal leadership within the sector to connect public and private policy on the matter.”
Carbon Code of Conduct
One of the biggest recent developments in sustainability with the capacity to make a difference is the Australian Carbon Industry Code of Conduct, a voluntary code run by the Carbon Market Institute.
The Code defines industry best practices for carbon project developers generating credits for carbon reduction that are sold to Government and other businesses. 22 Australian companies are currently signed up to the code, with more expected to join when the Code is formalised on 1 July 2021.
Connor explains: “The Code sets out best practice standards that signatories in the carbon industry must adhere to.
“This increases trust, accountability, transparency and consumer protection in the sector. It is helping build an Australian negative emissions industry with carbon reduction credits of high integrity that can underpin both effective climate action and economic and export opportunities.”
The cost of carbon matters
With the earth’s average temperature rising more than 2 degrees Fahrenheit since the 1880s, at least we can now all agree that something needs to be done about global warming. However, managing emissions isn’t straightforward.
Companies based in the fields of manufacturing and mining, for example, would be unsustainable if controls or taxes were placed on emissions. Likewise, there are renewable power companies currently running at loss – we need green power, but how do we make solar and wind farms financially viable?
What’s inevitably ahead is a widespread, voluntary corporate adoption of the Government’s carbon scheme, involvement in which will enable every company to attain carbon neutrality either by reducing emissions or offsetting emissions via the purchase of carbon credits. But a pressing issue at present is that carbon’s value as a commodity is too low.
This is significant because investors in fossil fuels need a disincentive, and encouragement to adopt carbon as an alternative. Renewable energy can only continue if supported on the basis of its green credentials. Solar and wind farms, for example, are companies that will likely receive carbon credits from the Government.
What’s the ‘right’ price for carbon?
In Australia, the cost of carbon is mainly controlled via the Emissions Reduction Fund’s reverse auctions. The most recent one took place on Monday 12 and Tuesday 13 April 2021, and the average price per tonne of abatement purchased at the Auction was just $15.99.
Comparatively, the UK and European carbon markets are currently priced at 53 Euros (83 AUD) per tonne (at the time of publication).
At around 65-100 Euros per tonne (102 – 157 AUD), it becomes a credible asset and viable in trade terms to perform as required.
The International Monetary Fund suggests: “large emitting countries … should introduce a carbon tax set to rise quickly to $75 a ton in 2030.”
However, as with all emerging commodities, we are likely to see a surge in demand which could spark a spike in price far beyond the market’s valuation. It’s not unrealistic to anticipate a surge in value potentially beyond 100 Euros per tonne, the question, however, is ‘when’?
How do I implement a sustainability policy for my business?
Calculate your carbon footprint:
As a starting point, count your in-house emissions by examining your corporate energy consumption, for example (heating, lighting, printers, IT, dishwasher, fridges, hand driers). You can also count the other secondary emissions that are related to business such as travel, phones, furniture and paper products.
There are various free online carbon calculators available, the Global Footprint Network’s Ecological Footprint Calculator is easy to use and allows entry of estimated amounts. For bigger businesses, there are a number of companies offering wide-ranging environmental audits.
Assess your supply chain:
Look at everything that you purchase for the business going forward, whether that means product inventory for resellers, or the normal corporate requirements and sundries such as internet, tech equipment, printing, heating, lighting, coffee, tea, milk, biscuits, paper, beer, stationery.
Helping companies navigate this field is an emerging sector for companies that only stock responsibly sourced, recycled and eco-friendly products (have a look at Going Green Solutions for general office supplies).
Look for eco-labels:
These labels are intended to inform us about the environmental impacts of producing or using a product. Ecolabels confirm that the labelled product is more environmentally friendly than most, generally, standards are set so the top 20-25% of the market can comply.
Whilst they are voluntary, they are becoming an important competitive factor within Australia, as businesses, retailers and consumers are taking notice of them when making purchasing decisions.
There are also a number of companies within Australia that certify products with eco-labels, these include GECA’s ‘Good Environmental Choice Australia’ labels and Ecospecifier Global has a Green Tag™ system which encompasses building and manufacturing products.
There’s also the Australian Government’s Energy Rating Label on electrical appliances assessing energy efficiency and running costs, with more stars signalling more savings.
Additionally, the Eco Label Index brings together information on 57 eco labels commonly used on Australian packaging, providing the back story to each.
Manage waste responsibly:
Firstly examine what your company’s waste is, then consider how best to reduce, reuse and recycle it. Having separate landfill and recycling bins is a good start.
Business Recycling has information on recyclers and recycling options for about 90 different materials.
What else Can SME owners/ managers do?
Consider if B-Corporation Certification might be right for your business. B Corporations (B Corps) are companies certified by the US, not for profit company B-Lab, whose commercial decisions make a positive impact across their workers, customers, suppliers, community, and the environment.
To be approved for certification, companies must receive a minimum score from an assessment of “social and environmental performance”, integrate B Corp commitments into company governing documents, and pay an annual fee (based on revenue).
Companies must recertify every three years to retain their status. There are currently over 3,500 Certified B Corporations in more than 70 countries worldwide.
Marketing a Sustainability Programme
You’ve gone to the expense of investing in a sustainability programme, how can you now leverage this business decision and policy for the benefit of employees, customers and other stakeholders?
Live your purpose
The crux of sustainable or purpose-driven marketing is that you position your brand in a positive stance in relation to a specific issue that’s of relevance to your customers, or the wider community.
Once you’ve made logistical or operational changes, you then weave messaging into all of your corporate communications and content marketing, so that it becomes a credible part of the fabric of your organisation.
Done well, it can lead to establishing a point of difference and competitive advantage in a marketplace, however, executed poorly, it can come across as insincere.
Be specific
Think about the end result of your efforts and find a meaningful metric that’s measurable. Give it a number and publicise that number. It shows the metric matters, you’re not making token efforts or simply talking about being green.
Think of it as a greenwash antidote. For example, Qantas turns this into a $ value per seat, where customers can opt to offset carbon emissions for each flight.
Online fashion retailer The Iconic has launched ‘Considered’ – a destination page and filter system that highlights products with sustainability credentials and enables customers to shop by their values.
The retailer has pledged that 50% of their product inventory will meet at least one Considered criteria by 2025, while 493 brands have products that currently meet their sustainability criteria.
Don’t ‘Greenwash’
As being green becomes cool, there is a lot of greenwashing going on. It’s important to focus on authenticity and tangible brand acts. Associate and trade with other like-minded businesses wherever possible – you are the company you keep.
This can influence your hiring policy and is a positive signal to consumers that you not only talk the talk but also walk the walk. Our ad agency launched a pro bono program, Buy One, Give One this year, aimed at supporting innovative Australian companies within the purpose space.
We felt that giving our creative services to worthy startups is the best way that we can support the community and help save the planet.
CASE STUDY I: Felix mobile
Launched last year, Felix mobile is an environmentally friendly mobile plan from Vodafone and Australia’s first telco brand to be powered by 100% renewable electricity. The brand is certified carbon neutral by the Climate Active initiative.
Operating on an affordable $35 per month subscription, the Felix team plants trees on behalf of customers, with a new tree planted every month for every active phone contract.
Kelly Beater, Head of Sales and Marketing, Felix mobile commented: “Research showed that Australian consumers wanted two things: a mobile with good values, and a super simple offer.
“So that was our goal with Felix. We’re the simple plan that plants trees – which talks to our carbon neutrality, as well as living our environmental values. And you can’t have good values without happy customers, which is why we aim to deliver customer service that’s second to none.
“Nobody has all the answers though, so we’re constantly striving to create something even better, with ongoing projects that can help us make a positive impact.”
CASE STUDY II: Dharma Bums Activewear
Born on Sydney’s Northern Beaches, Dharma Bums yoga and sports clothing designs activewear for the future, putting purpose before profits. By using a combination of sustainable fabrics and quality workmanship, the brand aims to reduce landfills by ensuring garments have longer lifespans than competitor products.
Sustainability is practiced across the business, from water use to fabrics made from recycled plastic bottles, fully biodegradable packaging and fabric offcuts from the design studio are recycled into stuffing for the inside of boxing bags.
Debbie Lawson, Co-Founder, Dharma Bums, explained: “There have been a few standout points on our brand journey with sustainability.
“These include building the brand to a level where it could develop its own recycled fabric, and working closely with our partners to guide them into gaining sustainability certification.”
“SMEs on this path should be prepared for the process to take time – research and development are littered with false starts.
“You may begin working with a product (in our case, fabric) and discover it is not as environmentally friendly as you first thought, and then you have to begin again. The rewards though are worth it.
“Our customers recognise the hard work we put into our sustainable development practices and like to be involved in the journey.
“They will often suggest ways we can improve that we may not have thought of, so for us, it’s a valuable two-way conversation.”
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