Over the last few years, decarbonisation has gone from a buzzword to something businesses must take seriously. We unpack why organisations must put a long-term plan in place.
Over the last few years, decarbonisation has gone from a buzzword to something businesses must take seriously. Since the Australian Government's landmark Climate Change Bill passed in September 2022, Australia's emissions reduction target of 43 per cent by 2030 and net zero emissions by 2050 are now set in law.
So what does this mean for your business? We help you to understand the concept of decarbonisation, why it's essential and why organisations must put a long-term plan in place.
What are the fundamentals of decarbonisation?
The effects of climate change are all around us - from extreme weather events to rising sea levels, there's little doubt that urgent action is needed. While decarbonisation will be easier for some businesses to achieve than others, each business can begin its journey by understanding the basics and developing a plan.
Decarbonisation includes identifying an organisation's greenhouse gas (GHG) emissions footprint and implementing a plan to reduce these from their operations and supply chain. The aim is to get as close to zero emissions as possible. It's important to note that the priority should be on reducing absolute emissions, not just relying on offsetting with carbon credits.
A brief history of climate change legislation
Over time, significant global agreements have been vital in getting us to where we are today. These include the Montreal Protocol in the late 1980s, the Kyoto Protocol that came into force in 2005 and the more ambitious targets set with the 2010 Copenhagen Accord and Paris Agreement of 2015.
Fast forward to recent times when COP26 (Glasgow, 2021) was a significant event that re-energised the global community in its climate change goals. Now over 90 per cent of the world's GDP and around 90 per cent of the world's emissions are covered by net zero commitments, significantly accelerating action on climate change.
At COP27, held in Sharm el-Sheikh in November 2022, Climate Change and Energy Minister Chris Bowen represented Australia. The Minister launched Australia’s bid to co-host the 2026 United Nations climate summit in conjunction with Pacific nations. Australia wishes to be seen as a driving force in renewable energy, making a decarbonisation plan for businesses more aligned with government policy than ever.
A new urgency: why the next best time is today
CO2 atmospheric concentrations have been increasing since the start of the 19th century, leading to increased surface temperature and climate variability in Australia and around the globe. The science is clear: the link between global warming and physical consequences is here, and we must act now.
Regulators are now catching up to scientists and the communities who have long been demanding change. Here in Australia, the Government's Climate Change Bill - with its 43 per cent reduction target by 2030 and end goal of net zero emissions by 2050 - puts a lot of pressure on particular industries to accelerate decarbonisation efforts.
However, with these targets now enshrined in law, it gives greater investment certainty to businesses and investors and aims to stabilise the country's energy system. It also sends a message to the world that Australia is on a credible path to net zero.
This could be your organisation’s catalyst to start or accelerate its decarbonisation journey.
The business imperative for decarbonisation
Naturally, there is a moral case for decarbonisation but doing right by the planet is also good for business.
Increasingly we will see some form of price put on carbon emissions, whether explicit or implicit. Reducing emissions from your operations and supply chain should also reduce the financial burden for organisations.
The business case for decarbonisation is also about access to markets, capital, and people.
- People – People are increasingly looking to work for organisations that align with their values. How does your organisation appear to potential candidates regarding action on climate change? How your organisation acts in this space could directly affect talent acquisition or staff retention.
- Capital – This might be transitional or physical risk, but the obligations of a business to declare its actions to mitigate climate-related risks will increasingly influence the terms of access to capital.
- Markets – Just like employees, customers and suppliers have views on an organisations’ climate-related policies and actions. What is the reputational risk, to customers or suppliers, of doing business with you? Your organisation may need to demonstrate its commitment to decarbonisation to access new markets.
Putting a plan in place
Now for the 'how' of the decarbonisation process.
Measure - quantify and map your greenhouse gas emissions
Firstly, it’s important to understand your existing emissions and your current state. You need to capture the data and establish a baseline. Scope 1 emissions are under the organisation’s operational control, whereas Scope 2 & 3 emissions are indirect emissions. For example, emissions from suppliers’ operations are classified as scope 3, as they are a consequence of the supply chain.
Discover - review the options available
Think about what the organisation is hoping to achieve. What's available? What's commercially viable? What's realistic to implement? These goals should be science-based and align with the broader enterprise strategy.
Implementation - put a plan in place
How will the implementation of targets flow through all aspects of your business? Set a framework and an ability to monitor progress for continuous improvement.
Decarbonisation is a journey, and your plans should be able to adapt and improve over time. Tracking progress will help show how you measure against agreed targets and whether the plan needs to be tweaked, accelerated or try new things.
How BDO can help your organisation
Organisations in Australia may face unique challenges in their decarbonisation journey. We are a large country that has historically relied on emission-intensive industries. There's no doubt that meeting the ambitious targets set for 2050 will be a challenge. Here’s where BDO can help:
- We have a large and diverse team of local and global experts, ready to put their knowledge and wealth of experience to work for you
- We work with organisations to provide a level of rigour around processes and targets
- We can come in at any step of your progress, provide an end-to-end solution and be your trusted adviser on every step of this journey.
Please get in touch with our sustainability team to learn more about how BDO can help on your decarbonisation journey.