Published in the FINANCIAL REVIEW Aug 26, 2019
A United Nations joint-led global push to persuade businesses to reduce their greenhouse gas emissions in line with the Paris Agreement targets has gained little traction, with just 13 Australian companies signing up to the initiative since its launch in 2014.
Of those 13 companies, which include Westpac and Origin Energy but few other household names, only five have actually set their emissions targets.
Globally the record is not much better, with just 611 companies signed up to the Science Based Targets Initiative, only a third of which have have had their targets approved.
But supporters of the initiative hope the next 18 months will see a new wave of companies commit to Paris-aligned targets, as businesses and investors increasingly recognise the urgency of the climate crisis.
The Science Based Targets Initiative asks businesses to cut their greenhouse gas emissions to a level that is consistent with limiting global warming to 1.5 degrees, the internationally accepted goal set out in the Paris Agreement. Total global emissions must come down by 45 per cent on 2010 levels by 2030 to ensure that target is met.
The initiative is led by the United Nations-affiliated UN Global Compact, the World Wildlife Fund, the World Resources Institute and CDP.
The list has some huge names on it, including McDonald’s, British American Tobacco, IKEA, Nissan and Hewlett and Packard. News Corp, the US-based publisher of The Australian, Herald Sun and Daily Telegraph, newspapers known for their climate change scepticism, is one of the 232 companies that has had its science-based emissions targets approved.
However, companies from high emissions sectors are few and far between on the list.
Kylie Porter, executive director of the UN Global Compact’s Australian branch and a former banker with ANZ and NAB, said Australia was “absolutely lagging in comparison to Europe on the number of companies that have committed to adopt a science-based target”. But she said she was talking with around 50 companies, including some “really big companies”, that she said were “seriously committed to adopting [a] science-based target”.
The lack of globally enforceable regulation has spawned a number of private sector and NGO-led voluntary initiatives that encourage businesses to take action on climate change.
Perhaps the most prominent is the Task Force on Climate-Related Financial Disclosure (TCFD), which has developed guidelines for how companies should disclose their exposure to climate risk.
The TCFD, which is chaired by billionaire Michael Bloomberg, has been cited by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority as an appropriate framework through which to measure and report climate risk.
ASIC, APRA and the Reserve Bank of Australia have all sounded warning notes about climate risk, with ASIC earlier this month writing climate risk into its regulatory guidelines for the first time.
The emergence of other voluntary initiatives such as Climate Action 100+, the Responsible Investment Association Australasia, the Investor Group on Climate Change and the Australian Sustainable Finance Initiative – which are supported by some of Australia’s biggest banks and financial institutions –have raised hopes the private sector is taking a lead in lieu of government action.
But none of these initiatives explicitly aim to reduce carbon emissions in line with what scientists say is needed to limit dangerous global warming.
Jonas Bengtsson, CEO of Edge Environment, a firm that advises companies on how they can reduce their carbon footprints, said the next 18 months would be a crucial time for businesses. He said many businesses’ emissions reduction policies would expire in 2020, meaning they would now be thinking about what would replace them.
“A lot of existing sustainability strategies were set at a time when key technologies and policies were in their infancy, and the urgency wasn’t quite there yet. The landscape today is different: while it was previously considered a risk to set ambitions that were undeliverable, now it’s more about failing to go far enough,” he said.
He said 51 per cent of the ASX 100 companies do not have carbon targets, and 76 per cent do not have a plan for reducing emissions.
“The useful coincidence we have is that many current corporate sustainability strategies mature in 2020 – from Westpac and Brambles to Stockland and Woolworths – meaning Australian companies have a golden opportunity to ensure that the next generation of strategies are truly transformational,” he said.
“While the policy context in Australia hasn’t been helpful up to now, momentum is clearly growing, and there is lots of scope for bold action that will deliver a stronger economy.
“The question I’d like to put to CEOs and boards is: will your beyond-2020 strategy be designed to safeguard the future of the planet, and your company?”
One of Edge Environment’s clients is Australia’s second biggest telco Optus, a subsidiary of Singaporean telco Singtel. Singtel is one of the 232 companies to have its targets approved by the Science Based Targets Initiative. It has committed to reduce its scope 1, 2 and 3 emissions 40 per cent on 2015 levels by 2030.
Andrew Buay, vice president for group sustainability at Optus and Singtel, said customers and stakeholders were increasingly demanding the company explain what they were doing to transition to a low-carbon business model.
“We are now setting a new ambition and revising our strategy to achieve net zero by 2050 to be in line with a 1.5C scenario,” he said.
The 13 Australian companies currently signed up to the Science Based Targets Initiative include Origin Energy, Investa, Frasers Property, Dexus, Edge Environment (all of which have set targets); Westpac and Mahindra Automotive.