Global warming and resultant climate change is becoming more prominent in our daily lives. With record heat waves in Australia, floods across Western Europe and blizzards across North America simultaneously, it is clear that “the times they are a changing”. In reality none of these events can be directly linked to climate change and carbon emissions. What is clear however is that these events are becoming more frequent and with more intensity than ever before. On the balance of evidence, we are starting to see climatic events directly linked to man-made carbon emissions.
Large corporates have recognised the time to act and are making significant strides in reducing their emissions. Due to the enormity and scale of the problem, one must ask the question however whether carbon measurement, management and reduction have any relevance to small and medium enterprises? These companies are already under significant pressure with a slowing economy, weakening Rand and a legislative framework not conducive to good business. Should they care about their carbon emissions?
The short answer to this very simple question is a resounding YES and this is why….
Energy drives the economy and in South Africa, thanks to our friends at Eskom, we have some of the dirtiest energy on the planet. To create this energy, Eskom burns coal which produces carbon emissions which cause climate change. From a carbon accounting perspective, these emissions are associated with the user of the energy, namely your business.
More importantly, we are operating in an energy constrained environment. There is simply not enough to go around. Where there is limited supply, the price will rise and that is what is happening with energy. Rates will continue to rise significantly for the foreseeable future.
Understanding ones energy use, and associated emissions is an important first step in coming up with a plan to start reducing. For the small and medium enterprise this is often a significant bottom line cost so being prudent around energy consumption is paramount.
International trade tariffs
These have been mooted for some time now but expect to start to see these in the next 3 to 5 years. And don’t wait to do something when they arrive as it will be too late. If you rely on export business you will simply become non-competitive.
The basic premise is that dirty goods with high carbon intensity will attract higher cross border tariffs than goods that are less carbon intensive. Unfortunately, due to the dirty nature of our energy, our manufacturing sector is not well positioned globally when it comes to the carbon intensity of our goods.
The result, start becoming energy efficient now as it will pay off in the long run. Renewables should also be thoroughly investigated to lower both your operating costs and carbon intensity.
As discussed above, big business has embraced sustainability in a significant way. They simply have no choice in the fight to remain competitive. As a result we are seeing an increasingly growing trend within their procurement practices to request environmental and carbon metrics from their supply chain.
Classically this can be likened to BEE from a procurement perspective. The ‘greener’ you are, the more likely you are to get that contract. The weighting of these metrics certainly vary from company to company but sustainability and the low carbon economy is here to stay and the prudent business leader will hop on the bus now rather than being too late.
What about carbon tax?
Carbon tax is the big unknown at the stage and the government’s white paper on the subject did not bring much clarity to their intentions. What we do know is that currently carbon tax is mooted to begin in January 2016. The intention is to tax emissions at R120 per tonne. A 60% threshold has been proposed which will make the effective rate R48 per tonne. What is uncertain is whether this tax will apply to small business or not. The chances are that a minimum threshold will be set for the tax and this will be fairly large in its first iteration. So this is probably good news for the small enterprise on this front but the holiday won’t last forever.
Failing to act brings with it risk. It is really as simple as that. The Y generation are far more environmentally conscious than the generations before and will weed out those organisations perceived to be harmful to the environment.
One must also guard against ‘green washing’. Strategic plans to reduce emissions and hence costs should be part of the boardroom agenda in every business, irrespective of size. Embracing sustainability has risen up the corporate agenda rapidly and integrated reporting is now mandated.
In simple terms, small and medium enterprises must follow this lead and adapt or die. Understand you emissions and where you can reduce, do not ignore that elephant in the corner any longer.