In April 2016 over 170 countries came together in New York City to sign the historic Paris Climate Change Agreement. It was a significant moment – the largest ever signing ceremony for an international treaty – and commits all countries that signed it (including Australia) to reducing carbon emissions to help limit global average temperature rise to 1.5 – 2.0 oC.
Australia now has to put a plan in place for getting to net zero emissions before 2050. This is going require a very significant structural change as the economy adjusts to a low carbon future. This scale of the emissions reductions that will be required to achieve the Paris targets cannot be achieved by the Federal Government alone, business must also help drive down carbon emissions in the economy.
CEOs and business owners must see climate change as a business challenge and an opportunity. Firms that ignore climate change issues run the risk that things like transport and energy costs increase and that their products and services become obsolete. On the other hand, firms that see climate change as an opportunity can cut operational costs and get ahead of the competition by developing new and innovation low carbon products and services. There is an increasing awareness of climate change in the broader community and increasingly consumers are looking to purchase environmentally sustainable products and services. Ultimately firms that take action on climate change will enhance their reputation, while those who do not run the risk of losing out to competitors.
All firms must now develop a Climate Change Strategy to ensure their survival and success in a carbon constrained world. The essential first steps in developing a climate change strategy are:
1. Understand your exposure to the climate change issue. You should assess your carbon footprint and the impact of a low carbon market transition on your products and services. The carbon footprint must be comprehensive and analyse carbon emissions throughout the supply chain. This is a critical analysis for anticipating a firm’s vulnerability to climate change regulations and market shifts that may result.
2. Take action to reduce carbon emissions across the entire value change. Many of these opportunities will lead to cost savings by driving out waste and inefficiency. Early action will be a tangible demonstration to your staff and customers that you are serious about doing something about climate change If you take early action you have the opportunity to get ahead of your competitors.
3. Embrace change – Develop new low carbon business models, products and services to drive success in a market that is facing significant disputation as old ways of doing business are no longer viable and products and services are becoming obsolete. Identify how the challenge of climate change can drive innovation in your business.
In a future blog we will discuss how you can measure your carbon emissions from your own business operations, supply chain and products and services.