The Climate opportunity

The past ten years have seen climate change explode on to the global agenda and, riding in its wake, a new order of regulations, legislation and compliance measures to which companies must adhere. Tightening regulations in energy efficiency, building and vehicle emission standards, waste regulations and greenhouse gas (GHG) reporting are all imminent.

Measures will be set out in a Policy White Paper on Climate Change, to be released by government in 2010, with the translation of this policy into a legislative, regulatory and fiscal package by 2012. For companies that generate large quantities of GHGs or purchase large amounts of energy, climate change regulation is a significant issue that is likely to affect future costs. But climate change regulation is not just about GHG emissions and energy use; it has considerable implications for international trade, agriculture, transportation, tourism and other areas. If we continue to grow without carbon constraint, South Africa faces the threat of border tax adjustments or trade sanctions from key trading partners, and the eradication of thousands of jobs in the high emitting trade exposed sectors.

Climate change is a mega-trend, and the momentum created by the upcoming climate change negotiations could enable climate-compatible development in important sectors. To capture each opportunity will take continued strong domestic policy action, which builds on recent progress to build institutional capacity (integrated with current development priorities and taking into account existing barriers to development), support for the private sector’s role in the financing and operating infrastructure, and international support.

The climate change negotiations could offer unprecedented opportunities for Africa to strengthen its adaptive capacity and to move towards low-carbon economic development in a way that will use its comparative advantages (e.g. forests, hydro and solar power potential and land) to attract investment from the private sector and benefit the continent’s nations.

Targeted adoptation measures related to irrigation, drought resistant agricultural techniques and health systems, could draw new attention and incremental funding, while Africa’s comparatively low cost mitigation potential – mainly in land use and forestry – could give the region a strong position in a global climate change deal focused on emission reductions (land use and forestry are currently excluded from the CDM and it is hoped that the Copenhagen talks will address this), and avoid the 36% forecast emissions growth from under a business-as-usual scenario.

And, Africa’s development could avoid the lock-in of a high carbon infrastructure, and realise climate-compatible growth opportunities that would both keep emissions low and offer substantial additional benefits, including energy security, rural income opportunities, protection of biodiversity, lower pollution, reduced migration and potential for conflict. The prospects to explore new areas of business that have arisen out of the climate change challenge have therefore, never been greater.
If companies are not yet convinced that climate change requires a focused and tactical approach, then ponder this: investors are beginning to evaluate corporations on the basis of their preparedness for associated risks and opportunities related to climate change. Every day, more and more money is flowing towards companies that are demonstrating an understanding of how climate change is impacting their businesses and are implementing actions to thrive in the new, carbon-constrained global economy. They are limiting their carbon exposure, maximising energy use and evaluating products and supply chain impacts – and they’re out-competing their dawdling peers in the increasingly competitive market for capital and consumer revenue.

KPMG applauds the companies participating in the CDPs that have started this process. Facing up to the immense challenges, and responding positively to them can only build better, more resilient businesses, and we are proud to be associated with all those that are laying the foundation for positive action.

Shireen Naidoo, BSc, is a Partner: Sustainability Services at KPMG, and a member of the judges’ panel of the ACCA Sustainability Reporting Awards in SA.