South African business response

In November 2008 I spoke at the launch of the second round of the South African contribution to the Carbon Disclosure Project (CDP). We found that the businesses that contributed to the project have recognized that climate change and its impacts are the biggest environmental challenges we are facing in this century, and they have decided to be part of a collective response. They understand that it would not be economically, environmentally or politically sustainable for South Africa to continue to increase our emissions along a business-as-usual path.

To tackle the challenges ahead, definitive leadership within both the public and private sectors will be required, particularly given competing social and economic priorities, comparatively high per capita GHG emissions and high vulnerability to the impacts of climate change.

This second CDP survey found encouraging evidence that South African companies are beginning to appreciate and respond meaningfully to this challenge:

• This year, the CDP was extended to include the top 100 companies on the Johannesburg Stock Exchange (JSE). This means that the sample size more than doubled since last year's report, which only included the JSE top 40.

• South Africa's second CDP generated a response rate of 59 per cent.

• There has been a sizeable increase in the number of companies disclosing their GHG emissions. More than 75 per cent of responding companies disclosed their GHG emissions this year. While in several instances this disclosure is only on a partial basis, there is, nevertheless, an emerging commitment to improved monitoring and reporting on greenhouse gas emissions.

• In a significant change on last year's responses, there appears to be much greater awareness of, and engagement in, government policy on climate issues. This builds on the long-term mitigation scenarios process, which entailed the engagement of numerous senior executives across different sectors.

A collaborative approach to climate solutions is developing. Acknowledging that an escalating price on carbon will become part of the future business environment, several companies are beginning to work with government, stakeholders and industry peers on national policies relating to climate change. Notwithstanding these encouraging developments, there remains room for improvement:

• Relatively few companies (23 per cent) have disclosed specific company-wide GHG emissions reduction targets, and most of those companies that have emissions targets have focused on reducing their emissions intensity, rather than striving for a reduction in absolute emissions. If South Africa's emissions are to peak and then decline, companies will need to demonstrate a significantly higher level of ambition.

• On a related issue, while most responding companies have developed, or are implementing, formal systems for measuring and reporting on their GHG emissions, some important gaps remain in their governance systems for climate change, and in the nature and extent of executive board oversight on this issue.

• Carbon-intensive companies dominate South Africa's disclosed GHG emissions. The three largest GHG emitters (excluding ESKOM) - Sasol, BHP Billiton and Anglo American - account for two-thirds of the total reported GHG emissions of responding listed companies in South Africa.

• Electricity consumption constitutes 41 per cent of the total reported GHG emissions.

It is evident that South Africa's current electricity generation mix has a profound impact upon the majority of corporate emission levels. Although there have been some encouraging improvements since last year, there are still indications that mainstream South African investors do not fully appreciate the business implications of climate change, or that they are exerting meaningful influence on the corporate sector on this issue.

South Africa has remained sheltered from emission reduction targets under the Kyoto Protocol due to its status as a developing economy. As a result of this, our private sector has been slower than some of its counterparts in learning how it will be affected by climate change.

We need to be prepared as the future climate regime will see South Africa having to make a substantial deviation of its emissions trajectory below baseline - in a measurable, reportable and verifiable way.

It is hoped that climate change awareness through the CDP will facilitate appropriate decisions amongst those companies involved. New opportunities and incentives could emerge for those who are proactively positioning themselves to face the changing political and economic landscape in a carbon-constrained world.

Not only does proper tracking and reporting make business sense, but it is only when companies know their carbon footprint that they can properly plan to mitigate. It is also an indicator of good corporate governance, of accountability and of taking co-ownership for the future.

Government is determined to continue to take responsible action on climate change. I am therefore looking forward to working even more closely with business in building on the work of the LTMS and the CDP. It is only by working in partnership that we will be able to make the kind of progress that is required by the latest scientific findings on climate change. Responding early and decisively is the biggest contribution that business can make.

The National Business Initiative and Incite Sustainability, the authors and sponsors of the report and companies see that the CDP can help in unlocking new opportunities, creating new competitive advantages in new products, technologies and processes, and instigating a shift to greater efficiency in existing operations. It is vital that those companies that do not yet track, report and manage their emissions join these efforts. It will place them in a position to understand their future risks and vulnerabilities in a changing global and domestic business environment and to be prepared for an era in which mandatory reporting of GHG emissions will become part of the landscape.

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