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Climate change action is being driven by business and industry

While everyone’s focus in recent months has been on the COVID-19 pandemic, climate change was top of everyone’s mind when the year began with bushfires ravaging Australia. The pandemic has seen individuals and organisations assess their ideologies and perspectives on a range of topics, climate change being one of them. It now seems that climate change is back on everyone’s agenda and none more so than business and industry.

While everyone’s focus in recent months has been on the COVID-19 pandemic, climate change was top of everyone’s mind when the year began with bushfires ravaging Australia. The pandemic has seen individuals and organisations assess their ideologies and perspectives on a range of topics, climate change being one of them. It now seems that climate change is back on everyone’s agenda and none more so than business and industry.

 

Underpinning climate change policy is the 2015 Paris Agreement. The Paris Agreement had 195 signatory countries who pledged to limit global warming to ideally no more than 1.5 degrees Celsius above pre-industrial levels. With mining responsible for between 4 and 7% of  global greenhouse-gas emissions, achieving this target requires decarbonisation. This will result in a significant shift in demand for mining commodities and potential profits unless organisations and the industry changes.

 

BHP recently announced its support of the Paris Agreement and climate change approach. The company’s approach is focused on several areas including reducing operational greenhouse gas emissions, and managing climate-related risk and opportunity.

 

To achieve this BHP has set both long and short term goals. It goals including:

  • Achieving net zero operational emissions by 2050;
  • Maintaining operational emissions at or below 2017 levels by 2022, using carbon offsets if required;
  • Reducing operational greenhouse gas emissions by at least 30% from adjusted 2020 levels by 2030

It has also committed to contributing to decarbonisation of their value chain, strengthening the link between executive remuneration and delivery of their climate plan, and providing further insight into how BHP’s portfolio is transitioning to a 1.5°C scenario.

 

Fortescue Metals has also committed to achieve net zero operational emissions by 2040. It has also invested over US$800 million to reduce emissions from power generation by investigating opportunities to increase the use of renewable energy including solar generation and green hydrogen.

 

Some companies are starting to take the lead on initiatives that in turn ensure they can maintain production. For example, the Drayton mine in New South Wales improved evaporation monitoring to reduce water loss.

 

While companies are taking the lead, industry bodies also play an important role in climate change policy. In an acknowledgment of this, BHP has committed to work with industry associations to develop a protocol and plan for advocacy. Their intention here is to assist those associations to improve how they allocate resources and ensure the industry has a consistent and transparent voice on issues related to climate change.

 

The company has gone further by committing to publish material associations it is a member of that have an active position on climate policy and disclose those that materially depart from its global climate policy standards. 

 

While this is a promising move, the Investor Group on Climate Change (IGCC) is pushing to go further by streamlining climate change disclosures in Australia and New Zealand. Their proposed changes are based on the Task Force on Climate-Related Financial Disclosures (TCFD) framework. The TCFD is a coalition supported by over 300 investors and has recommended that companies disclose their transition risks of decarbonisation  to improve decision-making, risk assessment, portfolio management and engagement. The report advocates for disclosures in several areas including:

  • The skill and expertise of the board, directors and executives in climate change;
  • Links between risks and opportunities identified and the company’s strategic and organisational response; and
  • Reporting on both transition and physical risks, costs and implications.

The push for a consistent approach to climate change is also supported by the Australian Climate Roundtable - a group that includes not only business interests but environmental groups and unions. They’re concerned that without a clear approach to national targets and roadmaps, Australia will risk investment in favour of other economies. The CEO of the Business Council of Australia, Jennifer Westacott, has said that billions of dollars worth of investment as well as jobs and new industries could be created with a clear climate change policy.

 

The approach reflects changing community attitudes towards climate change. The industry has recognised that being on the front foot with climate change is good business.

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