SA corporates should prepare to cut carbon emissions

Business in South Africa is set to enter a new era – the mandatory cutting of carbon emissions as South Africa joins other countries in combating global warming.

The Kyoto Protocol is being renegotiated and South Africa, along with other developing countries such as China, Brazil and Mexico, is being targeted to cut its emissions. South Africa is one of the world’s largest emitters of greenhouse gases (GHGs) relative to the size of its population and economy. South Africa is not currently subject to mandatory emissions reduction in terms of the Protocol.

According to a new report released today by the South African Institute of Chartered Accountants (SAICA), a significant contribution to emissions savings will be expected by South Africa in the next few years. The report notes that local climate change laws could be implemented by 2012.

The report, The Reporting and Assurance of Greenhouse Gas Emissions in South Africa, outlines South Africa’s current position and what lies ahead for businesses. Africa has been identified as one of the continents that is most vulnerable to the affects of climate change, with all of its major economic sectors facing huge impacts.

The report is based on a similar publication issued by the Institute of Chartered Accountants in Australia and is written in conjunction with Ernest and Young South Africa.

The potential financial implications of climate change on organisations is receiving increasing attention both locally and internationally. However, says, Graham Terry, Head of the Office of the Executive President at SAICA, there is still insufficient focus on sustainable business in South Africa. "It’s a non-negotiable imperative for all organisations. It profoundly impacts on the world economy and is one of the biggest issues facing organisations across the globe," he says.

Research has shown that many of the top 40 listed companies in South Africa do not set definite climate change-related targets and do not incorporate climate change into their investment decisions.

In a global context, The Corporate Climate Change Communication Report (Corporate Register 2008) examined the climate change disclosures among the FT500 companies. It found that 335 (67%) of the top 500 publish corporate social responsibility reports, of which:

• 65% included a specific climate change section;
• 41% addressed climate change in the CFO/Chairman’s introduction;
• 16% outlined where management responsibility for climate change issues lies;
• 78% of reports disclosed quantitative emissions data;
• 63% of reports were aligned with the GHG Protocol that is used to calculate and report emissions;
• Mitigation measures reported were: energy efficiency (74%), renewable energy (46%), transport initiatives (35%) and emissions trading (34%);
• 37% of reports set out specific, measurable, time-scaled targets to reduce emissions, while 14% included broader objectives; and
• 7% of reports included assurance statements specifically covering climate change, over and above general assurance of the full report.

Twelve of the FT500 companies are located in Africa and of these only five produced sustainability reports during the study period. Of all the companies investigated in the survey, the reports from Africa contained the least climate change information and disclosures.

The SAICA report emphasises how imperative it is that organisations and professionals reporting on and verifying GHG emissions understand all aspects of emissions management, including how an organisation identifies and measures its own emissions.

"In addition, assurance teams involved in GHG emission projects need to be multi-disciplinary and comprise not only of auditing professionals, but also individuals with environmental or engineering experience."

SAICA will shortly publish a book entitled GREEN – Why corporate leaders need to embrace sustainability to ensure future profitability. SAICA will also establish a sustainability website designed as an information source for members and the public on broad sustainability issues and current reporting and assurance guidelines.