Making a start on your carbon reduction plan

What are the implications of the IPCC for New Zealand businesses?

The sixth assessment of the International Panel of Climate (IPCC) change, released in August this year, put any conjecture to bed. We are in a climate emergency. Climate change is irrefutably caused by human activity and we will need to respond with immediate, rapid and large-scale reductions in greenhouse gas emissions to limit warming to 1.5°C.

We all have an obligation to respond.  Businesses must be prepared and adaptable to change. These changes will be seen in the environment itself and will impact production, supply chains, but also rapid changes in consumer preferences and habits.

We are regularly approached by businesses wanting to know where to start and what they can do to take the most meaningful steps to reducing their carbon footprint.

The following is a list of the most frequently asked questions directors of small and medium sized businesses are asking us.

Should I worry more about legislation and climate compliance costs in my future business model now that the report is out? 

If you’re a listed company or you have over $1b insured, fund managed or invested, then you will already know that the External Reporting Board (XRB) will require emissions and climate risk reporting on your portfolio from 2022. The IPCC report will support the government in implementing the 13 April Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations into law with even more urgency.

For the rest of us, this is a precursor of what we can expect to trickle down into most businesses over the next few years.

Just as health and safety became an important item to measure and report on at a director level during the early 2000s, climate and other ESG reporting is going through the same escalation of importance right now.

Regardless of legislative requirements, we also have a moral obligation to take action, and need to budget for sustainability improvements moving forward. 

I don’t know my emissions. Am I exposed? 

Yes. And not just from potential legislation.

Customers are rapidly shifting spending to more sustainable businesses and products, so if you haven’t made sufficient efforts to address and mitigate your carbon output, your competitors will increasingly have an edge. This is a significant risk if your key markets include Millennials and Generation Z.

Staff attrition is also a very real risk. The same group increasingly want to work for organisations with a strong ESG focus. 

How do I determine my footprint?

There are simple, free calculator tools available online that are easy to find including on business.govt.nz  and CarbonClick websites.

For more comprehensive tools and guidance, there are excellent consultants we recommend in New Zealand who can measure and analyse your footprint in great detail.  

Working from home is helping reduce our footprint, isn’t it?

Working from home has had a profound impact on reducing transport emissions, with other benefits including more time available for work or families which would have been otherwise consumed during the commute.

However, in some extreme cases, we’ve seen higher emissions as a result of people working from home. An example would be heating houses for individuals working from home vs the efficiencies obtained in heating an office with staff.

It’s important to understand what component of the work-from-home carbon footprint needs to be added back to the company emissions. You can deduct the normal commuting emissions from this.

We recommend providing a calculator tool for your team to understand their footprint and how to reduce it. A good tool can report on this work-related component across your team's footprint. 

Can we simply buy any old carbon offsets to become carbon neutral and continue with business as usual?

We don’t see carbon offset as a one-size-fits-all solution. Carbon offsets are a complex world, and they need to compliment a carbon reduction strategy.

First, your consumers and staff will increasingly expect a reduction strategy.

Second, the quality of offsets is variable. Some schemes carry very few co-benefits like biodiversity and social impact. In fact, some offsets even have questionable additionality, meaning we don’t believe some projects will make a long term difference to climate change or our planet's restoration.

We’ve seen Microsoft’s pine forests go up in smoke in the recent US wildfires, and that’s a risk with certain crops - particularly monoculture ones. However, some offset projects are incredibly well balanced with significant improvements seen in local ecosystems, communities and the planet. Seek them out and tell their stories to your staff and customers. The Waikene Native Forest project in Kaikoura is one that many Kiwi’s love. 

Am I expected to go out and replace our car fleet with electric vehicles (EVs)? 

It’s important to note that while EVs save a large amount of emissions over their lifetime, there is a larger carbon footprint to produce the cars.

You want to be sure you can fully capitalise on the climate saving capabilities EVs have as well as being financially sensible, considering the higher cost.

The return on investment can be significant though. Personally, my emissions have reduced by 28% total emissions (including production) since I purchased my EV. As a rule of thumb in New Zealand, if you travel over 30,000km in an EV, you’ll safely make up for the additional production emissions, and be into climate-saving territory.

Given the average 10-year life expectancy of an EV, this should make the business case for a shift a no-brainer.  But there are a few considerations to build into your calculations:

1. Where the EV is manufactured makes a difference. For vehicles manufactured in China, the production emissions are around 30% higher due mainly to the energy supply being predominantly coal based. 
2. Where you’re charging your EV from makes a difference. In New Zealand we produce 75-85% clean energy (if lake levels are stable), which usually makes an EV a viable option, and while you could debate the need to consider cleaner energy in South Island vs North Island, and transmission losses by the time energy reaches places like Kaitaia, it’s more a case of whether you have a fleet in Australia or the US, where the emissions factor per KWh is much higher due to more coal generation.
3. When you charge your EV makes a big difference. If you’re charging during peak time, you’re likely using more electricity generated from fossil fuel / gas in the first instance. If you charge overnight, you are more likely to be using renewable energy which has a very low carbon footprint.

One mistake we see is the lack of a simple, practical high level plan for carbon reduction.  Rushed purchasing of EVs for the fleet or jumping into a deep audit process can be costly and to the detriment of more meaningful reductions. We recommend first looking at where you can invest to achieve the biggest emissions drop per dollar spent.

Make sure you engage staff on your sustainability journey too. They’ll be a core part of delivering on your carbon strategy. With their buy-in, new initiatives are more likely to be deployed successfully.

We value people, and the ability to get out and meet in person. Is this way of doing business under threat?

Yes it is.

Covid-19 has unlocked the new normal for business. Meetings online are embedded in business practice and we’re seeing many businesses actively employing a mix of in-person meetings for significant business dealings and videoconferencing to replace some in-person meetings as a way to actively reduce transport emissions.

We’ve worked with businesses which have seen emissions reductions by as much as two thirds employing a hybrid meting strategy.

Am I too late to begin a carbon reduction scheme?

No, but if you are slow to take action or you claim greener credentials than you have in reality, you risk being identified publicly or called out for greenwashing and we are increasingly seeing consumers question businesses’ commitments and calling out those which fail to meet increasingly high expectations. 

The good news is if you start now, communicate honestly about the journey you’re embarking on and the steps you’ve taken so far – even if these are still small steps – staff and customers typically respond positively. 

If you are doing great things, and can tell the story, you’ll engage your customers, and they will respond with increased loyalty and support - building genuine long term brand value. 

About the author

David Rouse MInstD is an award winning entrepreneur and philanthropist and CEO of CarbonClick. CarbonClick empowers businesses and their customers to tackle climate change by making carbon offsets simple, trustworthy and cost effective. 

The views expressed in this article do not reflect the position of the IoD unless explicitly stated.