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2024’s challenges in dealing with climate change and ESG issues

15 January 2024

Distillation of opinions from Macks Advisory’s resources, reveals the extent to which governments and industry can achieve essential coordination in dealing with climate change.

 This coordination could be significant for many Australian businesses in 2024, along with environment, social and governance (ESG) issues.

 Business owners must deal with the reality Australia has a mere six years to achieve the federal government’s aim of a 43% reduction in baseline emissions. And they care little for what they see as irrelevant, on-going argument about the cause of the current media tagged “climate crisis”.

 Whether it’s occurred naturally -- as climate crises always have -- or whether humans are now a primary cause of the latest run of climatic disasters from which it’s said the world may not recover, is not their major immediate concern.

 Businesspeople want to know now what major reforms in the economy the government is willing to undertake to enable their businesses to fulfil sustainable potential in the current crisis. Some of these needed reforms have been canvassed in our previous newsletters, but it’s only when they eventuate that the private sector can be expected to do its part in reaching the desired 43% reduction in emissions by 2030.

 See later for more about previously referred to ESG issues.

 Opportunities in reducing emissions

 Clearly there are opportunities as part of an emissions reduction campaign to make better use of land in our forestry and timber sector, both from the perspective of carbon storage, and among industries the sector helps underpin.

 As well as boosting sovereign capability, scaling up a sustainable plantation timber industry would give certainty of supply for a broad range of businesses involved with housing and construction, packaging, and production of paper products -- businesses that have suffered savagely in the past few years because of disrupted supply chains.

 The need to achieve massive decarbonisation nationally and do it quickly across all sectors, presents unprecedented opportunities for industries to benefit from coordination.

 For instance, industries where emissions are hard to abate, need to be considering large scale investment in areas like intermodal transport.  Such coordination among industries could see them shifting -- as a means of lowering a business’s emissions and as logistics allow -- their heavy use of transport, between road, rail, and sea.

 Our informants among large retailers and manufacturers, tend towards expectation that in the immediate future, macroeconomic conditions will create a softer demand environment that will necessitate adjustments to inventory levels, particularly for discretionary items.

 Accordingly, there’ll be a lessening need among businesses for transportation of goods and products, and that will present opportunities for coordination in the use of space on fewer transport vehicles.

 Furthering the case for coordination

 Major polluters acknowledge a need to reduce emissions and they have individual targets for reduction, conceding neither government nor industries can achieve a significant result alone. Thus, they see coordination as being critical to success.

 The federal government must undertake sensible infrastructure investment, ensure transition to a lower carbon energy mix that will support the whole economy, and have the right policy settings in place to encourage businesses’ willingness to decarbonise.

 The private sector’s obligation is to use advanced computer technology (AI for example), to help build predictive capabilities that optimise a business’s potential, detect anomalies in its operation, and identify inefficiencies.  In this way duplication and misdirection can be avoided, emissions reduced, customers benefitted, and operators provided with a much better view of the business’s asset pool.

 Then there are previously mentioned (ESG) issues needing to be confronted together with a business’s emission problems. These ESG issues are often highlighted by news media when investors suffer sudden and substantial losses on listed equities.   

 Business operators should understand that ESG goes beyond environmental matters like climate change and resource scarcity, and encompasses all non-financial topics not typically captured by traditional financial reporting. Environmental standards include a company’s use of energy resources, policies on waste management, and its impact and efforts towards net-zero emission and climate change

 It’s a matter of balance

 Accommodating ESG issues boils down to striking a balance between investor, customer and other stakeholder group needs, and there’s a growing awareness among business owners that these should be considered not just independently but in an integrated way, each in relation to the other.

 Unless you’re a business owner aware that each of these groups has a growing appreciation of each other’s presence – for example that investors have become increasingly concerned with a business’s treatment of customers and employees increasingly interested in people’s perception of the company where they work – then you could be heading for trouble.

 For many businesses to be sustainable these days they must look beyond the needs or one group of stakeholders, or one of the elements of ESG.

 Your business may score well on environmental practices but lose credibility by failing to meet perceived social obligations.

 As for the “G” part of ESG, there is an increasing and critical expectation among stakeholders in businesses, that governance must be ever more proactive and accountable for poor performance in “G” that has led to shortcomings in either “E” or “S”.

 Working from home

 It’s not for Macks Advisory to advise you on whether a working at home policy is more or less likely to enable your business to meet challenges of climate change, deal satisfactorily with ESG issues, or function more efficiently in all respects. But perhaps we can usefully report on what seems to work well in many businesses.

 These are businesses where executives aim to provide flexibility for employees to arrive at a point where both can prioritise mutually, how, rather where, work can be done in everyone’s best interests.

 The days and number of days when employees can most effectively work in an office depends on the nature of a business, the function of the team in which employees work, and often geography, but in Australia it’s been found generally that two to three days office work each week by employees results in a balance that results in optimum satisfaction for both businesses and workers.

 There is growing acceptance that the role of offices has changed, that they’ve become more of meeting place for employee collaboration and productive interaction rather than places of regulated supervision – and there’ll need to be plenty of collaboration in and among businesses in dealing with the unavoidable challenges of climate change and ESG issues.  

Disclaimer: The information contained in this webpage is general information and does not constitute legal advice. Nothing in this webpage is or purports to be advice. If you do need advice, then you ought to seek and obtain appropriate personal professional advice based on your personal circumstance.

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