"What matters to company directors?" asks Sarah Barker, Head of Climate Risk Governance at MinterEllison. Her gaze draws in the 70 sleepy faces who got up early on Thursday, 24 October for South Pole's Climate Leaders breakfast in Melbourne.
At 8 o'clock on a Thursday morning, most of the eyes she meets are peering up over their first cup of coffee, having not really taken in the question.
Focusing on the theme: 'Net Zero 2030 – Mitigation and Adaptation', the event brought together representatives from Australia's private, public and civil sectors to discuss how businesses, industries and individuals can work together to reach zero emissions in a way that is good for people, the planet and profits.
Sarah was joined by Rob Kelly, Program Manager at ClimateWorks Australia and South Pole's own Rhyannon Galea, Carbon & Renewables Portfolio Manager. Each speaker presented a unique climate challenge before the event broke into groups to workshop their challenges.
Now, back to the question: What do company directors care about?
"Making money!" Sarah proclaims, and the room visibly relaxes with a collective sigh –
that makes sense. She continues by articulating how climate change is affecting that very thing: making money, before posing another question, "What else matters to directors?"
The answer to this question is, "Not going to jail," and Sarah then elaborates on how directors' duties are expanding as the physical effects of climate change begin materialising.
Sarah's audience 'ahha' moment
This change is echoed in the legal opinion of Noel Hutley SC and Sebastian Hartford-Davis, given originally in 2016 and revised in 2019, which Sarah paraphrases as follows:
"Directors who fail to consider 'climate change risks' could be found liable for breaching their duty of care and diligence in the future…as with other material financial risks, [they] will be expected to:
- Skill up (with appropriate inquiry of independent experts where necessary)
- Develop and implement robust processes based on sound methodologies and assumptions.
- Assess and consider potential (direct and indirect) impacts of climate change on their corporation."
This means that in order to continue "making money and not going to jail", company directors must increasingly consider climate change.
Financial markets are now pricing climate risks – indicating "how to make money" – while Hutley and Hartford-Davis's opinion is being applied broadly in Australia, having been adopted by the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Reserve Bank of Australia (RBA).
Directors will therefore have to consider climate change as a part of fair asset valuation in order to "not go to jail".
Next up Rob Kelly, Program Manager at ClimateWorks Australia explores net-zero pathways for industry and business.
ClimateWorks 'Tracking Progress to net zero emissions' report reveals a net-zero emissions Australia is possible, but we are not on track. Don't worry, though: when net-zero targets are adopted at scale, the costs for the end user will be much more affordable than we are led to believe.
A net-zero emissions car would come at a premium of 1%, or about $180. When a metallic paint job for your petrol-guzzling European model can cost upwards of $2000, what's less than $200 to help save the planet?
What about net-zero air travel? This comes at a slightly higher consumer cost of about 10% because there are fewer available technological advances in low-carbon air travel. This aside, the overall cost to the economy of low-carbon will be a fraction of the damage bill otherwise incurred by climate change.
Rob Kelly, Program Manager at ClimateWorks Australia
The nexus of Sarah and Rob's topics is this: if we do nothing to mitigate global warming, we are headed for a 4ºC world complete with cascading physical risks. Climate change will affect communities around the world – the vulnerable first, with advanced economies like Australia's to follow.
If we plan well and build resilience to keep the average global temperature rise well below 2ºC, then advanced economies – that can afford to – will initially face challenging transition risks. But the cost of this is nothing compared to the price of "business as usual" for all of us later on.
This is something that our final speaker's generation knows all too well.
Young climate leader, South Pole's own Rhyannon Galea, gives an impassioned appraisal of how the youth of today will experience the climate of tomorrow. She begins with a heart-wrenching comparison of the optimism that the baby boomer generation grew up with...
Australia, a land of ever-growing opportunity. New technologies, boundless job prospects, affordable houses, big families. A time of optimism and promise for what is to come."
...versus the reality faced by those born from 1990:
Climate pessimism is ingrained in today's younger generation, even when making decisions about their own lives. Discussions about having children are often met with, 'I'm not sure what kind of world I would be bringing them into'. Dreams of the life we want are replaced with conversations about how we should be living: apartments, public transport, fewer children, conscious consumption.
Rhyannon's generation is taught to be scared of the future. Older generations know what's wrong and getting worse, so we educate the next generation about it – they grow up with a smart phone in one hand, and concerns about an increasingly uncertain future in the other.
Rhyannon is exasperated by the political carbon football being kicked around at the moment while her future becomes increasingly compromised. Biodiversity loss and mass extinction, food insecurity and water shortages, land-use changes, inequitable social impacts and failing infrastructure requirements – these are no longer Orwellian dystopias: they are the millennial reality.
Despite mounting climate challenges, Rhyannon looks up with determination: carbon markets, innovation R&D and green funds are some of the tools we need to embrace to accelerate change and address not just carbon but the symptoms of climate change as well...
Rhyannon is asking corporates to:
- Look beyond your carbon ledger to evaluate impacts and risks
- Climate change is more than carbon in the atmosphere – address the experience of climate change in addition to your carbon footprint
- Understand that we are all affected by and influence the issue – if you are "carbon neutral" but environmentally damaging on other fronts, you need to reevaluate
- Go beyond the minimum – "carbon neutral" – and raise your ambition!
- Combat short-termism by setting longer term targets.
And at the individual level working within companies:
- Your biggest resource is your time & career. Use it!
- Bring 'climate morality' into measuring career success – put a 'Climate KPI' on yourself
- Find a role or change your role to make those considerations the norm
- By demonstrating climate leadership, you will inspire those around you to do so also
Each Climate Leaders event shakes up the usual 'speaker versus audience' format by separating into breakout groups to workshop solutions to speaker challenges.
This time, the workshop identified 'Pains' in the speakers' issues scaling up, before participants explored potential 'Gains' to rapidly deploy solutions:
Sarah's challenge: How do we scale / leverage corporate governance of climate risk management?
Rob's challenge: How do we accelerate decarbonisation in the industrial sector?
Rhyannon's challenge: How do we go further than treating climate change as just a carbon (CO2e) problem?
How does "making money and not going to jail" work in a changing climate?
Jail aside, company directors stand to make a lot more – and lose a lot less – if they stop kicking around the 'carbon football' and responsibly plan for a net-zero, climate-resilient future. To ensure long-term success, smart businesses must deploy low-carbon solutions now while exploring ways to mitigate the everyday symptoms of climate change that are affecting all Australians.
In other words: taking steps to mitigate emissions now and build a resilient tomorrow is the easiest way for company directors to make money and win over millennials – and they won't even have to try not to go to jail!
Thank you to everyone who joined us for the Melbourne Climate Leaders breakfast! Connect with our Climate Leaders to keep the conversation going:
- Sarah Barker on 'Corporate governance & climate change: what you need to know today for a net zero tomorrow'
- Rob Kelly on 'Net zero emissions pathways for industry and business'em>
- Rhyannon Galea on 'How do we go further than treating climate change as just carbon?'
Are you and your company looking to take the next step on your climate action journey? South Pole is the world's leading developer of climate action projects, and we can help you every step of the way! Reach out to Jay to connect over coffee or organise an internal learning session with South Pole and your team.
Host: Jay van Rijn with speakers Rhyannon, Rob and Sarah (right to left)