ROGER HISLOP: Time has run out for ESG smoke and mirrors

The UN Environment Programme’s Emissions Gap Report 2022 shows that since COP26 the commitments by various countries to nationally determined contributions have not materialised. Those few that have will barely affect the temperatures forecast for the end of the century.

The goal is to limit global warming to 1.5°C, but the predictions point to a 2.8°C increase. To get back on track annual greenhouse gas emissions have to be cut by 45% between now and 2030, and will have to keep falling. For this to happen the task cannot be left in governments’ hands; businesses should step in and play their part.

The urgency to do something real, and do it now, is no longer a debate anywhere but on the political fringes. Every day news headlines talk of burning heatwaves, killer cold snaps, devastating floods and crippling droughts.

The effect of environmental, social & governance (ESG) strategies in corporates is under the spotlight. It was the thing to do a few years ago — launch some extravagant ESG programme to great fanfare. But a malaise has set in. Commitments waver and cynicism has taken root due to greenwashing and scamming.

The 2022 KPMG CEO Outlook Survey has revealed that ESG has fallen as a top operational priority for nearly 70% of global executives. In SA, 10% of CEOs have stated that scepticism about greenwashing is their top challenge in communicating ESG performance to stakeholders. This is worsened by most countries not having laws or guidelines against greenwashing.

Wanting to capitalise on ESG investments and appeal to the growing sustainably conscious consumer, businesses greenwash because it is easier to appear to do something than to really do it. Greenwashing is done through tactics such as claiming to be net-zero or carbon neutral, which can be ambiguous at best.

Wishful thinking

A popular practice is “offsetting” carbon — in which a company emits carbon into the atmosphere and offsets it by planting or protecting trees, which remove carbon from the air. To describe carbon offsets as a smokescreen would be droll, but largely accurate.

Internationally, governments are taking notice. The US Securities & Exchange Commission has set up a task group to tackle corporate greenwashing, while the UK’s Competition & Markets Authority aims to prosecute companies that cross the greenwashing line. Many companies are sincere in their efforts but are perhaps engaging in some wishful thinking, hence the new term “greenwishing”. 

It is essential that the SA government institutes regulations and guidelines to ensure businesses are making good on their net-zero or zero carbon pledges; that mandatory annual progress reporting is in place; and that emitters are open to public scrutiny. We no longer have the luxury of kicking the carbon can down the road.

Aside from buy-in from institutional investors that are slowly making good on their commitments to favour zero-carbon companies, activist consumers are increasingly voting with their wallets,

Many companies did not take energy efficiency seriously because it was difficult, there were few consequences to waste, and they were still making money. Now that times are tough, the imperative to engage with energy management has become a business necessity. Big companies have started to establish full-time C-level roles to manage energy efficiency, reduce energy consumption and lead decarbonisation efforts.

Time-consuming

Additionally, ESG reporting requirements are becoming more codified and more mandatory. Energy efficiency and decarbonisation requirements, driven primarily out of the EU, are being adopted globally. In SA, energy performance certificates (EPCs) for commercial property owners are finally coming into play. By 2025 building owners will risk a fine of R5m, five years imprisonment or both unless they obtain and display the EPC.

As getting these certificates can be time-consuming, property owners should start sooner rather than later to get energy efficiency audits done (or better, energy management systems that automatically spit out the data needed for an EPC) by the time it is officially implemented. There is an inherent payoff to having an EPC — if you have a handle on the problem, you can do something about it.  

The quickest way to get a handle on energy consumption challenges is to engage with the problem practically. Implementing managed smart metering and automating electrical load management is the easiest way for businesses to do it. It helps them know exactly what needs to be changed at an operational level to reduce costs, improve energy resilience, improve business visibility and gather the right data. This data lets them plan how to tackle obvious waste, and set baselines, demonstrate improvements and show that they can meet their carbon reduction goals.

Technology has made it easier for businesses to reduce their energy consumption than it is for them to greenwash. Active energy management technology allows companies to save money while still being the good guy. Now, businesses can have their environmentally friendly cake and save it too.

• Hislop is an energy management systems executive at CBI, a subsidiary of JSE-listed industrial group Reunert.