The uncertainty around national climate change policy, regulations and timelines was negatively impacting on South African companies' response to climate change, said consultancy firm Ernst and Young (E&Y) on Thursday, after conducting a survey on the matter.
In a report, ‘Action amid uncertainty - the South African business response to climate change', E&Y said that all survey participants stated that national policies were crucial to guiding and shaping the company's climate change strategy and policy.
The South African Department of Environmental Affairs has stated that it would release the country's draft climate change policy by July 2010, after which a White Paper would be produced by the end of the year, with the ambition of getting the White Paper ratified by Cabinet in early 2011, to make it legally binding.
There was also uncertainty regarding climate change in the international arena, with no legally binding agreement having been reached at the global negotiations in Copenhagen in December 2009.
E&Y Climate Change and Sustainability Services associate director Jayne Mammatt said that regulation and policy were required to "focus the mind", and could also assist when trying to justify an investment in clean technology or climate change strategy to the board of a company.
E&Y also recommended that business engage with government in order to understand future goals and strategy of the country, as well as engaging with other businesses to leverage cost-saving initiatives in the energy sector particularly.
Despite recent challenging economic conditions and regulatory uncertainty, the E&Y report found that global executives said that the climate change agenda would significantly affect business performance and strategy over the next few years.
The survey found that 80% of the South African companies surveyed planned on increasing spending on climate change initiatives between 2010 and 2012.
"Although corporate leaders are aware of the risks and potential opportunities that climate change may have on their organisations, only 10% are likely to spend more than 5% of revenue on climate change initiatives, indicating that there is still some uncertainty on how to mitigate climate change related risks," said Mammat.
Energy efficiency was still the key driver for many organisational activities including expenditure, as all organisations selected energy costs as the motivating factor for driving climate change activities, while 90% stated that future investment would be in energy-efficient initiatives.
SUPPLY CHAIN CONCERNS
Greening the supply chain, as well as product innovation, or redesign, were highlighted as critical areas within organisations that still needed to be effectively addressed.
"There appears to be very limited engagement with the supply chain on climate change issues, yet 80% of respondents identify the supply chain and procurement areas as key for the organisation's climate change initiatives to succeed," noted Mammatt.
She added that the lack of focus in these areas could minimise the impact of climate change initiatives, as well as see potential revenue generation opportunities arising from operational excellence or product innovation, slipping away.
In the survey, companies noted that sources of supply for cost-effective environmental products were few, or unknown.
Another challenge that was highlighted, was that supply-chain buy-in was not a simple process, particularly when considering the potential extent of the supply chain, and because the lack of control makes implementation difficult.
E&Y Climate Change and Sustainability Services manager Loshni Naidoo emphasised that effective engagement with supply-chain stakeholders would ensure results.
The survey highlighted a number of other findings and challenges and made certain recommendations on how to overcome these challenges in the South African context.
The report was informed by the responses from ten South African companies, which were extracted from an independent, third- party survey of 300 global corporate executives from 16 countries, representing companies with revenues of more than $1-billion in yearly revenue.