Podcast transcript Episode 1
[0:00:00]
Music track starts
Guest (clip): If we recognise that decarbonisation is happening.
Guest (clip): You just have to start somewhere and see what’s practical and what’s feasible in terms of reductions.
Guest (clip): Directionally, we know that this is going to be a really big thing for businesses over the next ten years.
Guest (clip): It represents one of the fastest routes for us to decarbonise as a country.
Guest (clip): Potential cost benefit
Guest (clip): It’s really powerful. It can mean we all move incrementally forward together before 2050.
[0:00:27]
Taylor: Welcome to the Net Zero Path for Business, a podcast delving into the process of transitioning to renewable energy and emissions reduction from the very beginning. It’s a show where we explore ways to not just survive but thrive as a business along the way.
I’m your host, Taylor Hawkins, and I’ll be bringing together industry advisors, experts, and businesses as we explore things like switching to EVs and the practicalities of going solar.
Join me as I ask our guests to share their stories of transition and the strategies that have helped them on their way. We’re presented by AGL, inviting you to join the change.
Taylor: As we dive into talking about our future ambitions for net zero, I would first like to acknowledge the leadership, knowledge and resilience of the Aboriginal and Torres Strait Islander peoples who have safeguarded the sacred lands and waters of this country, that we know as Australia, for thousands of years. May we strive to honour, learn from, and meaningfully partner with leaders of such calibre.
Taylor: Welcome to our very first episode of the Net Zero Path for Business. Today, I thought the best place to begin is the end goal: net zero. What does the path there look like, and why should you care? Net zero essentially means cutting greenhouse gas emissions to as low as possible before then finding other ways to absorb or remove CO2 from the atmosphere.
It’s what we need to do to mitigate the effects of climate change. Australia currently plans to reach it by 2050, in line with the International Treaty on Climate Change, the Paris Agreement. But there are certainly businesses out there taking a more urgent approach and setting their sights higher.
So with everchanging inflation, decreasing budgets, and all the other problems your business faces every day, why should you worry about decarbonisation too?
Of course it’s better for the planet and our future, but there are also many other benefits to consider.
Taylor: Today, I’ll be delving into all of those reasons to act with Franziska Curran from climate change advisory firm, Anthesis. We’ll discuss everything from net zero targets and what they entail to the new legislation coming in and why not to get left behind. Enjoy!
[0:02:43]
Taylor: Thanks for joining me as our very first guest on the Net Zero Path for Business, Franziska.
Franziska: Thanks so much, Taylor. It’s really nice to be here.
Taylor: First off, tell me a little bit about Anthesis and the work you do there.
Franziska: Sure. So, Anthesis is a global sustainability activator. We focus on guiding clients towards a decarbonised and more sustainable future.
But in Australia, you might have heard of us as NDVER Environmental, where we’ve been operating for around 13 years before we recently rebranded to Anthesis.
So with Anthesis in Australia, I focus on supporting large and complex clients who want to decarbonise across their supply chain to set credible net zero targets and help them to get there.
Taylor: When you say credible approaches and strategies to net zero, what does that mean exactly?
Franziska: So there’s many ways to approach net zero strategies, but it’s really important that you think about it both from a top-down and a bottom-up perspective.
So from a top-down perspective, you need to understand what level of ambition your company is able to set, as well as what does science say we need to do to keep global warming within manageable limits or the 1.5 degree is the target. So firstly, understanding that ambition, and then from a bottom-up perspective, exactly how are you going to get there?
What’s your full scope of emissions? And what opportunities will help you reduce emissions across those different sources? Then planning for those, putting them in a sequence, and understanding how you’ll get there.
[0:04:10]
Taylor: So now that we understand a bit more about what these credible strategies look like, what does a climate commitment look like concretely?
Franziska: Yeah, good question.
Obviously there are many different types of climate commitments and commitments more broadly around sustainability. But in the context of net zero and net zero climate commitment, it’s really important. A really important concept to first understand is the different scopes of emissions.
So a net zero target typically, and in best practice, includes scopes one, two and three emissions and targets around those. So I’ll just quickly go through what different scopes of emissions are.
So scope one, emissions are the direct emissions associated with your business, usually through the combustion of, say, fuel. So this is fuels that you burn or the release of methane through industrial process emissions, but it’s direct and you have complete control over of how that happens. So that’s scope one.
Scope two, on the other hand, is what we consider an indirect emission source. So it’s related to the electricity that you consume. So while you turn on and off a light switch to consume the electricity, the emissions associated with the production of that electricity actually occur somewhere else. So they’re your scope two, indirect emissions.
Scope one and two are the most important, they’re the ones that are reported under Australia’s National Greenhouse and Energy Reporting Scheme, and they’re the ones that typically you need to start with. And these are also the focus for the start of your decarbonisation.
Whereas scope three emissions, these are all emissions that happen in your supply chain, both upstream and downstream.
[0:05:50]
Franziska: Scope three emissions are considered indirect because they don’t actually happen where you operate, they happen in someone else’s scope one and two emissions. So that’s an important concept. It’s always double counting. My scope three emissions will be someone else’s scope one or two emissions.
One of the best frameworks for scope three accounting is the Greenhouse Gas Protocol Scope Three Framework.
What this does, this framework outlines 15 different categories of scope three emissions that can help you make sure that you’re considering the full breadth of the supply chain emissions that you might be related to.
So this includes the emissions associated with products and services that you use, as well as the emissions that are associated with the use of a product that you sell. So it’s really powerful, this linkage of your supply chain, because it can mean we all move incrementally forward together.
Now, coming back to your question and about a climate commitment, so we typically see people start with their scope one and two and then move to their scope three. But best practice is full scope one, two and three emission targets. They could be of different levels of ambition, but we all know they have to be net zero before 2050.
[0:06:59]
Taylor: Well, that’s really helpful to understand the differences between the scopes and how maybe progressively over time, you can increase the scopes that you’re looking at to really enrich your perspective.
But for our wonderful listeners, I can understand if they’re maybe feeling a little overwhelmed with all the information. How do you recommend that they find the right target for their business?
Franziska: So as a business that’s setting off to start a net zero target, I’d be looking at your full scope one, two, and three, including scope three emissions, which can be a lot more subjective and really difficult to first quantify, but doing your best to create a first full inventory of those scopes of emissions before planning to reduce them.
So a full net zero target usually includes scope one, two, and three emission sources.
[0:07:44]
Taylor: And I can absolutely see how navigating all of these frameworks can be confusing for businesses, so we’ll make sure that we include links to that framework you’ve just mentioned in the show notes.
But when you’re speaking to businesses, business leaders, what are you finding are their main motivations for wanting to decarbonise?
Franziska: Yeah, good question. The why is really important and something all companies should have a discussion about at the offset before they start their decarbonisation journeys. So one of the reasons we historically have seen from early movers is alignment, a close alignment with their mission or their purpose.
So being or existing in a decarbonised world as an actor that has a low carbon product, for example, could be core to their purpose. So that’s the early movers.
We also see a lot of companies come onboard because it’s becoming kind of expected of them. So their peers are all doing it. It’s normal now for many companies to be considering the embodied emissions, for example, the emissions in their product that their customers are going to have. And it’s no longer okay to ignore that aspect. And it’s important to quantify and be able to talk about this with their customers.
And then the third one there is about supply chain upstream and downstream pressure. So investors wanting you to prove that you’ve got a climate commitment, so that they can also achieve their commitment, which includes their investment in you, for example.
Or the customer piece. So, people asking, what are the embodied emissions of this? How do I talk about your product as it goes into ours? But then I guess there’s also this shift in thinking from risk mitigation.
[0:09:21]
Franziska: Of course, climate change will pose a whole number of risks, and we need to think about it like that and embedded in existing risk management frameworks in your company.
But it’s also now an opportunity. So, if you can produce a low carbon product and you can be the first out there, or if you are a low carbon business and you’re heavily on that decarbonisation trajectory, it does give a competitive edge.
And we can move away from risk mitigation to also opportunity realisation.
A big part of this is the recent legislation changes with respect to the safeguard mechanism. So, this is for Australia’s 215 or so heaviest emitters, who will now be required to reduce their emissions approximately 4.9% year on year out to 2030.
But any emissions that they reduce above and beyond that baseline, they can also turn into sort of tradable credits. So, we’re seeing instruments like that come in around the world, or already enforced around the world, that can support a transition towards opportunity realisation in monetary terms. In that example.
[0:10:26]
Taylor: Wow. It’s certainly great to hear that there are these extra benefits that businesses can really embrace. I know, looking at the data and my own anecdotal experience, if I see that something is green, climate friendly, I’m gravitating towards it a lot more. So, I can certainly see how that is changing in our communities.
Franziska: Absolutely. And in particular the economic benefits and cost savings of making action on climate change. On one side, there’s also just energy costs, the costs of running your business. So reducing your fuel consumption or electricity consumption or the use of solar panels on your roof can also translate to cost savings as well as decarbonisation.
In addition to that, other reasons, and the most present reason to start your decarbonisation journey is the mandatory disclosures that are coming in around climate risk.
So companies will need to disclose their scope one, two and three emissions and what they’re going to do about them.
[0:11:20]
Taylor: Now, I’m glad that we’ve covered so many of the incredible benefits that can be had in embarking on this journey, but what do you think is stopping some businesses from taking this first step, and what would you say to ease their minds?
Franziska: Well, many companies are worried about the costs associated with the decarbonisation trajectory without necessarily considering the efficiencies and cost savings that can happen as a result. So any reduction that you can achieve in your scope, one and two, probably, often, has a reduction in the energy consumption and those associated costs.
Other companies are overwhelmed by the amount of information out there. There’s so many frameworks and so many guidelines, and how do you know that you’re doing the right thing?
Sometimes this can even result in greenhushing – people making commitments, but not wanting to share them publicly in case they’re facing scrutiny as a result. So you don’t have to do this alone. You can get professionals, such as our consulting firm, and other guidelines to help you on that journey.
But the final thing I’ll say about this is also around you’re not alone. You can work with your key stakeholders and your supply chain to make this journey together, and you have to, because of scope three emissions.
There’s various guidelines out there to support with supply chain engagement. How do you talk to your suppliers about their targets? And how do you help them to set credible targets as well?
This can also look like working together for broader knowledge sharing, saying, “Hey, this is what we have done and what we’ve found that could be applied to peers or your upstream or downstream actors.”
But what is critical is we’re all in this together. We all have to do it together.
Your scope three is someone else’s scope one and two. So you can’t directly reduce those, but you can work with them to have those reduced together.
[0:13:04]
Taylor: That’s such a fantastic point, and I think a great comfort to all of our listeners that they’re not in this alone and that this is a community effort that they can engage their stakeholders in and really take this journey together.
For any business listening now considering going on this journey, do you have any last advice?
Franziska: Yeah, absolutely. I think net zero by 2050 or 2040 can seem really daunting. It’s hard to know where to start, and it seems like a very large task, and it is. But it’s something that can be taken incrementally. So you have to start small and look at it as what percentage each year. How fast can you accelerate that over time?
But you just have to start somewhere and see what’s practical and what’s feasible in terms of reductions.
This is why setting interim targets is important. So net zero by 2040, for example, that still feels like a long way away. But if you set a 2035 or 2030 target, then at least you’ve got something to aim for in the short term or the medium term.
It’s all about incremental changes and trying to embed this into your pre-existing frameworks. So your risk management frameworks that you already have to set targets to make progress now and accelerate towards net zero in the next decade or two.
Taylor: That’s such a great way to think about it. We cannot let perfection be the enemy of progress. And so just taking these first initial steps is the most powerful thing that we can be doing.
So thank you so much for taking the time to sit with me today, Franziska. I’m feeling even more compelled and able to act after speaking to you.
We will put those guidelines and frameworks in the show notes for anyone to access after this conversation. But thank you so much again for your time.
Franziska: Thanks for having me, Taylor.
[0:14:50]
Taylor: Next, I thought it would be interesting to hear from one of Australia’s logistic giants on how they’re approaching decarbonisation.
Here’s Ruby Diaz, Manager of Environmental Sustainability from Linfox, talking about some of the big changes they’re making and why.
Ruby: My name is Ruby Diaz. I am the Environmental Sustainability Manager for Linfox Australia and New Zealand. I’m managing the GreenFox Program and that’s environmental sustainability here at Linfox.
We were inspired about decarbonisation by our chairman. He created the GreenFox program. At that time, we didn’t know what it means to reduce emissions, but he put a very bold target out there, and it was to reduce 50% of our emissions in the next ten years by 2017.
We actually managed to reduce 52% of the emissions two years before the target.
So we had been in that journey of reducing our emissions. And all the programs for GreenFox are focusing on that end goal. Our climate commitment is to be net zero by 2050. And if we can, we will do it before.
It’s very challenging in the logistics industries for the type of technology that we have. But we also have another commitment, which is 100% renewable energy by 2030. So we have a very aggressive program for decarbonisation, especially for scope two emissions which are from the electricity we use in our distribution centres.
[0:16:27]
But also, we are working very hard to meet that goal. And we are not looking 2050, we’re looking 2026, 2028. So what we can do now in the short term, to be able to be on track with that long term target.
Our main driver for choosing climate commitments of that type is definitely the Australian communities. Australian communities are receiving all these greenhouse gas emissions from the road every day from freight transport. And we would like to make a positive impact and reduce those greenhouse gas emissions in those communities.
A very big force of action is all this new generation coming into our industry asking us to do something about it, and we would like to align with their values. And we have been always very proactive in that regards.
But definitely, I guess the aggressive programs that we have on decarbonisation is because we also would like to show them that we also believe that doing the right thing is good for all the communities.
[0:17:36]
Ruby: There are a lot of challenges in the logistics industry to make those commitments a reality.
The main one is that freight road in Australia at least represents about 7% of the greenhouse gas emissions. So for the industry to decarbonise, we need zero emission trucks. And that type of technology needs to be deployed rapidly in the country.
Linfox started our net zero emission split journey in 2021, actually in the middle of the pandemic.
We understood that the diesel engine cannot provide for the greenhouse gas emissions, especially to get to that net zero goal that we all want.
But also, there are many challenges to deploy that type of technology. Some of them are related to charging. So there is not an existing network at the moment in Australia for charging those trucks. And that’s the reason why we started to prepare a huge investment in building the next generation of distribution centres.
[0:18:40]
We wanted to have the capability to charge those trucks from renewable electricity and renewable energy that we have installed in those roofs. And also, we wanted to design those warehouses to be able to cope with that increase in energy that we require to plug in these trucks. So this technology is properly deployed in an environmental, responsible way.
I guess what is next is the next generation of electric trucks is coming very soon. Those trucks are going to be larger in capacity, are going to be able to reach longer distances, and also are be fully charged solely on renewable energy. So we are building the capacity for that.
We are also combining that with battery systems. So we have the solar panels, we have the battery systems. And what we would like to create is these energy ecosystems within our distribution centres that can cope with what is coming.
[0:19:44]
So we also have energy management systems that can provide the energy required to the facility, but also to the trucks.
And in the future, what we like is that there is a software integration for smart charging where there is a minimum interaction for the humans to be able to do the routes in an efficient way, so we can meet the demand of our customers and we can actually replace the diesel trucks because we are meeting the same distances.
For businesses trying to come into the decarbonisation journey, I would say, well, first, don’t be scared. It’s exciting. You need to start now. You need to start making decisions. Everything that you can do in regards to sustainability, perhaps also at the same time benefits your finances. So sustainability is not an extra lot and an extra cost, it’s actually a process cost. It will help you with your cash flow, also help you strategize your capex.
[0:20:51]
So for instance, by installing solar. We all know that at some point that is going to be free energy for your site. So talk with the people in the industry. Don’t work on this alone. Sustainability is about partnership and there are many, many associations that can help you kickstart.
Either big companies like AGL or it’s also associations where it’s the sector association, there’s a lot of things happening out there and we sustainability managers are very keen on supporting that type of progress.
So don’t be shy and reach out.
[0:21:28]
Taylor: It’s so heartening to hear that even in an industry like logistics that’s quite hard to decarbonise there are businesses making changes. They’ve set targets, they have a plan, and they are moving forward even though it isn’t easy.
I hope today’s conversations have helped reframe this journey as incremental progress rather than big daunting change and inspired you to consider what you might be able to do.
Next up, we’ll tackle that first step to take as a business. See you then.
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