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SA Business: To transition or not to transition

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If South African businesses don’t adapt to climate change, they will be left behind and ultimately become redundant in a net-zero global economy. However, like any challenge, a host of opportunities await.

Imploding infrastructure
Any business is dependent on infrastructure. It needs functioning roads, railways, harbours and energy supply to grow and prosper. It’s also reliant on fast disaster management to bounce back above the bottom line.
South Africa’s infrastructure already faces a multitude of challenges – from the strain of a growing population to mismanagement and corruption. This has left the country susceptible to an array of disasters, be they natural or man-made. Climate change will only intensify this vulnerability – also called physical risks.
Ironically the current situation has prepared local businesses for what is to come. The private sector already carries much of the burden of infrastructure, service delivery and disaster management as the government can’t close this gap. For example, the Eskom crisis has forced many companies to install their own power supply, mostly from renewables.
Insurance companies also have much to lose in regular extreme weather events. Through its Partnership for Risk and Resilience programme, Santam partners with municipalities to develop flood and fire disaster resilience through preventive measures. Since 2012, they have invested more than R100 million in helping 82 municipalities to better respond to the risk of fires and floods.
These seemingly altruistic acts are in the interest of insurance companies that have to pay out millions in the aftermath of disasters. But as the climate warms, these win-win partnerships offer a way forward.

Remaining relevant in a net-zero world
South African businesses must factor in the physical risks as well as how to remain relevant in the global market. Corporate South Africa’s response to climate change has to align with trade partners’ climate policies.
Although implementation is lagging, on paper more than 140 countries, including the biggest polluters – China, the United States, India and the European Union (EU) – have set a net-zero target for 2050. To achieve carbon neutrality, these countries must cut GHG emissions along their supply chains. Low emissions or zero-emission products, such as electric vehicles, and services will get preference.

Physically fit
Physical risks refer to risks associated with extreme weather events such as severe droughts, wind, flooding, rising sea levels and extreme heat. For businesses this could result in infrastructure damage, supply chain disruption, increased water shortages and rising insurance costs.

Carbon neutrality poses a huge challenge for South Africa, as our economy is dependent on fossil fuels. We could be heavily taxed on our exports – for example, the EU launched the Carbon Border Adjustment Mechanism (see sidebar below) in October last year.
South Africa is in an unenviable position. We are a developing country, and also one of the largest emitters. South Africa doesn’t have sufficient funds to transition the economy away from fossil fuels without a considerable political, financial and social cost. But what we also don’t have is a choice. We have to find a solution.
South Africa could benefit from the climate challenge by aligning with global climate goals and gaining access to international climate finance. South Africa has huge potential in renewable energy as well as in low-carbon transition-driven export sectors. Minerals, such as platinum (fuel cell vehicles) and manganese (batteries), could gain market share.

The Carbon Border Adjustment what?
The EU’s Carbon Border Adjustment Mechanism is a tool to put a price on the carbon emitted during the production of carbon-intensive goods – like cement, iron and steel, aluminum, fertilisers, electricity and hydrogen – that are entering the EU, and encourage cleaner industrial production in non-EU countries.

Four ways business can join the just transition
  1. Government and businesses can collaborate to invest in renewable energy. These investments reduce emissions and create jobs. To date, the government’s Renewable Energy Independent Power Producer Procurement Programme has installed a grid capacity of 6 184 MW from 89 power plants and created more than 30 000 jobs. Another 51 projects are in the pipeline.
  2. Foster a culture of innovation and research to develop sustainable technologies and solutions that drive economic growth while minimising environmental impacts. SA Breweries’ Project Imifino, part of their water stewardship strategy in Ibhayi, uses brewery waste water to grow spinach for the local community. The crops act as a “treatment plant”, absorbing nutrients and leaving the water relatively clean. This process enables the brewery to recover 90% of the water through its recycling plant, significantly enhancing water efficiency.
  3. The Presidential Climate Commission has created the Just Transition Framework (JTF) – an ambitious roadmap towards a low-carbon economy. Businesses can consult and incorporate the principles of the JTF into their policies and decisions. The JTF serves as a guiding document to address climate change as well as inequality, job creation, poverty alleviation, and the restoration of natural systems for resilience.
  4. Invest in skills development programmes that equip the workforce for green jobs and industries. Eskom’s decommissioned Komati power plant is being set up as a training facility – a first in Mpumalanga. The centres will focus on renewable energy skills, such as wind-turbine maintenance and installing solar photovoltaic systems.

As with the pandemic, the climate challenge cannot be solved in a silo. Business has to adapt, innovate and work together with government, academia and civil society to solve an issue that, if left unattended, will affect every living being on this planet.

We Mean Business
We Mean Business, a coalition of organisations, invites companies to be part of the low-carbon revolution.

This article was funded by

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