Impacts of the Climate Change Act on Asset-Intensive Organisations

Insight by COSOL /

The path to a decarbonised Australia is starting to take form as the Australian Government is expected to track progress in its annual climate statement. We take a look at the impacts of the Climate Change Act 2022 on industries in Australia and how asset-intensive organisations can utilise technology to help meet their reporting obligations.

At a glance

  • We discuss the importance of putting asset data at the centre of mining operations to provide accurate insights for decision-making
  • We introduce the integrated asset information ecosystem for mining and how it integrates with existing platforms such as an ERP
  • We summarise how mining organisations can achieve digital asset management maturity that leverages the latest technologies and the abundant amount of asset data already available to them.

On September 2022, the Climate Change Act officially passed legislation in Australia. The Australian Federal and State Governments are now working together on tackling climate change with a common goal. This initiative would provide reassurance to industries, business investors, consumers, unions, farmers, conservation groups and the community, that the path to a greener and more sustainable Australia is conceivable through an executable and measurable legislated approach.

Although the Climate Change Act took a decade to be enacted, these long overdue emissions reduction policies should see organisations achieve or surpass their emissions reductions targets earlier. By doing so, they would become resilient against any sudden policy changes in the future and gain a solid competitive advantage.

Organisations that choose to demonstrate their commitment to sustainability would certainly make themselves ahead of their competitors by reducing operating costs, enhancing their brand, retaining talent, increasing customer loyalty and attracting opportunities in clean energy investments – a potential win-win scenario for businesses, the economy and the environment.

Implications of the Climate Change Act 2022

The Clean Energy Regulator, an Australian Government body, has adopted the three scopes of emissions under the National Greenhouse and Reporting Scheme (NGER) that organisations should set against with when assessing their sustainability output.

Three scopes of emissions

  • Scope 1 emissions are emissions as a direct result from activities such as manufacturing and coal mining.
  • Scope 2 emissions are emissions from indirect consumption of an energy commodity such as electricity.
  • Scope 3 emissions are emissions not included in Scope 2 but are produced in the broader economy such as flying commercial planes and consumption of products or services.

While some organisations are already setting their own emissions target, the incessant pressure from policy makers and regulators will further mandate that industries, particularly those heavy emitters and asset-reliant, to adopt digital technologies that can gather critical data on their day-to-day operations, and subsequently track and report on their emissions against those three scopes that have been laid out under the NGER.

Major industries such as energy, logistics and manufacturing are considered among the highest emitters in the country and would soon find themselves required by the Australian Government to reduce their emissions by 6% annually. This proposed mandate would have an enormous effect in seeing Australia’s carbon footprint be reduced by 43% by the end of 2030 and attain net-zero emissions by 2050.

However, these carbon reductions ambitions are merely the minimum target and not the ceiling. And while the Climate Change Act 2022 does not exist to impose obligations on organisations, formalising these targets in legislation guarantees that it remains an enforceable law regardless of government in power and thus further underscoring the importance of a sustainable Australia.

Four key implications to Australian organisations

  1. Flow-through legislation: Australian federal agencies (such as Infrastructure Australia, Clean Energy Finance Corporation etc) are likely to have emissions reduction targets embedded into their functions and therefore impact their decision-making and interactions with the private sector.
  2. Impacting projects: New projects would be regulated and subject to a suite of policy and legislative changes along with those measures that have already been established such as Safeguard Mechanism reforms.
  3. Stricter emissions caps: Under Safeguard Mechanism reforms, baseline emissions would be reset and increased annually to accelerate reduction goals.
  4. Guide new policies: As a legislated requirement for the Government, the emissions targets will play a substantial role in future Australian Government policies. Policymakers will need to ensure policy changes help and don't hinder Australia and its organisations to achieve their emissions targets.

The current and future policies on emissions caps would undoubtedly cause disruptions and challenges to organisations in their operations and supply chain. If they choose to be sustainability leaders and proactively, rather than reactively, identify and manage risks such as climate change and social issues, then they can avoid non-compliance penalties and other negative consequences.

Therefore, by starting to implement sustainability initiatives now, organisations can enjoy a myriad of benefits such as enhanced reputation, cost reduction, value creation, shareholder satisfaction and new strategies for future growth.

Sustainability action is now a business imperative

Environmental Social Governance (ESG) is an approach by which organisations attempt to address the need to foster ethical operations that are sustainable for the people and the planet. Sustainability, in other words, is striking the balance between environment, society, and profit.

Organisations are under tremendous scrutiny and are expected to continuously improve the transparency and sustainability of their processes. Not only should organisations operate profitably but they should also constantly assess how they measure up against these three non-financial metrics: environmental, social, and governance.

With these being considered, consumers are likely to favour organisations that prioritise ethical and sustainable practices while employees would find it fulfilling to work for an organisation with values that are aligned with theirs.

Moreover, considering that there has been a growing trend among investors that they are likely to take ESG metrics into account prior to making such investments, organisations with clear ESG actions and outcomes could offer quantifiable data that can help convince potential investors.

Now that sustainability has become a business imperative, it is important that organisations implement ESG strategies early on so that they would have a competitive edge over rivals and be better prepared for any sudden policy changes. These initiatives would improve their financial performance and certainly guarantee them long-term financial health.

Utilising technology for decarbonisation goals

Industries have long been heavily dependent on technology. But with the adoption of advanced technology that has the capabilities to manage big data, organisations could utilise accurate insights to assess their emissions and productivity status to make more informed decisions.

While there is a vast array of technologies, processes and approaches to data capture, it is also important to consider that different organisations have varying histories with regard to their carbon emissions, so the solution may not appear to be that simple.

The greatest challenge has always been how to manage that vast amount of data. Incorporating the right best-of-breed technologies and creating a common data environment is the most effective way to give organisations relevant and accurate insights that operational and management teams could rely on for business decisions as well as ESG reporting.

For those using IBM Maximo, ESG reporting from across the entire organisation and supply chain has just been made simpler with IBM’s newest technology Envizi.

IBM Envizi is a sustainability SaaS platform that consolidates enterprise ESG data for analysis and reporting and integrates easily with IBM Maximo. It has been designed to remove the barriers to accelerating sustainability performance and enable organisations to accurately track and calculate and report on their emissions activities.

The capabilities of such technology in capturing data through an integrated ecosystem of technologies could provide organisations with a clear picture of what actions they need to take. The data collated could then be delivered on dashboards in real-time to operational teams which they could analyse. The organisation could subsequently make adjustments in their business processes to continually mitigate their carbon output all the while tracking and modelling progress towards their sustainability targets.

In conclusion

The Australian climate change legislation should act as a motivation rather than an obligation for industries to take immediate and simultaneous actions. By collectively integrating data and technologies into their business activities, organisations could contribute to a global systemic change and accelerate the fulfilment of our nation’s environmental mission – a decarbonised Australia.

Turn sustainability into action

Contact us to discuss how sustainability platforms such as Envizi can help your organisation meet current reporting requirements and future ESG goals.