BCSD Australia News

Stay updated with the latest from the Business Council for Sustainable Development Australia (BCSDA). This week, we highlight WBCSD’s new guidance on setting science-based nature targets, the Partnership for Carbon Transparency’s 2024 program, and a people-first approach to the energy transition. Discover how corporate climate actions impact financial health, the shift towards electric arc furnaces in steelmaking, and key insights from the IMF on the green economy’s impact on employment. We also cover Australia’s labour market trends, Business for Nature’s policy recommendations for COP16, and KPMG’s findings on ESG in M&A. Stay informed and drive sustainability in your business.

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?? WBCSD welcomes the latest release from Science Based Targets Network target nature with updated technical guidance and resources for companies to set science-based targets for #nature.

Science-based targets for nature are a critical aspect of the evolving corporate performance and accountability system for nature.?

?? With support from Quantis, WBCSD has been working with 12 leading member companies to pilot SBTN’s methods over the last year, complementing the official SBTN Initial target validation pilot which involved 8 WBCSD members and project members. These engagements have been valuable to all, elevating key considerations such as the importance of understanding local impacts and the need for traceability.

Setting science-based nature targets requires an advanced level of nature action maturity. WBCSD is committed to working with SBTN and its partners to ensure that all companies, regardless of their maturity on nature, develop nature strategies that are aligned with material dependencies and impacts on nature and identify the most relevant priority actions to focus on. This alignment between material nature issues and linked actions serves as the foundation of any credible nature target.

?? Exciting news!

The Partnership for Carbon Transparency (PACT) has just announced its 2024 Implementation Program.?

Building on last year’s success, an expanded cohort of 25 ambitious companies is driving harmonisation in the calculation and exchange of Product Carbon Footprints (PCFs). These companies are taking bold steps to enhance carbon transparency and drive impactful decarbonisation action across their value chains.

Congratulations to all participating companies and their suppliers for spearheading efforts to make carbon transparency a reality!

??The energy transition isn't just about reaching net-zero carbon goals or replacing fossil fuels with renewable energy. It should be characterised by justice and inclusivity, respecting and supporting the needs of all individuals and communities.

WBCSD – World Business Council for Sustainable Development and 万宝盛华 believe in a just energy transition that puts people first. We are advocating for a transformative approach that combines technological innovation and human-centered strategies.

Our vision includes ??

??Evolving green jobs from existing roles with sustainability in mind.

??Using data-driven insights to guide reskilling efforts and workforce development.

??Rapidly adapting education systems to equip the next generation with essential green skills.

??Collaboration among businesses, governments, and educational institutions to create inclusive talent pipelines for the green economy.

?? Integrating employment and skill-based factors in all investment decisions.

Investing in reskilling is crucial to preventing potential job losses and fostering community resilience as we aim for an energy transition at pace. A people-first approach to the just energy transition emphasizes human capital as a driver for positive societal change. ?? ??

???? How Corporate Climate Change Mitigation Actions Affect the Cost of Capital

Climate change mitigation is becoming a pivotal factor in determining the financial health of businesses. A recent study led by Yizhou Wang, Siyu Shen, Jun Xie, Hidemichi Fujii, Alexander Ryota Keeley, and Managi Shunsuke, published earlier in May 2024 in Corporate Social Responsibility and Environmental Management, sheds light on a critical aspect of this dynamic: how corporate climate actions influence the cost of capital.

Key Findings:

- Higher Emissions, Higher Costs: The study, which analysed data from approximately 2,100 Japanese listed companies between 2017 and 2021, reveals a clear correlation between corporate emissions and the cost of capital. Companies with higher carbon intensity face increased costs of equity, debt, and weighted average cost of capital.

- Benefits of Transparency: Companies adhering to the FSB Task Force on Climate-related Financial Disclosures (TCFD) guidelines and transparently sharing climate-related information benefit from lower overall capital costs. While such disclosure is linked to an increased cost of debt, it concurrently lowers the cost of equity and overall capital, underscoring the financial benefits of transparency and accountability in climate actions.

- Commitment vs. Action: Importantly, the study found that mere corporate commitment to climate change, as opposed to tangible climate actions, showed no significant impact on the cost of capital. This highlights the significance of actionable strategies over symbolic commitments.

- Industry-Specific Impact: The relationship between climate mitigation actions and the cost of capital was notably stronger in industries where climate change is recognised as a material issue. This suggests that industry context plays a crucial role in how climate actions influence financial outcomes.?

Strategic Recommendations:

- Adopt TCFD Guidelines: Aligning with TCFD recommendations and prioritising actionable climate strategies can lower your company's cost of capital.

- Industry Focus: For sectors where climate change is a material issue, such as energy, utilities, and manufacturing, the financial incentives for robust climate actions are even more pronounced.

- Move Beyond Commitments: Implementing concrete climate actions rather than just commitments can significantly enhance your financial standing.

?? Significant Shift in Steelmaking: Moving Away from Coal to Electric

?In the 'you learn something new everyday' category.

In a transformative move for the global steel industry, 93% of new steelmaking capacity announced in 2024 is set to utilise electric arc furnaces (EAFs), significantly reducing reliance on coal-based blast furnaces.

This shift, detailed in the Global Energy Monitor latest "Pedal to the Metal" report, marks a critical step towards decarbonisation, with 49% of global steel capacity under development now adopting EAF technology.

This is a crucial development as the steel industry accounts for 7% of global greenhouse gas emissions.

What is also clear is that despite these advancements, the transition is not yet fully realised. Coal-based production methods still dominate, with 46% of new capacity in construction relying on blast furnaces, according to the consultancy firm Global Efficiency Intelligence.

There is a clear need for sustained pressure to ensure these cleaner projects reach completion, aligning with international climate targets.

China and India are leading the charge, with China not issuing any new permits for coal-based steelmaking in the first half of 2023. India, now the top steel developer globally, also has significant EAF projects in the pipeline, although the majority are still in early stages.?

For Australia, this shift presents both challenges and opportunities. As a major player in the global steel supply chain, Australian businesses must adapt to these changes, investing in sustainable practices and technologies to remain competitive and environmentally responsible.

How do you see the future of steelmaking evolving in light of these changes? What steps can Australian businesses take to accelerate this transition? Share your thoughts and let’s discuss how we can collectively drive towards a more sustainable future.

The Green Future: Exploring Labour Market Implications for Men and Women

The transition to a green economy is not only a vital step for environmental sustainability but also a transformative force in labor markets globally.

?A new International Monetary Fund study, "The Green Future: Labor Market Implications for Men and Women," authored by Naomi-Rose Alexander, Longji Li, Jorge Mondragón, Sahar Priano, and Marina Mendes Tavares, sheds light on how this transition impacts employment, education, and gender equity across different countries.

?? Key Findings:

- Global Labor Trends: By analyzing data from Brazil, Colombia, South Africa, the United Kingdom, and the United States, the study finds that the proportion of workers in green jobs is similar across advanced economies (AEs) and emerging markets (EMs). However, there are distinct occupational patterns:

- In AEs, green job holders typically have higher education levels.

- In EMs, green job holders tend to have lower education levels.

- Gender Distribution: Despite educational disparities, the distribution of green jobs across genders is strikingly similar across countries, with men occupying over two-thirds of these positions.

- Wage Premium and Gender Pay Gap: Green jobs are characterized by a wage premium and a narrower gender pay gap, indicating better economic opportunities and equity for those in green sectors.

- AI and Green Employment: The study further explores the implications of artificial intelligence (AI) for expanding green employment opportunities, highlighting AI's potential to drive job growth and inclusivity in the green transition.

Understanding Australia's Labour Market: June 2024 Insights and Implications

The Australian Bureau of Statistics (ABS) reported a slight uptick in the seasonally adjusted unemployment rate to 4.1%, marking a nuanced shift in Australia's labour market dynamics.

With employment increasing by 50,000 and unemployment rising by 10,000, the participation rate climbed to an impressive 66.9%, just shy of the historical high.

The figures highlight the tight labour market, with the employment-to-population ratio rising to 64.2%, close to its peak of 64.4% in November 2023. These figures underscore a robust engagement in the labour market, despite the challenges posed by a slightly higher unemployment rate and persistent job vacancies.

Key Insights:

- Employment Growth: An increase of 50,000 in employment showcases robust labour market activity.

- Participation Rate: At 66.9%, the participation rate is a testament to Australia's active workforce.

- Unemployment Trends: While the unemployment rate has seen a modest rise, it remains significantly lower than pre-pandemic levels.

- Hours Worked: A 0.8% increase in monthly hours worked reflects the resilience and demand in the labour market.

- Underemployment and Underutilisation: Both rates have improved, indicating better workforce utilisation.

Strategic Implications for Businesses

Labour Market Tightness:

- Risk: Filling job vacancies remains a challenge, potentially limiting business expansion.

- Opportunity: Investing in employee retention and upskilling can provide a competitive edge

SDGs and Policy Implications

SDG 8: Decent Work and Economic Growth

-Target 8.5: Achieve full and productive employment and decent work for all women and men.

- Indicator 8.5.2: Unemployment rate, by sex, age, and persons with disabilities.

Harnessing Australia's Demographic Evolution: Strategic Insights for Sustainable Growth and Resilience

Australia's population landscape has transformed dramatically over the past century.

As BCSDA analyse the Australian Bureau of Statistics data released on 16 July 2024, from the latest demographic reports, several key trends stand out that can inform strategic decision-making across various sectors.?

?? Key Insights from the Historical Population Data:

- Population Growth: Australia's population has surged from 3.8 million in 1901 to 25.7 million in 2021, a 6.8-fold increase. This steady growth, despite global upheavals like WWI and WWII, underscores the nation’s resilience and economic potential.

- Urbanisation: The urban population has expanded from 58% in 1911 to 90.3% in 2021. This rapid urbanisation highlights the increasing demand for sustainable urban planning and infrastructure.

- Fertility Rates: Fertility rates have declined from 3.1 births per woman in 1921 to 1.7 in 2021. This shift signals changing societal norms and impacts workforce planning and economic policies.

- Life Expectancy: Life expectancy at birth has increased significantly – from 58.8 years for females and 55.2 years for males in the early 1900s to 85.4 and 81.3 years respectively in 2021. This longevity revolution demands new approaches to healthcare, retirement planning, and social services.

- Migration Trends: Yearly net overseas migration grew from 76,000 in 1972 to 241,000 in 2019, playing a crucial role in population growth and cultural diversity.

The Business Council for Sustainable Development Australia is pleased to support our partner Business for Nature, which has published a business statement with five high-level policy recommendations for governments to accelerate the implementation of the #BiodiversityPlan to drive corporate #Nature action.

The statement, which comes less than 100 days until the UN Biodiversity COP16, has been endorsed by 130 businesses and financial institutions with combined revenues of $1.1 trillion.

The statement includes the following recommendations:

? Make sure business and financial actors protect nature and restore degraded ecosystems

? Ensure sustainable resource use and management to reduce negative environmental impacts

? Value and embed nature in decision-making and disclosure

? Align all financial flows to transition to a nature-positive, net zero and equitable economy

? Adopt or strengthen ambitious global agreements to address key nature loss challenges

What progress is being made towards incorporating traditional knowledge into the Biodiversity Plan? ??

Countries must respect the rights of Indigenous Peoples and local communities to achieve the world's major international commitment on biodiversity, the Biodiversity Plan.?

In a recent article, UNEP-WCMC explores the remarkable progress being made towards comprehensively monitoring how Indigenous Peoples' rights related to biodiversity are being fulfilled, including:?

?? An expert Workshop on Traditional Knowledge Indicators was organized in March 2024 to review the status and methodologies of the four traditional knowledge indicators, to address the gap in the GBF monitoring framework.?

?? In May, a subsidiary body of the UN Convention on Biological Diversity (CBD) accepted in full new recommendations on traditional knowledge indicators, which will be put forward at this year's COP16.

?? Unlock the Business Case for Sustainability! ??

WBCSD – World Business Council for Sustainable Development is thrilled to introduce the comprehensive guide "Building the Business Case for Sustainability," developed by WBCSD in collaboration with KPMG. This practical guide is designed to help corporate finance and sustainability practitioners navigate the complexities of integrating sustainable practices into everyday business operations.

??? What's Inside?

Five actionable steps: Scoping, impact translation, identifying KPIs, data collection, and drafting a business case.

Impact Tables: Linking 32 sustainability opportunities to financial and intangible drivers.

Themes & Opportunities: Dive into climate change, nature conservation, and social justice with 16 themes and 32 opportunities.

??? Why It Matters?

As the impacts of climate change and nature loss intensify, and social issues become more prominent, sustainability is crucial for the financial viability of businesses. This guide bridges the gap between ambition and actionable strategies, empowering companies to make a compelling business case for sustainability.

Global ESG Due Diligence Study 2024: Moving from Risk to Value Creation

In the landscape of mergers and acquisitions (M&A), environmental, social, and governance (ESG) considerations have emerged as pivotal factors. What is the evidence for this statement?

According to a recent KPMG study, ESG priorities have seen a significant uptick in transactions over the past 12 to 18 months, despite a slowdown in M&A markets due to rising interest rates and ESG backlash in certain regions.?

Key Findings:

- ESG on the Agenda: The survey, which included over 600 active dealmakers from 35 geographies, found that 82% of respondents have ESG considerations on their M&A agenda.

- Willingness to Pay Premiums: Notably, 55% of these dealmakers are willing to pay a premium of 1-10% for assets that demonstrate high ESG maturity, highlighting the value placed on sustainable practices.?

Drivers of ESG Due Diligence:

- Identifying Risks and Opportunities: 58% of respondents agree that the primary driver for conducting ESG due diligence is the monetary value of identifying ESG risks and opportunities early.

- Regulatory Response: 44% of respondents emphasise the importance of being better prepared to respond to regulatory requirements.

Strategic Implications for Businesses:

- Value Creation: As ESG considerations become more integral to M&A transactions, businesses that proactively address ESG factors can not only mitigate risks but also create value and attract premium offers.

- Regulatory Compliance: Staying ahead of regulatory requirements through diligent ESG practices can provide a competitive edge in the market.

- Market Perception: Companies with high ESG maturity are increasingly perceived as more attractive investments, driving higher valuations and better deal outcomes.

#GRIStandards and the #ESRS: two sides of the same coin?

The 2nd appointment of our #CSRDEssentials campaign dives into the ESRS —disclosure requirements that companies must meet to comply with the #CSRD.

They offer a unified approach to sustainability reporting across the EU, increasingly aligned with the GRI Standards thanks to ongoing collaboration between us and EFRAG!

?? The CSRD Essentials clarifies the key aspects of the ESRS: structured into cross-cutting, topical and sectoral, sector-specific, and standards, they encompass various disclosure requirements. Standards differ based on company type:

?Large companies and listed firms: comprehensive reporting requirements.

?Listed SMEs: simplified standards tailored to their capacity and complexity.

?Third-country companies: standards phased in over time.

?Non-listed SMEs: voluntary standards focusing on basic sustainability narratives.

ENCORE, a valuable tool for financial institutions, companies, and regulators, has recently updated its underlying data. These improvements are based on the latest scientific research and feedback from pioneering ENCORE users who are actively involved in assessing nature-related risks. The updates have been completed as part of the #SUSTAINproject, with technical inputs from different partners such as UNEP-WCMC, the Netherlands Environmental Assessment Agency (PBL), the International Union for the Conservation of Nature (IUCN), IUCN Europe and Eidgenoessische Technische Hochschule Zürich (ETH Zurich).

"ENCORE is one of the most used screening tools to understand impacts and dependencies on nature. And yet, this tool needed to be strengthened and further improved. I am grateful that we have been able to contribute to that, in collaboration with the SUSTAIN consortium partners, and with the financial support of the European Commission. The upgraded ENCORE tool now is available for users. I hope this will lead to a further increase of the use of ENCORE and to better and more effective screening of nature risks."

- Martin Lok, Executive Director Capitals Coalition

Unveiling the Climate-Finance Link in businesses!

The fourth session of the WBCSD Climate Transition Roadmaps Masterclass Series, in collaboration with Boston Consulting Group (BCG), explored how to align decision-making processes, identify value and risk drivers, and secure funding for crucial transformations.?

Check out the summary of the session here - https://lnkd.in/eHSR97BX

Here's a sneak peek at what we covered:?

? The financial implications of climate-related risks and opportunities

? Internal and external funding mechanisms (e.g., ICP, green premiums, etc.)

? Integration of climate into all critical financial decision-making

Don’t miss out on the valuable insight shared by Anne-Cécile Moreno, Head of Energy Transition (Transparency & Enablement), Senior Director at Maersk, during the Masterclass on employing Green Premium as an effective tool to address their environmental impact.