It’s certainly true that the ongoing climate dispute has divided us as a nation.
There are the staunch environmentalists who proclaim that we are on the verge of human extinction. The avid ‘climate deniers’ who (on the merit of their intuition alone) profess to have greater credibility than the 13,000 academic papers which support climate change. And then those who simply sit on the proverbial fence, throwing shakas in Hawaii (not naming any names).
Reuters Columnist Clyde Russell says that, whatever your personal stance, as a resources business you’d be wise to tap into the growing opinion of the masses: that it’s time to make positive change and decarbonise our economy.
Ahead of the Global Iron Ore Conference, Russell spoke with Informa about the rewards of taking steps towards carbon neutrality – and the risks of not doing so.
Risks of not taking action
The importance of social license to operate (SLO) appears to have been downplayed in the resources industry – with few, if any, SLO-dedicated staff having senior-executive-level status within a mining organisation, says Russell.
“SLO is one of the top concerns of any mining company, but the person in charge of SLO is rarely one of the top two or three leaders of each company,” he said.
The result is that SLO objectives are often stifled by efficiency and financial metrics – usually the main KPIs for a company’s biggest heavyweights: it’s board and C-suite.
Russell says coal companies should continually ask themselves ‘Do enough people support what we’re doing that allows us continue what we’re doing?’
Though often a confronting question, the consequences of not doing this, he says, are far more serious than we may imagine.
“When you lose community or government support it starts to impact your business in a big way. People will back you up to a point, but eventually banks will stop investing in you due to the reputational risk of supporting your brand.
“Insurance companies, too, will increasingly deny your applications for fear of upsetting more substantial clients within their portfolio.
“We are already noticing these things start to happen within the coal mining industry. Many have lost support – not only from the latte sipping socialists in trendy suburbs but also thoroughly professional hardworking types, heavyweight investors and majority shareholders.”
“If your shareholders want out, yes there will always be more. But these days most large companies recognise the importance of quality shareholders: i.e. big institutional investors.
“If you get rid of those and they’re replaced by hedge funds, speculators, dodgier funds or tax havens you become a less appealing company and your share price becomes more volatile.”
Increasingly politicians are turning their backs on the coal industry too, Russell warned.
“If Labour gets back into power this will, no doubt, multiply and accelerate. And it may be that you are forced to decarbonise anyway.
“But if you wait this long to do it then you’ll be seen as lagging behind the community – certainly not a positive look for your brand.”
Russell also reminds us that a carbon adjustment tax is a very real looming possibility for Australia.
“Eventually everyone may be forced to take care of their scope 3 emissions [emissions created in the beneficiation of their product], but possibly even their scope 2 [transportation] and 1 [direct emissions] as well.
“Companies that are producing dirtier products or through dirtier means (i.e. fossil-fuel powered smelters) are starting to get a penalty – through premiums or involuntary price differentiation,” he said.
Rewards of taking action
Conversely, those that are seen to be paving the way in decarbonisation can reap a host of benefits, says Russell.
“More and more people are drawing a link between coal and the ongoing bushfire crisis and our sustained period of drought. What was once a far-flung scientific discussion, is now becoming people’s lived experience,” he said.
“If you get out in front of something so central in our society’s collective conscience, you are seen as an inspirational leader, someone to follow.
“People will want to invest in you and be associated with your brand. You’ll get invited to speak at conferences. All of this no doubt being great exposure.”
Decarbonisation projects can be costly, but represent just a tiny dent in profits for some of the biggest market players, says Russell. Plus, they often pay off dividends.
“Ultimately you might actually save money. Most mine sites save on diesel power. And if you invest in a mid-size solar array you may be able to power cheaper than diesel over the longer term, whilst becoming carbon neutral.
“If you’re publicly seen to be doing that and making genuine change (not just doing lip service), even better.”
Russell believes it’s now getting to a point where a whole carbon system is probably going to take shape and says that companies can either fight it or get ahead and have a much easier ride.
“You have to look where the world is moving. In the West, climate deniers like Donald Trump and Scott Morisson are in power right now, but whoever succeeds them is likely to have stronger climate policies.
“And we’ve already seen from the likes of Great Britain how quickly decarbonisation can take place when a PM that supports climate change is in power.
“Globally, the last hoorah for climate change will likely be Trump. He may will win re-election but realistically only has another four years and then America will change – possibly quickly.”
Russell concludes by saying that it doesn’t actually matter what you believe – it’s about what everybody else believes.
“Nobody wants to believe they’re causing damage to the environment. If you really believed in climate change then you couldn’t carry on what you’re doing. You’d have to offset it in another form. If you declare it’s not real, you just keep your money.
“But even if it is all a hoax or a conspiracy theory, that’s irrelevant. You’ll end up going broke if you think that way.”
Clyde Russell is among an esteemed line up of speakers to address the Global Iron Ore Conference – 18-19 March 2020 in Perth.
Learn more and register here.