What happens when something is not as advertised? That warm inner glow we had when we bought the contraption disappears, and we end up feeling cheated. Business is about to be hit with the next super-costly business killing regulation. What is it, and what should you do?
I’ll get to the whopper in a moment, but thought I’d tie the experience in with a recent “if it’s too good to be true” moment that reminded me of an important lesson. We decided to try a new fully biodegradable washing detergent as part of our efforts to save the planet from some of whatever nasties. Put the clothes through the wash, hung them out to dry as per normal. Slight smell, oh well, must have sat in the drum for too long. Re-used/re-washed, perhaps a few times and thought it was just my imagination that the clothes smelled funny until I started getting unfavourable comments.
Basically, the detergent didn’t work. By the time we realised, some clothes were beyond redemption and became landfill, others were recovered using a mega dose of our tried and proven product. Having to re-wash (using more power, water etc) negated any benefits, had the product done its core job in the first place. Of course we won’t buy the product again, but the thing is there is no recompense for being sold a dud. Time and money – lost.
Back to what’s being sold to businesses as the next world saviour: “Mandatory climate-related financial disclosures”. It’s a whole new industry brought to you by Federal Treasury, and the benefits to businesses are found in the very first word: Mandatory. It’s something imposed on people when there are no logical benefits to sell for them to do it voluntarily. When things don’t make sense, don’t fall for the sales pitch (or lack thereof).
What is it?
Starting from 1 January 2025, there’s a complicated matrix of when various sized businesses must start reporting basically CO2 data. Let’s keep it simple: it’s really estimations of the CO2 used across all aspects of every business, then annually reporting those CO2 emissions whilst setting a strategy to achieve net zero. For the first year, the lucky winners are companies with more than $500 million in revenue and/or 500 employees, before cascading through the economy over subsequent years.
Having sat in on a few presentations and read some simple “guides” (78 page that still don’t explain what to do for example) nobody can really explain how all this will work. This is why it’s now creating a whole Government bureaucracy as well as a band of consultants wringing their hands on how many ways they can “assist” with all these processes. Businesses will need yet another spreadsheet department to produce a Sustainability report annually that tracks CO2 against the organisation’s strategic targets, and the impact it will have on the business by coming up with “2 forward looking scenarios” (=pie in the sky estimations, one which will show a flourishing business, the other a business in demise). Think of it as having one accounting section (reporting on your financial position) and eventually an equally large “sustainability” section (reporting on the impact of CO2 on your business). Except one department is striving to grow the business, whilst the other is striving to reduce it.
Scope 1 emissions are in theory whatever CO2 you directly emit through your own business (i.e. fuel use, chemicals, travel etc). Eventually there will be benchmarked targets within each industry. So how does this “easy” first step work, if for instance your company just imports and on sells products or services compared to one that actually produces the product in Australia? And where does the measuring start and finish (for example if doing this properly a business trip should include air travel, hire car/taxi, CO2 at the hotel etc – yes, seriously…).
Scope 2 emissions is the electricity consumption. That’ll just be a total from your power bill, that you actually have very limited ways of influencing short of turning the lights out. (note that the coal mine and power generator have also already both counted this CO2 in their reports).
It is the Scope 3 emissions reporting that really bells the cat on this whole scheme. This purports to measure the up and downstream emissions in your full value chain. It includes “everything from product or service conception to delivery, consumption and end of life”.
If the whole concept wasn’t vague enough already, Scope 3 is meant to encapsulate it all. So let’s assume that our company now tracks up (suppliers) and downstream (customer) emissions – those companies are ALSO counting these emissions. And that my friends, is how you make a self-perpetuating industry: you count the same emissions multiple times (your supplier and customer is reporting the same emissions, are they not?), with Government’s Treasury adding it all together (to report like GDP) thereby guaranteeing a continuous cycle of finding ways to measure/report/strategise/action – then rinse and repeat ad nauseum.
What should you do?
Nothing. Ignore it. Forewarned is forearmed, but here is why:
The first organisations are bigger companies that will gradually capture smaller companies in their net that have none of these reporting requirements (so whatever data the large companies produce will be wrong for many years anyway). Most of Australia’s products come from Asia, where measuring this is not a thing. Even these large companies have a few years to work out how they will collect all this data (the whole industry is still making it up as they go along) with “quantitative analysis” (that is, confirming the CO2 amounts) not required until “from 1 July 2027”. Of course, Government gives themselves enforcement powers, but basically businesses would then have 2 years to rectify anyway.
If you are concerned that you need to act now, consider reading the room a bit. Here is a range of new requirements that nobody knows how it will work with no immediate penalties for not being the guinea pig. And there is no upside to starting early, you’ll just lock yourself into “doing something”. By all means, if it floats your boat, go your hardest, but the recent election result in the USA was a vote to disrupt much of the bureaucratic tape industries, so the world’s largest economy is switching away from these kinds of requirements on business, and the second largest economy (China) only pretends to do something with the goal being to trap countries like Australia to legislate us to buy wind/solar/electric vehicles that China then ships to us.
This legislation was rushed through in September and doesn’t take effect until next year gradually rolling out by 2030, which is after we’ll have had a Federal Election. Cost of living will be a major voter consideration, and all this reporting adds significant cost to everything, so would be an obvious area to cut the burden on business and save Government considerable sums to instead put towards more important needs in our society.
So why spend any time, energy or money putting in place a bureaucracy in your business that is likely to go the way of the dodo bird? And even if all the above is wrong, it would be wise to let others waste their resources putting together something workable first. Just like my laundry experience, be cautious of what you buy into, and when it doesn’t work, cut your losses and learn from it (or even better to learn from someone else’s experience first).
Businesses are being sold a cute little innocent looking puppy, that will grow and turn into a wild uncontrollable dog.
Words from the wise
The nine most terrifying words in the English language: “I’m from the Government, and I’m here to help”. – Ronald Reagan
“When the facts change, I change my mind. What do you do, sir?” – John Maynard Keynes
“I can’t take my dog to the park because the ducks keep biting him. I guess that’s what I get for buying a pure bread dog.” – unknown Dad.
As always, Onwards and Upwards!
Fred Carlsson
General Manager
