INTHEBLACK December 2021 - Magazine - Page 26
F E AT U R E
// C L I M AT E C H A N G E
“A company’s carbon reduction strategy is
typically driven by the board and executive,”
Ridehalgh notes.
Once a company adopts carbon reduction
targets, he says, accountants can work with
the technical experts in operations and the
sustainability department to determine
projects that will reduce emissions.
“The accountants will then help prepare
the business cases, including the costings, of
initiatives to reduce a planned level of greenhouse
gas emissions,” says Ridehalgh.
“These are the business cases that determine
what projects have the lowest cost per tonne of
carbon dioxide (or carbon dioxide equivalent)
abated, and so should be prioritised.”
FACTORING IN THE CARBON
Currently, global carbon prices vary by
jurisdiction, ranging from about A$20 in
Australia up to about €60 (A$95) in Europe.
Whatever the carbon price, it will likely raise
the cost of current practices, and that will help the
company evaluate its choices.
Terence Jeyaretnam, partner with EY Oceania’s
Climate Change and Sustainability practice and
senior adviser for the Value Reporting Foundation,
encourages accountants to advocate for the company
to set an internal carbon price.
“An internal carbon price tells you what a carbon
price might do to your business, and that’s good
transition planning,” Jeyaretnam says. Various
commercial calculators are available to help factor
in amounts of carbon produced by various modes
of transport and the carbon emissions produced by
the original industrial process.
CONSIDER SUSTAINABLE DEBT FINANCE
Jeyaretnam suggests that corporate accountants
consider sustainable debt finance. This includes
“green bonds”, used for specific projects designed
to boost specific environmental objectives, as well
as general borrowing programs.
Sustainability link loans, for example, allow a
company to borrow at a lower interest rate if it
meets negotiated enterprise-wide objectives. If
the company does not meet the objectives, which
must be independently assured, it will have to pay
a higher interest rate.
“You can’t do a sustainability link loan without
the finance team ‘owning it’,” says Jeyaretnam.
“The sustainability team plays a role in terms
of setting performance, targets and goals – and
measurement and assurance – and the finance
team will oversee the debt product.”
26 ITB December 2021
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a CPA Australia
report on climate
change and
decarbonisation
“UNDER
INTEGRATED
REPORTING YOU
HAVE TO ASK, IF
THE BUSINESS
HAS TO PAY FOR
THE COST OF
CARBON BECAUSE
OF THE IMPACT IT
HAS ON NATURAL
CAPITAL, HOW
MIGHT THAT
CHANGE THE
OVERALL
BUSINESS
MODEL?”
TERENCE JEYARETNAM,
EY OCEANIA
LEARN ABOUT INTEGRATED REPORTING
Accountants should also become familiar with a
form of non-financial reporting called integrated
reporting, Jeyaretnam advises.
“Understanding integrated reporting will help
accountants think about biodiversity as a natural
capital. Under integrated reporting you have
to ask, if the business has to pay for the cost of
carbon because of the impact it has on natural
capital, how might that change the overall
business model?”
Integrated reporting is a widely accepted
method for a company to consider how different
elements add to, or detract from, enterprise value.
Fok says curiosity is key for accountants
and finance professionals when it comes to
helping their businesses and their clients
address the challenges of climate change and
decarbonisation.
“I’d ask, ‘Have strategic decisions been made
with a sound upfront assessment of how they
may impact both financial and enterprise value
in the short and long term?’.”