Australia's joining the Climate Club marks a turning point for mid-sized businesses. The implication is that proactive engagement with sustainability initiatives is no longer a peripheral concern - but rather a core driver of future competitiveness.

In 2023, Australia joined the ‘Climate Club’, a G7 initiative backed by the majority of the world’s major economies. They’re far from the only new entrant, with Argentina, the Netherlands, Switzerland and Singapore all recent entrants. This was noteworthy for a few reasons, perhaps the largest being that Australia has traditionally lagged behind other countries when it comes to climate action.

One of the reasons for this lag has been earlier governments’ stances that prioritising climate action deprioritises economic security. This was not the message communicated at this event:

“This isn’t just the right thing to do by the environment, but this is also the right thing to do by jobs and by our economy”

Australian Prime Minister Anthony Albanese

It’s an important takeaway from the event - this was an economic decision.

Energy, irrespective of how it is generated, is another commodity, another product. Faster, cheaper, more convenient products ultimately dominate. As with fossil fuels, there will be winners and losers in a decarbonised world. First movers have an advantage. As we discussed here:

if Australia invested in extracting value from renewable resources (traditionally Australia has been very good at digging things out of the ground), it would be cheaper for Australia to process minerals locally rather than send overseas for value-add (e.g., iron ore to steel). Australia might also end up exporting power, if the Sun Cable ends up connecting with Singapore and being switched on.

So, what does this mean for Australian mid-cap organisations? There are important lessons to take from our further integration into the climate action fold. A proactive engagement with sustainability initiatives is no longer a peripheral concern, but rather a core driver of future competitiveness.

Reach out to international competitors

While Australia has lagged behind on climate action compared to other nations, for smaller, flexible corporations (and not just in Australia) this presents an opportunity. There are many finance teams in other similar regions who have had the public and government asking questions on sustainable change and we can learn from them. Where were their biggest emissions cuts? What sort of software and knowledge did they leverage? How did they kickstart sustainable transformation?

The SME Climate Hub is a great place to start if you’re looking for other climate-conscious SMBs.

Set the bar high

The Climate Club is all about setting a higher bar for emissions, and voluntarily going beyond the targets stipulated by the Paris Agreement and other IPCC outcomes. The generally agreed goal is net-zero by 2050, but as Dr. Simon Bradshow of Australia’s Climate Council put it:

“this is far too slow – we really should be aiming to achieve net zero by 2035.”

For mid-sized businesses, the faster you reach net-zero, the better your mid-term advantages. You'll outshine local competitors in the eyes of informed consumers seeking sustainable options. Plus, you'll reduce risks from energy price fluctuations and minimize disruptions from extreme weather events, benefiting staff and customer well-being. As Albanese emphasises, taking climate action is essential for both government and business economic success.

Implications for Australian mid-sized business

The current scenario presents a compelling opportunity for mid-sized businesses to seize first-mover advantage. Here are key considerations:

• Market Differentiation: Consumer preferences are increasingly shifting towards sustainability-conscious brands. Demonstrating a commitment to environmental responsibility can be a powerful differentiator in attracting and retaining customers.
• Enhanced Operational Efficiency: Investing in renewable energy sources and energy-efficient practices can lead to significant cost savings in the long term.
• Supply Chain Resilience: Climate change disrupts supply chains through extreme weather events. Sustainable practices can mitigate these risks and bolster operational continuity.
• Regulatory Landscape: As climate action becomes a global priority, stricter regulations and carbon pricing mechanisms are likely to emerge. Early proactive steps will ensure compliance and avoid potential financial penalties.

Navigating the Transition: A framework for action

Embracing sustainability requires a strategic approach. Here's a suggested framework:

1. Comprehensive Carbon Footprint Assessment: Measuring current emissions provides a baseline for identifying areas of improvement.
2. Goal Setting and Alignment: Aligning company goals with national and international sustainability targets demonstrates a commitment to collective action.
3. Develop a Sustainability Strategy: A clear roadmap outlining specific initiatives is crucial for achieving emissions reduction goals. This may involve energy efficiency upgrades, renewable energy procurement, and waste reduction programs.
4. Continuous Monitoring and Reporting: Regularly tracking progress and transparent communication of sustainability achievements foster trust with stakeholders.

Work smarter, faster

You need to get started now. While leveraging international knowledge and setting ambitious goals is a great starting point, you’ll need a comprehensive overview of your financial and emissions reporting if you’re going to ensure that the actions you can take now are as efficient as possible.

If you don’t yet have the people with the internal capacity, contact us here at Getting to Zero and plan how to get your team started.

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