Who's got the energy?

Happy New Financial Year to all who celebrate.

I don’t think this list is full of accountants, but I’m sure there’s a fair chunk of you that spent yesterday either furiously sending invoices, or furiously paying them. Either way, I hope your forthcoming deductions are as plentiful as they are creative.

I’ve wrapped up my interviews for the upcoming series on the Future of ESG with, in no particular order except the one that the letters always seem to go in:

Their insights will be hitting your inbox over the next month, and I’m really excited to share them with you. And yes, I did say they would be coming out last month, but what are you going to do about it; sue me?

Speaking of which…

The Story

Last month, Energy Australia, one of the largest retail energy companies in Australia, and the third-largest greenhouse gas emitter, publicly acknowledged that their "Go Neutral" carbon offset product was “unclear” at best.

They apologised to their customers and removed the product from sale, admitting that "offsets do not prevent or undo the harms caused by burning fossil fuels."

So, how did we get here? Let’s rewind. 

Since 2016, Energy Australia's "Go Neutral" product promised customers they could make their fossil fuel energy "carbon neutral" by paying a premium for carbon offsets. 

Parents for Climate, an environmental action group made up of… well, you guessed it, parents, sued, arguing this was misleading. Their case: when you burn fossil fuels, you still emit greenhouse gases into the atmosphere and no amount of tree-planting, while a nice thing to do, directly undoes that damage.

The energy giant initially fought the case, not defending carbon offsetting, but claiming that their statements about the product being carbon neutral “would have been understood as expressions of Energy Australia’s opinion rather than statements of fact.” 

…oh, did you think we said ‘Science Based Targets?’ No, no, we said ‘Simon’s Based Targets’ he works in product, and he reckons this is a great way to go.

But as the case headed to Federal Court, Energy Australia settled, agreeing that; "burning fossil fuels creates greenhouse gas emissions that are not prevented or undone by carbon offsets." You can read the full statement here.

Energy Australia isn’t some cowboy operator from the carbon credit wild west. 

Their “Go Neutral“ product was certified under the Australian government's Climate Active scheme. Climate Active offers carbon neutral certification for organisations who voluntarily report their emissions and offsets; a standard bearer for national certification.

But, businesses across the country are already seeing the writing on the wall for carbon-offset-led claims of neutrality. Since the turn of the year a growing list of more than 100 businesses have walked away from Climate Active, including high profile brands like Australia Post, Canva Telstra and PwC.

As Richard Denniss from The Australia Institute puts it; “when PwC is telling you to pull your socks up, you know you have an integrity problem.”

Effective next year, the European Parliament has banned "carbon neutral" claims if they rely solely on offsetting, and it looks as though Australia, among other regions will be heading down that path. According to a report last week in the AFR, there is a growing expectation that the Government will soon walk away from the Climate Active program itself.

The good news is that products like “Go Neutral” are proof-points that consumers are continuing to seek ways to shift their spending to more sustainable habits. Even with the context of cost of living crises, and increasing electricity bills. 

The bad news is that they are also proof points that companies may intentionally or otherwise take shortcuts or seek out higher margin solutions to hairy sustainability challenges. But, in the end, the truth will out. As Parents for Climate CEO Nic Seton put it: "the era of unchecked greenwashing is over."

So what is the future of the E in ESG? For impact professionals, and the businesses we support?

Like an ageing Michael Caine; carbon offsets will (and should) continue to play an important supporting role in the full suite of climate action that can be taken by business - it just won’t be a leading one anymore.

As Lindsay Hooper, the CEO of the Cambridge Institute for Sustainability Leadership puts it plainly; “as we move beyond the ESG hype bubble, it is time for business to recognise that, irrespective of short-term market sentiment, an economic transition is inevitable.”

The future of the E in ESG is only growing in importance, and in sophistication; as it does, the number of pathways to circumvent responsibility are dwindling. Increasingly, the only way around a business’ environmental impact, is to properly and fully work through it.

Cheers,

Tim

PS: Don’t forget, in July, I will be doing a 3 part series interviewing some great leaders about the current state and future trends of the E, S and G of ESG.

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