Climate change risk management
Our divisions respond to climate change in two ways. Firstly, we work to understand the specific risks created by climate change for our businesses and address those risks. Secondly, we actively monitor and manage our own greenhouse gas emissions and reduce them where possible.
This year once again we tested the robustness of our businesses against climate change using CSIRO 2030 data in our annual risk process. Our annual risk review process confirmed that our existing operational, strategic and compliance risk controls are adequate for managing climate change risk in our businesses. We believe suitable action is being taken and we are making appropriate disclosures.
Our annual risk review process has identified climate change as an emerging risk and our businesses are therefore taking steps to actively consider and monitor its potential impact on business operations, the community and the broader economy. The climate change risks we assess are physical, regulatory, reputational and competitive risks.
Our analysis has found that projected changes in sea level, storm surge intensity, temperature, precipitation and more frequent changes in extreme weather will exacerbate existing risks while also exposing our divisions to the following risks. This list is not exhaustive and does not extend to our supply chain.
- Energy infrastructure reliability: Extreme weather (including heat waves) will likely impact energy infrastructure, including generators and transmission and distribution lines. This will affect energy reliability.
- Food safety: Any extended outage of power or heatwaves leads to large-scale food spoilage. This means food is not available to customers and cannot easily be re-supplied to stores. The flow on consequences of food shortages, albeit temporary impact public health and safety.
- Energy cost: The cost of refrigeration, heating, ventilation and air conditioning is expected to increase each year due to an increased number of unseasonably hot days.
- Store openings: More severe and frequent extreme weather events will likely mean roads and buildings rendered temporarily unusable. During these extreme weather events customers are unable to reach stores to get essential items, stores are unable to open and stores cannot be re-supplied.
- Infrastructure damage: Extreme weather events could damage our physical assets such as stores, as well as transport infrastructure.
To mitigate the effect of physical risks for our businesses, we are working to improve the efficiency of our electricity supply which reduces our overall emissions as well as demands on distribution networks. Where we are tenants in buildings, we work with landlords to improve our site's physical resilience to climate change. Some of our retail business units are working to include solar systems into new stores as standard and on existing stores where feasible and with landlord agreement. Most of our retail stores have detailed equipment-level energy consumption monitoring in place. Intelligent management systems go beyond the equipment level to optimise overall site operations, interfacing with preventive maintenance, proactive energy management and forward planning of energy efficiency opportunities.
Our businesses are focused on diversifying their supply base as a way of mitigating risk and also building long-term relationships to help suppliers make investments for the long term. Strong business continuity plans are in place to ensure we can still transport and provide products to customers living in areas experiencing extreme weather events.
We work to educate our customers about sustainable living choices to reduce their carbon footprint and provide them with products which can assist with adapting to climate change.
There has been a significant shift in governments’ attitudes to emissions regulation since the Conference of the Parties in Paris in 2015 where 197 countries agreed to limit global warming to two degrees above pre-industrial levels. Large countries such as China are setting ambitious targets and encouraging more global consistency in approach. This trend is expected to continue. Our businesses test resilience against a climate change regulatory risk scenario where the governments of Australia and our trading partners implement regulation to limit global warming to 1.5°C-2°C above pre-industrial levels.
We anticipate that there are a number of policy levers the Federal Government could use between now and 2030, which could have an impact on our businesses.
By reducing our emissions as much as possible through employing innovative energy efficiency projects, staying abreast of any regulatory changes and incorporating a shadow carbon price into our capital expenditure decision-making, we believe our existing controls are adequate for managing regulatory risk.
In the context of more frequent severe weather events and shifting global attitudes, customers may have changing expectations of companies, including their operational efficiency, environmental transparency in their supply chain and product range. While this is difficult to quantify, by reducing emissions as much as possible through employing innovative energy efficiency initiatives and reporting on our progress to stakeholders, we believe our existing controls are adequate for managing reputational risk.
Emerging business models that take advantage of climate change opportunities or are more resilient to climate change risks may become a threat. Such business models are considered in the context of our current business model and our businesses consider whether any competitive risk mitigation is required over the next 10 years.
Our annual risk review process confirmed existing operational, strategic and compliance risk controls are adequate for managing climate change risk in our businesses. We believe appropriate action is being taken including appropriate disclosures.
The Group actively explores opportunities to support positive environmental outcomes as we transition to a low carbon economy.