What’s stopping us from decarbonising the future?

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Nexus, Publish By GHD.

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Where ideas connect.

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Michael, great to have you with us today.

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Can you talk us through a little bit

about why not understanding

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emission

baselines can lead to poor decisions?

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Yeah, I think that the answer to

that is twofold.

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There's obviously aspects of voluntary

and mandatory reporting that companies

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need to ascribe to annually,

and a bad decision would be

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to erroneously report to the regulators

or to your stakeholder group.

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And so having a good understanding

of your baseline in that respect is,

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is quite important.

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But then we think of the functional

aspects of decarbonization is

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you really want to understand your problem

space better or as well as you can,

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so that you can implement solutions

to be able to decarbonize.

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One aspect of that

that we see is with respect to scope three

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currently organizations

and typically are using spend

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based analysis for scope three emissions

based learning, which from an industry

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perspective is perfectly acceptable

and largely applied.

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But where the difficulty is, is,

is that they're unable to effect change

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in their organization

based on that methodology.

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And so really running to ground

material emissions

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within scope three and elsewhere,

with appropriate methodologies for,

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for doing Baselining is very,

very important to both decarbonization

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and your subsequent reporting.

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And how can spending more time

on this help businesses?

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Michael, if you can go into a little bit

more detail and can you talk us through

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scope three briefly

before diving into that question?

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So businesses with scope three

emissions exposure are those

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that typically have upstream

and downstream supply chains.

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And if we think about it,

many businesses do.

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And where they want to be understanding

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emissions is in material

aspects of upstream.

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So this could be, precursor materials

for their products or feedstocks,

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but also downstream.

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Where is the product used?

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How is it transported,

how is it warehoused, etc., etc..

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And that is different for different

products, different businesses

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and different services

that the industry might be offering.

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So it is really imperative for businesses

to properly understand

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their supply chains

both upstream and downstream.

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And then to, spend a bit of time

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understanding the boundary

of where they want to analyze

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and to properly understand

the materiality of those emissions.

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For example, you might be a manufacturer

of a small product,

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but you have a large, logistics supply

chain that sits behind the distribution

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of that, to your client base

and really running to ground the emissions

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for your logistics, can be quite helpful

in you being able to firstly understand

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your business as usual emissions

for scope three and logistics,

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but also then working

with your logistics partners

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or if they are owned within the business,

with your fleet management

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teams, to be able to understand how

you can solve, your emissions problems.

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For those scope three elements.

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And at times there can be uncertainty

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and investment risks

associated with decarbonization.

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Can you talk us through how we could

potentially reduce that associated costs

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and uncertainty, as well as potentially

de-risk decarbonization?

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If we go back to the traditional business

model, have how the industry interacts

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with the supply chain, it's often

very transactional, and that results in

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you asking of end of what something costs

and really not

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having any say in the development of that

or the optimization of that.

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And you accept the market price.

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I think with decarbonization,

what it enables or requires of industry

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is to be more involved

with your supply chains

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in both understanding how they're going

about their business from an emissions

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perspective and potentially energy

efficiency perspective.

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But also to understand where the costs are

within that part of the business,

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because your vendors or your suppliers,

downstream or upstream,

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will be themselves

potentially implementing,

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decarbonization solutions,

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within their business,

which could have a cost impact on you

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and understanding where those costs

are ascribed in their value chain,

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and in their business is very important

to understanding

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and reducing the uncertainty

of your own decarbonization efforts.

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And I think more broadly,

what decarbonization also promotes within

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industry is quite an amount

of diversification from coal business.

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So we see a lot of manufacturers

that might typically work

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in the development or production

of components, or they might be OEMs.

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And now they're having to think about

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energy storage, or they're having to think

about rooftop solar.

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So they're getting into the power business

in some respects,

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which is not where they skillset,

not where they keep efficiencies.

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So being able to properly understand

cost in those aspects

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and maybe who's the most appropriate

organization to be,

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conducting those activities

within your business,

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you may choose to outsource to a vendor

that has a better cost appreciation.

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In that respect.

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Now, we've spoken

about industry roles of organizations.

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Do you think that there is a role

for government to support,

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or even something like blended

finance models in this space?

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Yeah, completely.

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And I think the the role for government

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and also potentially industry

lobby groups, are several fold.

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You have the very literal contributions

that government need to make,

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to support and de-risk, project

financing, through grants,

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potentially through assistance

in blended finance, where the government

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will will take on some of the financial

risk of some of these, projects,

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to get them over the line.

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But there are other things that government

can do, to support industry,

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because if we think of decarbonization

along the engineering development

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chain, there's all sorts of interventions

that government can do to assist

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the industry, whether that be assistance

with concept and feasibility studies,

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whether that is, providing support

and assistance in front end

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engineering and design.

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But it could also be in the implementation

construction phases

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where the government can either provide

capital or expertise, where organizations,

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can't necessarily source

that value within their organization.

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So there's a whole heap

of supporting mechanisms that government

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can and should consider in terms of skills

within a particular organization.

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How can organizations

across the different regions

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sport gaps in their skills for better

planning in the decarbonization space?

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And the second part to

this question is how important

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is it to retain workers from sectors

like coal

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and transitioned them into new roles

as we move through decarbonization?

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Yeah, I think that's a very good question.

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And, there is no silver bullet to this.

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And I think the industry is,

having a degree of,

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introspection as to how to appropriately,

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position themselves

to increase skills and capability.

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I think the first thing

is to properly understand business needs.

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When a business considers technology

and engineering that consider their needs,

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from a skill set perspective, they need

to be thinking along the same lines.

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And we see companies that have long term

strategies to get into different, biofuel

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plays, different future fuels industries

where they don't have

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a domestic capability

within their organization.

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And being able to pivot a workforce.

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And you mentioned coal

as an example of that.

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We see a lot of concern within the coal

sector of how those communities

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and how those workforces,

will be repositioned

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within this, this new economy,

this decarbonized economy.

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So being able to understand

your needs is very, very important.

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And I would say those needs sit right

across the vertical within the business

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when we're considering

both technical needs.

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So the needs to be able to design,

to operate, to maintain

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these new technologies also within boards

and senior management

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positions, is making sure

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that we have the appropriate roles

and responsibilities within organization

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to be able to orchestrate,

some of these decarbonization efforts.

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One example is, sectors like wind,

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completely designed differently

than, say, the oil and gas industry.

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Thank you Michael.

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And that leads me

to my final question for you.

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You've given us

some really good scenarios, examples

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and if you had $10 billion today,

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how would you tackle the issues

we've just discussed?

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I'd start that saying

10 billion isn't quite enough.

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It's all I've got.

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Unfortunately,

my joke answer is to reinvest

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it and, get a little bit more money to

to play with.

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But if I was really to sit back in

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my chair and see where that 10 billion

could be more effectively

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used, I would say I'd be putting

that towards skills building in areas

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where your country, your organization, is

seeking to really develop its, expertise.

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When we talk about Australia,

there's a lot of, conversations

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around the hydrogen economy and some of

the biofuels and future fuel space.

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I think really, tooling up the workforce

and making sure that's adequate staffing

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capabilities, technical expertise,

and to a degree, sovereign capacity

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to be able to build, to innovate, within

these areas would be money well spent.

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The governments are very, very skilled

at setting up innovation hubs.

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And, and really coalescing universities

around skills building.

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So I think the government would be

best placed to spend that 10 billion.

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Brought to you by Nexus, Publish By GHD.

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Where ideas connect