The recent enactment of South Africa’s Climate Change Act 22 marks a landmark moment for businesses operating within the country. This legislation signals a profound shift in the nation’s approach to addressing the global climate crisis, and business leaders must navigate a complex web of new regulations, reporting requirements, and strategic imperatives. Failure to adapt to this evolving landscape could result in significant reputational damage and the erosion of long-term competitiveness. By aligning company operations, investments, and corporate strategies with the Act’s objectives, businesses can not only mitigate their environmental impact but also position themselves for sustained success in the years to come.
In this blog post, we will delve into the key provisions of South Africa’s Climate Change Act and explore the critical considerations for businesses. From carbon budgets and sectoral emissions targets to reporting requirements and adaptation planning, we will unpack the complexities and identify the strategic pathways to help companies thrive in the new climate-conscious economy.
Carbon Budgets: Aligning with Emissions Targets
One of the central pillars of the Climate Change Act is the introduction of carbon budgets. According to Section 26 (2), the Minister will allocate a carbon budget to the concerned person or entity that conducts an activity listed as emitting greenhouse gases.
Businesses exceeding their allocated carbon budget must prepare and submit a greenhouse gas mitigation plan to the Minister for approval. Companies that fail to comply and emit more GHG emissions will be liable to pay a greater amount of carbon tax in terms of the Carbon Tax Act, 2019. This underscores the importance for businesses to closely monitor their emissions, implement robust emissions reduction strategies, and ensure they remain within their allocated carbon budgets.
Sectoral Emissions Targets: Adapting to Industry-Specific Frameworks
In addition to the carbon budgets, the Act mandates the Minister to list the sectors and sub-sectors that are subject to sectoral emissions targets. Businesses within these sectors will be required to implement policies and measures to achieve the emissions targets set by the Minister. (Chapter 5, Section 22)
The most significant impact of the Act on the private sector is the framework for regulating greenhouse gas (GHG) emitting sectors.
- Within one year, sectors and sub-sectors responsible for greenhouse gas emissions must publish their emissions targets.
- Develop sector-specific emissions frameworks and targets in collaboration with relevant Ministers.
- Release a list of greenhouse gases that contribute to climate change.
- Assign a carbon budget for at least 15 years to entities involved in emitting these listed greenhouse gases.
Synthetic Greenhouse Gases: Phasing Down and Phasing Out
The Climate Change Act empowers the Minister to declare certain greenhouse gases as “synthetic greenhouse gases” and require businesses to phase down or phase out the use of these gases. (Chapter 5, Section25) This provision presents both challenges and opportunities for companies that rely on or produce these substances.
Businesses will need to closely monitor the Minister’s declarations and develop plans to comply with the phase-down or phase-out requirements. However, this also creates an impetus for companies to explore alternative technologies, products that help with sustainability improvement programs and processes that are more environmentally friendly, potentially unlocking new market opportunities and competitive advantages.
Reporting and Monitoring: Enhancing Transparency and Accountability
The Climate Change Act also introduces robust reporting and monitoring requirements. Businesses allocated a carbon budget will be obligated to monitor, evaluate, and annually report on their progress against the allocated budget. Also, the Minister may require the concerned person or entity to provide data, information, documents, samples, or materials for the National Greenhouse Gas Inventory.
This increased transparency and accountability will help the government track the nation’s progress towards its climate goals and drive businesses to be more proactive in managing and reducing emissions.
Policy Alignment: Integrating Sustainability into Business Strategy
Underpinning the entire Climate Change Act is the requirement for businesses to review and, if necessary, revise their policies, measures, programs, and decisions to ensure they align with the principles and objectives of the legislation. (Chapter 2)
This policy alignment imperative challenges companies to take a holistic, strategic approach to sustainability. It goes beyond simply implementing emissions reduction measures and requires businesses to deeply integrate climate considerations into their overall corporate strategy, decision-making processes, and organizational culture.
Adaptation Planning: Building Climate Resilience
The Act also mandates the development of Sector Adaptation Strategy and Plans, which aim to identify and address the impacts of climate change on various industries. Businesses may be required to participate in developing these plans and align their operations and strategies accordingly.
By engaging in the adaptation planning process, companies can gain valuable insights into the climate-related risks and opportunities specific to their sector. This knowledge can inform investment decisions, operational adjustments, and looking into innovative solutions to enhance the resilience of their business models.
Navigating the Challenges and Seizing the Opportunities with Benchmark Gensuite
It is important to note that the Act will only come into operation on a date fixed by the President by proclamation in the Government Gazette. However, more and more ESG and Sustainability heads are taking a proactive stance to be part of the country’s journey towards a low-carbon, climate-resilient future.
By taking a head start on addressing the Act’s requirements, companies can mitigate their environmental impact and position themselves for long-term success. The new climate change law requires a comprehensive approach, which requires the help of Sustainability reporting specialists and experts. This may involve investing in sustainability and carbon emission reporting solutions, innovative products and services, enhancing supply chain resilience, and aligning corporate culture and decision-making with sustainability principles.
Learn how to be proactive about tackling your organization’s carbon emissions by contacting us today!
