Exporters cannot ignore carbon footprint

 CALCULATING AN ORGANISATION’S CARBON FOOTPRINT NO LONGER NEEDS TO BE A GUESSING GAME

SA’s economic survival in a post-Covid world depends significantly on trade. However, the ability to trade internationally depends on an enterprise’s compliance with worldwide standards and regulations, which often involve various trade tariffs.

As part of a global shift towards climate-change action, carbon tariffs on imported goods are in the pipeline for regions such as Japan, Europe and the US, in line with the US Clean Energy Security Act. This imposes a carbon tariff on certain developing countries that do not take mandatory emission reduction measures.

This means countries need to track and monitor their carbon emissions to be able to export goods, while calculating their carbon tariffs. This is where trade is headed, from a commerce and consumer choice perspective, so competitiveness will depend on a trade organisation’s ability to quantify its carbon consciousness and provide evidence.

Enterprises can no longer afford to ignore the triple bottom line regarding international trade. No longer can the social and environmental cost be omitted from profit calculations. Instead of one bottom line, businesses will need to account for profit, people and the planet. This triple bottom line approach makes it critical to acknowledge the urgency in reducing the carbon footprint of everything that is manufactured, traded and transported worldwide.

Developing nations are capable of producing cheaper carbon-intensive goods only because they have not yet set a price on carbon output and have thus far resisted legal commitments to reduce their emissions. Such carbon tariffs are intended to make up for the difference in price and have indirectly resulted in regulation of associated emissions.

In addition to ensuring ability and appeal to trade with other countries, industries in SA will need to be able to quantify, track and monitor their carbon emissions to be able to calculate liability for carbon tax payable locally. Our Carbon Tax Act makes provision for a phased rollout of tax liability for carbonintensive industries. By making businesses and consumers alike aware of the negative costs in production, consumption and investment decisions regarding emission initiatives, enterprises are incentivised towards adopting cleaner technologies.

The carbon tax will apply to scope 1 emitters in the first phase, which runs until December 31 2022. SA’s carbon tax model provides relief in the form of emission allowances ranging from 60% to 95% in the first phase, which permits a basic tax-free allowance of 60% for all activities and a 10% allowance for companies that use carbon offsets to reduce their tax liability. A 5% budget allowance is given simply for complying with the act’s reporting requirements, and a further 10% is allowed for tradeexposed sectors, to ensure they are not taxed doubly on carbon.

Soon it will be a legal requirement for SA trade organisations to have some form of carbon certificate as an import and export prerequisite.

As consumers make more carbon-conscious purchasing decisions, it will become increasingly critical for manufacturers to be able to show the emissions factor for every one of their products, so that they can differentiate themselves. Calculating an organisation’s carbon footprint no longer needs to be a guessing game based on assumptions. Software tools, including locally developed carbon tax calculators, can reduce the administrative burden for businesses in the assessment of carbon tax liability, providing accurate visualisation of the organisation’s carbon footprint.

Once an enterprise has a detailed understanding of its emission sources, it is possible to identify potential emission reduction measures that can be implemented to show that it is working towards becoming the carbon-conscious trade partner that other countries will soon be looking for.