Take note...

The Protocol is a reality which many South African companies would do well to take note of.

Paul Skivington, an enterprise-wide risk management specialist at Alexander Forbes Risk Services in South Africa says many South African companies would do well to take note of the Kyoto Protocol, which came into effect on 16 February 2005 with an objective of slowing down global warming.

Whether or not global warming is due to human activity, or simply a normal cycle of warming and cooling which has happened many times before, is a debate which will no doubt continue into the future.

According to Skivington, perhaps an even more interesting discussion is why should developing countries bind themselves to limits on emissions when one of the reasons developed countries got to be developed in the first place has been the absence of any such restrictions on industrial activity.

In China for example, the per head level of emission of greenhouse gases is 10 times lower than in the USA.

“Therefore it is not difficult then to understand why China has not signed any binding emissions targets - both a major opportunity in terms of carbon trading and the desire of the Chinese population to enjoy similar standards of living as the USA,” says Skivington.

Many would question then ‘what is the point’, if the USA, the largest emitter has not committed to the Kyoto Protocol (said to be the world’s most ‘far-reaching’ environmental treaty), and China the most populated country has not committed to emissions targets.

“What is clear however,” says Skivington” is that the Kyoto Protocol is a reality which many South African companies would do well to take note of.”

“From a risk management point of view it represents a change in the external environment which can pose risks for the unprepared. Business cannot claim to have been taken by surprise as it has taken a long time to get even this far.

“Companies which trade with many European countries, or are part of European multinationals, may well be forced to adopt standards in place in the countryof the Trading partner or Multinational head office, even if we have no emissions standards for greenhouse gases yet in South Africa,” he added.

On the opportunity side of the risk equation, the Protocol should encourage European countries to trade low carbon emission technologies with South Africa, and potentially to trade Carbon credits as well, although SA is not so well positioned in this regard due to the use of coal to generate most of its electricity.

Skivington also says: “While we clearly do not want to go back to the views of early in the 20th Centurywhen industrial plants belching out smoke were held up as examples of how well a countries industry was performing, it is also naive in the extreme to expect people to adopt lifestyles which are going to sacrificeadvancement for a lower impact on the environment.

“Mankind has never in its history done that before, and it is unlikely to start now.

“Realistically Kyoto is just a starting point on the road to truly sustainable development, but it has to be a win-win situation for all concerned.

“Companies which manage this risk well, and are innovative, will be winners in the medium term. In the short term it is probably more a case of ensuring compliance where necessary and being in a position of "No Surprises" for stakeholders,” says Skivington.