Climate change strategy
Climate change is incorporated into our broader sustainability strategy which is described in the Sustainability at Wesfarmers section of this report. The governance structure we have in place has been designed so that it is flexible enough to cater to the needs of our diverse conglomerate business model while remaining clear and practical.
Given the diversity of our businesses and consequently the range of risks and opportunities posed by climate change, we believe this approach is more effective than a stand-alone Group strategy.
We are focused on improving the greenhouse gas efficiency of our operations, which reduces our own business costs and risk, as well as contributing to climate change mitigation. We have identified the material climate change issues relevant to our business and incorporated them into our short and long term planning.
Two degree scenario analysis
To understand the longer term impacts to the Australian economy, including risks and opportunities for Wesfarmers, of limiting global warming to less than two degrees Celsius above pre-industrial levels, we have undertaken scenario analysis. This analysis helps our business to examine what outcomes we can expect under a wider range of economic, regulatory and societal conditions.
The scenarios below are based on different approaches to global climate change cooperation:
- Lagging action: Climate change mitigation is accelerated after an initial delay. A lack of early private sector investment due to limited incentives to reduce emissions and an increasing carbon price result in slow cost reductions of low carbon technologies. This scenario includes an expectation that emission reduction targets will strengthen over time.
- Global action: Action from major emitting countries results in a globally coordinated transition to a low carbon economy. A global carbon market trading system which can be accessed by all countries would provide Australia with the opportunity to trade carbon competitively.
- National action: Each country takes action individually to decarbonise efficiently. Stable Federal Government policy drives private sector investment in technologies to mitigate and adapt to climate change.
Based on these scenarios above, since 2014, Wesfarmers has put a shadow price on carbon to help reduce our carbon footprint cost effectively. Shadow carbon pricing is a method of investment decision analysis that adds a hypothetical surcharge to market prices for goods that involve significant carbon emissions. For example, if Wesfarmers is analysing an acquisition of new energy-using equipment, it would use expected energy costs of expected market prices plus a charge associated with the carbon dioxide that would be emitted when the fuel is combusted. Wesfarmers applies the shadow carbon price in the analysis of investments and other strategic decisions to give an edge to options that are more emissions efficient, other things being equal.
This is based on a moderated view of necessary and likely carbon prices in Australia and overseas based on the three scenarios described above. There is a view that a formal tradeable price on carbon will be re-introduced in Australia at some time in the medium-term. The underlying data behind the carbon price is reviewed annually.
Natural resource management
We are committed to being responsible stewards of the natural resources used in our operations. Forests are a critical part of our efforts to reduce greenhouse gas emissions and our businesses are focused on ensuring the forestry products they source are from legal and well managed forests. For example, Officeworks prioritises 100 per cent recycled content or Forest Stewardship Council (FSC) certification as best practice. Bunnings supplied the first FSC certified Merbau/Kwila timber decking into New Zealand stores in January 2017.
Helping customers reduce their emissions
Our divisions are helping customers reduce greenhouse gas emissions. For example, Bunnings continues to provide information and education to help customers make sustainable living choices and take practical actions at low cost or no cost to save energy, use less water and reduce waste. This includes providing a wide range of expert advice in-store and online, free DIY workshops and DIY how-to guides.
Officeworks is Australia’s largest retail collector of used printer cartridges, computers and electronic accessories. Through recycling these materials, Officeworks has reduced the need for resource extraction, thus reducing the carbon intensity of its products. Officeworks has also partnered with Restoring Australia to plant two trees for every one tree used in the paper and wood products it sells.