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Business leaders must plan for the new energy era


Guest blog by Leidar’s Senior Energy Specialist, Peter Houzer.

End of lignite in Germany in sight – and mandatory sustainability reporting starts in 2017

Following the COP21 meeting in Paris and the commitments made by all ratifying political leaders, dramatic decisions will need to be taken by regulators and businesses alike.

For example, if the defined ideal target of limiting the global temperature increase to 1.5 degree is to be achieved, it only allows for another six years of burning carbon at the same level as we have been, with an immediate stop in 2022. Lignite is undeniably known as the most hazardous and heaviest CO2 emitter per Megawatt hours of power produced. Most logically, this will be the first source we’ll stop using, with Germany, as the biggest lignite burner, at the forefront.

But it is not only the energy sector that is impacted severely. Each company with more than 500 employees has to change its energy consumption reporting and documentation. Publicly listed company are specifically affected. It requires immediate and bold action for company executives to navigate their organisations through reporting and communications needs stemming from the new regulatory requirements.

A burden on the balance sheet – limiting access to funding

Major banks, pension funds, insurance firms and other financial institutions already divert their investments to businesses with low- or no-carbon consumption. If your firm still has CO2 – like coal or oil – in its overall energy portfolio, or uses power from an unknown origin it will become a burden on your balance sheet. It even may limit or hinder access to needed financing from investors.

A company that is not carbon neutral in the given time frame might pay penalties. Or shareholders will raise their voices, insisting on changing the power consumption mix. To make it crystal clear: this risk is by no means limited to utilities or power generators: any company consuming undisclosed power will be affected.

A globally agreed “polluter pays” principle means that anyone either consciously or unconsciously emitting carbon-dioxide will be held responsible, and may pay the bill for mitigation and adaption later. With this in mind, and with an eye on future balance sheets, ratings agencies may drop their projections. Shareholders will re-consider their investments. Or will try to impose low-carbon strategies, including 100% reliance on renewable energy sources, as soon as possible.

New mandatory reporting and accounting of sustainable issues as of 2017

From next year (2017) onwards, independent reporting and accounting of environmental and sustainable issues – like those imposed by EMAS – in annual reports will be mandatory. Then how far your company, organisation or administration causes environmental impact will become transparent and visible, as will how much you burden local, regional or global systems.

The summary of these new reporting requirements is that business leaders

  • …should think twice when negotiating power deals with, or purchasing undisclosed power, through power exchanges
  • …have to make sure you get your Guarantees of Origin (GO) deleted on your behalf in the national registry
  • …must ascertain that future/forward contracts have a certified green component/origin included, backed by GOs
  • … need to communicate and engage more effectively with their stakeholders to assure the actions taken are known and understood

One other aspect is important: when annual power deals are negotiated this year – 2016 – in summer, or autumn at the latest, companies need to confirm their green, low-carbon portion secured for 2017, when the reporting and accounting will become mandatory!

Rolf Olsen

CEO, based in Geneva

Rolf Olsen launched Leidar in 2010 and continues to lead the company as CEO.  He advises clients on strategy and narrative development; crisis management; and complex reputational issues on a global scale.

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