Transport businesses embarking on decarbonisation initiatives will need to “risk stress test” their transition plans.
This is the view being shared by Gallagher, whose Head of Climate & Sustainability, Sophie Griffin, spoke at this month’s VTA Alternative Fuel Summit.
According to Griffin, not enough businesses were considering the risk their entity faced and how they would transition to lower their emissions.
“You can’t ignore it. You’re either going to be impacted by physical climate change or you’re going to be impacted by the rapid transition,” she told attendees.
Griffin said many transport businesses in her experience have been so perplexed by the expectations of their business when it came to emissions reporting, that they were considering drastic measures like dissolution and withdrawing from the market.
“Your emissions are most likely someone else’s scope 3 emissions, and that’s why they’re asking you for it,” Griffin said.
Calculating the output of emissions was difficult and highly dependent on the boundaries and complexity of supply chains.
“These things, like the manufacturing of trucks, where they are getting purchased from, the purchase from goods and services into your organisation, also your fuel supply chain and employee commuting, capital goods, are downstream for the use of sole services,” said Griffin.
“Vehicles bought need to be thought about in terms of how they are going to be used in the future and what roads they will be used on. Waste disposal, tyres and packaging. Customer fuel cards and logistics systems.”
An increasing rise in stakeholder activism had initiated lawsuits made against companies that made net zero mission statements.
Oil and gas giant Santos is currently in the Federal Court of Australia having had greenwashing claims brought against it by activist shareholders at the Australasian Centre for Corporate Responsibility.
In the insurance industry the appetite for certain types of risks, most notably coal, had been a byproduct of these shifts to an inflection point.
“We are also seeing the finance sector, where they’re making very bold statements on their investments into fossil fuels in the future,” said Griffin.
While transport and logistics businesses were left to consider where environmental risk ended and the risks of environmentalism began, Griffin said the insurance industry was positioning itself as a partner to help enable businesses in their decarbonisation transition.
“But you need to risk stress test your transition plans,” she said.
“Don’t make statements without knowing how you are going to get there.”
Insurance would, according to Griffin, play a major role in decarbonisation as it would enable finance and bridge what she called “resiliency gaps” as sustainability and efficiency were pursued during these transitional phases.
Changes in business models were often going to affect first-party and third-party exposures to the extent that policy limits no longer made sense or additional coverage might be warranted.
Some businesses, for instance, would need to consider introducing cyber risk into their value chain.
The big lesson Griffin wanted to impart on the audience was for transport companies to avoid handing over emissions reporting to third parties.
“Own your own emissions. Don’t pass them off to someone else to do it for you,” she said.
“Use it as an opportunity to train and upskill your staff. If you don’t own your emissions and you give it to a third-party this is where you can have gaps in knowledge and gaps in strategy within the organisation and your ability to move forward with that information when you want to take it on yourself.
“Most importantly, upskilling your organisation and uplifting them from a board level down, is one of the most beneficial ways to address your organisation.”