Reducing SA’s Carbon Footprint – the Procurement profession’s role

Reducing Greenhouse Gases (GHGs) has become a priority for South African business and the Government.What role will procurement professionals play in this regard?

The following graph shows the various scenarios of the changes to the volume of SA’s GHG emissions.

At the Climate Change Summit earlier in 2009, consensus between industry and government included the need to achieve the “required by science” scenario (achieving a plateau and then a reduction in GHG emissions as shown in red above). This will drive initiatives in energy efficiency and renewable energy alternatives from government and industry with the introduction of energy efficiency standards. It will almost certainly involve the introduction of a carbon tax in the near future which may result in the cost of goods and services increasing. The Summit and subsequent consensus will result in a government Green Paper in the early part of 2010 with a White Paper to follow by December 2010 and then legislation.

If the National Energy Regulator of South Africa (NERSA) grants State-owned power utility Eskom its 45% annual increase in domestic electricity rates for the next three years (which seems increasingly likely), electricity which cost 20c a Kw/hr in 2006-7 will cost approximately 99c a Kw/hr in 2012 (a fivefold increase!). Added to this is the imminent need to conserve and re-use water as this too is becoming a scarcer and much more expensive resource.

What does this all mean to South African Procurement Professionals? Karen van Staden of Purchasing Index offered her suggestions to SmartProcurement:

Initially, there is huge scope for reviewing electrical usage within an organisation from changing to low wattage light bulbs to assisting in the sourcing and implementation of alternative energy sources, not only for the primary parts of the organisation, such as manufacturing plant and mining operations, but discreet use of solar power for office buildings, garden irrigation systems, etc. For coastal areas subject to regular sea breezes, wind turbines may also be suitable energy generators.

In terms of transport, one of the larger contributors to GHG, the need to reduce carbon emissions into the atmosphere will give added weight to implementing logistics initiatives such as central distribution for those organisations situated away from main urban centres and sharing facilities with other organisations in similar industry sectors. This may also reduce supplier distribution costs and reduce internal stockholding.

Procurement also has a role to play in helping to understand and measure an organisation’s carbon footprint, an essential part in base-lining the current footprint and empirically managing reductions into the future, and collaborating with those responsible for sustainability. This can be quite complicated and establishing a comprehensive methodology will inevitably reduce a substantial administrative burden. This can also be used to measure major suppliers and assist them with their reductions.

Ironically the current budget squeeze at Eskom has reduced subsidies available for renewable energy initiatives. Therefore, organisations should evaluate alternative energy savings without relying on subsidies from that source, but rather on a reasonable expectation that electricity will be at least 3-4 times more expensive in the next 4-5 years compared to the current (2009) tariffs. Eskom will consider buying excess energy produced by organisations (generating 2 Megawatts or more) based on the recent REFIT tariffs announced by NERSA.

Purchasing Index will be benchmarking aspects of sustainability and carbon footprint initiatives for organisations in 2010, which will not only assist organisations to see how their relative carbon footprint compares with their peers, but more importantly, what initiatives other organizations are adopting to enhance sustainability and the motivations behind these actions.

Please contact Karen van Staden on 083-441-0864 if you would like to know more.