Scenarios affecting Wesfarmers’ sustainability

ACCT 3010 Sustainability Accounting and Reporting

   During the period spanning from 2015-2020, Australian Wesfarmers’ sustainability findings indicate that climate change poses risks, and the consolidated report usually gives the risk and audit committee as well as to the Wesfarmers board to review and approve. These teams have assessed and found that from the global practice and scientific forecast. It is necessary to hypothetically consider the findings to envisage the scenarios in the analysis of the climatic disclosures risk associations that were presented in 2017 by the TFCD Technical supplement (Karp, 2019)

The three scenarios are a respective reflection of the global average temperature limitations that increase beyond the pre-industrial capping by 1.50C, 20C and 40C by

2100 as shown in the table below.

Source: Wesfarmers Sustainability report 2019

   These three scenarios affect Wesfarmers’ sustainability because they pose transition and physical risks and risks linked to changing to an economy with lower carbon. They assessed this to improve their understanding of approaches to mitigate them and become resilient in the transition period to an economy of low carbon. This is foreseen to impact to the business of the Wesfarmers’ supply chain, products, scale, operations, customers, and geography. The risk will differently affect each trade.

Physical Impacts

   The duration of reporting found that the climatic changes projected in temperature, the intensity of storm surge, sea-level changes, frequent changes in extreme weather and precipitation will increase the current risks and additionally expose the Wesfarmers to the following risks:

  1. Safety of food: an extended period of a power outage of any kind or the waves of heat largely spoils food. This implies Wesfarmers will ni be able to supply enough food to their customers; neither will it be easy to provide stores again. Food shortage flow impacts, albeit short-term, affect public safety and health.
  2. Reliability of the energy infrastructure: extreme conditions of weather such as waves of heat will adversely affect the infrastructure of energy such and generators, energy transmission, and lines of distributions, which will result in unreliable energy supply.
  3. Damage of infrastructure: weather vagaries extremities are likely to damage Wesfarmers’ physical assets, including stores and transport facilities.
  4. Store openings: frequent extreme and server weather occurrence will probably imply buildings and roads will be rendered unusable. At such absolute climatic conditions, customers will likely not access the stores to purchase essential products, stores will also not be able to open, and resupply will be impeded.
  5. Costs of energy: refrigeration cost, air conditioning, heating, and ventilation are projected to rise yearly as a result of increased hot days.

Impact mitigation

                        The industry mitigates climate change risks through improving the efficiency of electricity supply to lower emissions and demands on the energy distribution networks. In places, they rent the report indicated that they collaborate with landlords in improving the resilience of their physical sites to the changes of climate. In some of the retail outlets, they adopt the use of solar in agreements with landlords. The majority of their retail stores are fitted with energy consumption monitoring types of equipment. Additionally, the industry has intelligence systems for management that goes above the level of equipment in optimizing te site operations, interface with maintenance prevention, planning, and management of proactive energy-efficient opportunities.

                        Moreover, the business focuses on supply diversification to mitigate risks as well as bridging long-term links for assisting suppliers in making long-term investments (Martin, 2019). Robust plans for business continuity are already put in place for ascertaining that the industry transports and provides supplies to their clients in locations experiencing severe weather impacts. Additionally, to sustain the business, they educate clients about the living choices that are sustainable towards reducing the footprint of carbon alongside providing them with commodities capable of assisting them in adapting to changes in climate. The table below shows the gas emission from greenhouses of Wesfarmers from 2015- 2019

Source:  Wesfarmers Sustainability report 2019

From the above table, it evident that Wesfarmers has been reducing the rate of emission steadily for a sustainable climate.

Regulatory impacts

   Apart from the physical impacts, there is regulatory risk impact, the Wesfarmers sustainability reports during the period indicated that there would also be the regulatory risk impacts as discussed below.

Form the reports; it was found out that there is a significant governments’ attitude shift toward regulation to emissions from the 2015 Paris conference of parties where an agreement was made by197 countries to limit the level of global warming to 20c above the standards of the pre-industry  (Lodhia, 2019). The Australian government is also encouraging the approach to global consistency. According to Wesfarmers’ sustainability report (2019), the Wesfarmers industry, however, tests the resilience towards this regulation and is trying to collaborate with partners to regulate their limits of global warming to operate between 1.50C-20C.  Their reports also anticipate other policy regulations to be applied during 2015-2030, which may negatively affect their industry’s operations. The industry reduces emissions through the innovation of projects in energy efficiency, staying updated on changes regulating energy and adopting a shadow price of carbon in the decision making of the industry capital expenditure (Martin, 2019). The industry reported that their existing controls are adequate to manage those regulatory risks.

Reputational impacts

   The report revealed that there are reputational risks caused by forecasted climatic changes. Contextually, frequent weather vagaries alongside changing attitude in the world, customers are likely to have their expectation towards the companies changing alongside their efficiency of operation, transparency of the product range for the supply chain (Lodhia, 2019). Whereas, this is not easy to quantify by emission reduction as depicted in the above table. However, through the initiative of the industry initiatives in energy efficiency and reporting progress, the industry believes that their existing measures of control are sufficient to manage this risk.

Competitive impacts

   Besides, the reports revealed a competitive risk posed by the climatic change to the industry. The report indicates that trending models in business often take advantage posed by climatic variance opportunities and are more resilient to such changes will be a threat to the industry (Martin, 2019). Such models are under consideration in line with the industry’s current models used in business operations in terms of whether they will require any mitigation against the risk of competition in the subsequent ten years. The report shows that the industrial process of risk review depicted present operational, compliance, and strategic risk controls that are sufficient to manage the risks of change in climate to the business. The industry believes that measures are underway comprising relevant disclosures. According to Wesfarmers’ sustainability report (2019), the group is actively exploring opportunities that can support desired environmental results as they transit to an economy of low carbon. a

References

Butler, M. (2017). “How Australia bungled climate policy to create a decade of disappointment.” The Guardian. Retrieved 14 January 2020.

Lodhia, S. (2019) “What about your qualitative cousins: adapting the pitching template to qualitative research” Accounting and Finance, Vol. 59, No. 1, pp. 309-329.

Karp, P. (2019). “Climate change has cut Australian farm profits by 22% a year over past 20 years, report says

Martin, S. (2019). “Labor says emissions would be 200m tonnes lower if Greens had supported CPRS 

Wesfarmers Sustainability report (2019). https://sustainability.wesfarmers.com.au/

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