“Let's drill down,” said Darren Scammell (pictured above), as he introduced the topic of carbon emissions. Insurance Business wasn’t sure if the pun was intended.
“Carbon emissions is the hottest topic at the moment, obviously,” said Scammell, who is consulting firm Grant Thornton’s (GT’s) national head of financial services. He also leads the firm’s Environmental, Social, and Governance (ESG) advisory offering.
The webinar presentation that followed was a useful guide for brokers and insurers trying to understand the complex reporting requirements, both new and already in play, around climate change and carbon.
The issue is also a focus of COP28, the United Nations Climate Change Conference, currently taking place in Dubai.
“Scope 1 is when organisations are being asked to report just what their direct emissions are around carbon,” said Scammell. “So what do they emit, where are the emissions coming from and what do they do.”
Scope 2, he said, refers to indirect emissions.
“This is when an organization buys electricity or gas, for example,” said Scammell. “That electricity or gas can be converted using mass models into a carbon output and that's what's being recorded.”
Scope 3 is focused, he said, on the emissions in a firm’s “value chain.”
“At GT we had a recent survey that went out to all staff asking them how they get to work,” said Scammell. “Do they catch the train? Do they drive? Do they ride their bike? Do they walk? Are they at home? If so, do they have solar panels on the roof, for example.”
He described these emissions as “not directly influenced by the organization but part of their process.”
Scope 4, he said, steps outside the supply chain.
“Scope 4 is one that’s being talked about,” said Scammell. “It’s outside your chain so what happens through the use of your product.”
He gave the example of a plastic bottle manufacturer.
“They sell the bottles but what happens then?” Scammell said. “Do they have to be melted down and then collected by trucks?”
This scope, he said, looks at what could be avoided if this firm, for example, recycled the plastics it uses. Scope 4, he said, would also take into account impacts from this plastic overtime as it breaks down in the environment.
“So it's not very precise terminology but we need to be considering it,” said Scammell.
The GF ESG specialist encouraged firms – including insurers and their stakeholders, if they haven’t already – to start working out a strategy.
“You've got a choice, you don't have to do it at this stage,” he said. “It’s 2025, around the ‘E’ side of things with carbon.”
But he strongly encourages firms to get started.
The other issue companies need to think about, he said, is how to communicate this ESG and carbon-related information.
“What's the best format to communicate? And when you communicate, is it correct?” Scammell said.
“Focus on the people in your organization,” he said. “Do they have the time and space to start gathering the information?”
Scammell said employees are generally very interested in ESG endeavours and suggested it was a good way to increase a firm’s staff engagement.
He said many Australian firms are already in the initial stages of their ESG journey and developing their sustainability strategies.
“They’re in the middle of it and starting to embed it – which can be part of your strategy to make your organization even more successful,” said Scammell. “So don't just think of it as reporting your carbon emissions in 2025, think of it as a broader opportunity to use the ESG framework to tell your story in a better, more succinct way.”
He encouraged the insurance industry to employ an ESG strategy as a competitive advantage.
“Get ahead of your competitors and make sure that you're mitigating your risks,” said Scammell. “In your industry [insurers], particularly, I know you do mitigate risks in that regard, it is a good way of actually reporting on what you're doing around managing the risks and the opportunities that come from climate change and carbon usage.”
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