This is the presentation delivered by Lee Swan at the first seminar for the ORT JET mentors hosted at Deloitte SA. It was delivered on 24 March 2012.

1. Green is the new Black:
Exploring the business implications of the
Sustainability & Climate Change Agenda
in South Africa
February 2012

2. Presentation Agenda
1. What does sustainability mean?
2. Background to the emergence of Sustainability and Climate Change as an
international discussion
3. Update on the South African Policy Position
4. Update from the Budget Speech 2012/2013
5. Key Issue to Consider for South African Business
6. Immediate Priorities for South African Businesses
2 ©2009 Deloitte LLP. All rights reserved.

3. What is ‘sustainability’ and
where did it come from?

4. Defining „Sustainability‟
Sustainability in one organisation isn’t necessarily the same as sustainability in another.
It is important at the outset to define what ‘sustainability’ means for your organisation. Which aspects
are material? Through workshops with Executives the definition of ‘sustainability’ could include aspects
of the Economic, Political, Environmental and Social Spheres to determine which facets of these are
materially relevant to your organisation.
Economic Contribution Natural Resource
Employment Emissions
Security of Energy & Energy Efficiency
Resources Carbon Emissions & Carbon Tax
Catalyst for Economic Pollution
ECONOMIC
Change Noise
Cost of Natural Resources Water
ENVIRONMENT
Human Capital Costs Asset Performance
Operating Infrastructure
Costs
Finance and Funding
Taxes Skills Development
Transformation
Investor Expectations POLITICAL
SOCIAL Community Development
Customer Expectations
Employment Creation
Climate Change Commitments
Role in Social Change
Regulatory Engagement
B-BBEE
Employee Considerations
CSI
©2009 Deloitte LLP. All rights reserved.
4

5. The emergence of sustainability as an international
conversation
1987: The UN Brundtland Commission definition
• Change from ‘Global Warming’ to ‘Sustainability’
• Sustainability or sustainable development is that which “meets the needs of the current
generations without jeopardising the ability of future generations to meet their own needs”
1992: Rio UN Earth Summit
• Gave rise to the UN Framework Convention on Climate Change (UNFCCC) – 194 signatories
1995: UNFCCC Conference of the Parties (COP 1 Berlin)
• Climate Change specific focus
1997: COP 3 and the Kyoto Protocol
• First voluntary global agreement on Climate Change – needed to be ratified
• Based on an acceptance of climate change science
• Based on an acceptance that industrialisation (and the associated growth in carbon emissions) is
accelerating the earth’s warming cycle.
• Focus on carbon reduction in industrialised countries
5 ©2009 Deloitte LLP. All rights reserved.

6. The emergence of sustainability as an international
conversation
2002: Jo‟burg UN Summit on Sustainable Development
• Took the definition further by defining sustainability in terms of social, environmental and economic
factors
• Became known as the 3 pillars of sustainability & Triple bottom line reporting
2004 - 2012: International Sustainability Reporting Standards
• Global Reporting Initiative
• King III on corporate governance in SA
1998 – 2008: COP 4 – COP 14
• Emergence of a number of treaties and accords on climate change
• Ratification of the Kyoto Protocol in 2005
• Placed a burden on ratifying developed countries to introduce climate change legislation
• Implementation of various ‘incentive’ based mechanisms (such as the CDM carbon credit
mechanism)
2009: COP 15 Copenhagen
• Global pressure for a ‘legally binding’ global agreement on climate change, including Developing
countries.
6 ©2009 Deloitte LLP. All rights reserved.

7. The emergence of sustainability as an international
conversation
2011: COP 17, Durban
• Still no legally binding agreement on climate change
• Agreement on the continuation of the CDM
• A degree of commitment on financing for low carbon development in Developing Countries by
Developed Countries (commitment to create the Green Climate Fund of $100bn per year for low
carbon projects).
• Establishment of new negotiating groupings by common issues and implications. SA is part of
BRICSA and the African Group.
7 ©2009 Deloitte LLP. All rights reserved.

8. Sustainability Policy Position
– South Africa

9. Recent policy shifts
• Presidential commitment to reduce South Africa’s greenhouse gas emissions
compared with business as usual (34% by 2020 and 42% by 2025)
• National Climate Change Policy White Paper published in 2011 and sets the
framework for regulating carbon in the South African economy.
• National Treasury: carbon pricing policy paper published in 2011. It sets out the
proposed introduction of a carbon tax in South Africa
• DTI & Treasury: grants and incentives available for R&D (including energy and
carbon), a number of grant programmes support development of large-scale
renewable energy (CIP), and some manufacturing grants now demand in-built
energy efficiency.
• Eskom: security of supply (keeping the lights on) and electricity price
escalations.
• NERSA Renewable Energy Bid Process: significant drive to establish
independent power production capacity in SA with a view to feeding RE into
Eskom’s grid. Lowering the carbon footprint of SA and assisting with securing
supply whilst accelerating economic development in local communities. 3 725
MW.
• King III: places sustainability firmly at the centre of good corporate governance
(Integrated Reporting)

10. National Budget Speech 2012/2013
Carbon Tax
• Second version of a draft policy paper on carbon tax will be released in 2012.
• Carbon tax will be introduced in 2013/14.
• First phase will run to 2019.
• The carbon price will be R120 per ton CO2e in 2013/14 and increase by 10% per year.
• No clarity on what scopes of emissions will be taxed.
• Companies will need a verified carbon footprint each year.
• All companies will be given a tax-free threshold of 60% so they only pay for 40% of their
emissions, until 2019.
• Some sectors will get additional tax-free threshold percentages – trade exposed
sectors and sectors with process emissions that cannot be reduced in the short term
(cement, paper etc.)
• In phase 2 (2020 to 2025), the tax free threshold will be reduced or removed completely.
• Offsets are allowed into the carbon tax and will reduce the impact of a carbon tax for
companies.
• Revenue will not be ring-fenced.

11. National Budget Speech 2012/2013
Electricity Levy
• The electricity levy generated from non-renewable sources will be increased by 1c/kWh
to 3.5c/kWh.
• The additional revenue will be used to fund Eskom energy efficiency initiatives such as
solar water heater programme.
• This will replace the current funding mechanism that is incorporated into Eskom’s
annual tariff application.
• The net impact on electricity tariffs should be neutral.

12. National Budget Speech 2012/2013
Fuel Levy
Increase by 20c/l with effect from 1 April 2012.
Infrastructure
The Budget Review lists 43 major infrastructure projects, adding up to R3.2 trillion in
expenditure. R300 billion of this is in the energy sector. Uncertain whether any of this is
ring fenced for alternative or renewable energy investment.
Green Fund
Government will initiate a national green fund in April 2012, with capitalisation of R800
million over two years to support green-economy activities.
Likely to fund low-carbon projects, but will also come with additional requirements like
minimum contribution to job creation, skills development and economic development in local
communities.

13. Finding balance &
resilience in your
business

14. Minimising burden & maximising opportunity
• Educate yourself – existing and pipe-line regulations and incentives could pose
risk or present opportunity for your business. Education is key to avoiding risk
and identifying opportunities.
• Define „sustainability‟ for your own organisation – establish where the risks
and opportunities are in your business and establish which economic, social,
environmental indicators are material to your organisation.
• Start measuring material sustainability indicators – mandatory carbon
reporting is here… and it isn’t simple. Integrated Reporting requirements are
here… and they’re not straightforward. Get on the learning curve early.
• Understand your organisations role in the value chain – can your
organisation have a positive impact on material sustainability issues of your
customers? Or worse… could the way you service your customers create an
additional burden for them?

15. Minimising burden & maximising opportunity
• Understand the supply chain – are there emerging liabilities in the supply
chain which are likely to be passed on to you at some point? Are your suppliers
pro-active in identifying risks and opportunities for you?
• Engage in the policy-making process – The time is now. Legislation, policy
and regulations are still evolving. Business must mobilise to engage in this
process to ensure that structures for carbon reduction and sustainability
reporting are appropriate. Business needs to do their own assessments on
impact of carbon tax etc.
• Begin with the end in mind – revisit business strategies & practices, capital
projects, product development and supply chain decisions to identify risks and
opportunities – ensure grants and incentives are built into decision making
process.

16. Minimising burden & maximising opportunity
• Get buy-in from the top – it is essential the CEO & Board understand the
implications for their business & provide their staff with a mandate to respond to
risks and opportunities.
• Adopt an integrated approach – sustainability is no longer a matter for
sustainability or green specialists on the sidelines, it should be central to your
business’s vision and strategy.
• Communicate with all stakeholders – talk to customers, investors, staff &
suppliers. Keep it relevant and substantive and listen to feedback.

17. First Steps

18. Start now
• Get to grips with the implications of the carbon tax for your business in the
immediate, medium and long term. Look at your value chain, your supply chain
and your organisation's role in wider supply chains.
• Understand the requirements around mandatory reporting on carbon – look
for the risk areas and distil the potential opportunities.
• Begin the journey towards an integrated report.
• All new projects should aim to qualify for carbon credits, capital grants &
incentives, R&D tax allowances (11D), energy savings allowances (12L).
Include this as part of initial due diligence on investments.
• Start identifying future projects which will result in energy savings. Energy
price escalation combined with carbon taxes can create 'shut down' situations
for many businesses

19. Contact us
Lee Swan
Manager : Sustainability & Climate Change Strategy
leeswan@deloitte.co.za
072 812 0751