A zero-carbon future that leaves no Australian behind

Garreth Hanley:
This is INTHEBLACK, a Leadership Strategy and business podcast brought to you by CPA Australia.

Jackie Blondell:
Welcome to INTHEBLACK. My name is Jackie Blondell. Today we are talking about how governments and businesses worldwide are working towards a zero-carbon future. This delicate balancing act involves carbon intensive industries, the communities that surround them, and the huge structural changes we will need to make in the future. PwC Australia estimates that the livelihoods of about 300,000 Australians could be affected by changes in the energy sector. We talk about how we might achieve a just transition to a zero-carbon future with Patrick Viljoen. Patrick grew up in a mining town, became an accountant, and is now a senior manager at CPA Australia focusing on environmental, social and governance issues, hello Patrick.

Patrick Viljoen:
Hi, Jackie.

Jackie Blondell:
Can you tell us what the term just transition actually means?

Patrick Viljoen:
There's a lot of talk around transition into a lower carbon state. So when we talk about transitioning, what we are effectively saying is for the last couple of decades, if not centuries, we've been dependent on fossil fuels to power economies and to power the way that we do life. We're aware that with the impacts of climate change, we are moving into a lower carbon state. So breaking that umbilical cord that we have to fossil fuels and independence on things like oil and coal. With that comes implications on organisations and businesses because we're expecting them to move into that lower carbon state, and that has impact on strategy, it's got impacts on your business model, your risk management. There's a whole host of things that you need to consider.

Taking the example of coal, just to use as an illustration, if we are now moving to say we are going to shut a coal mine that has a social implication. Because what you tend to find with coal mining or any kind of mining is that that is beholden to societies that live in that space, that operates as miners. And that could be a generational thing. It could be the dad, the son, the granddad. Everyone's been working on that particular mine. That's not the only problem. What we are now saying is not only are we saying mines should be shutting down, we're saying all mines should be shutting down. So there's no alternative to go to. The problem with the just transition is how do we move that group of people along on the journey? So if we are going to move into lower carbon energy production, how do we make sure that their skills are transferrable into the new world that we're living in? So in effect, leaving nobody behind because we're transitioning and that's where the just transition comes in. It's recognising the social aspect of this transition into a lower carbon state.

Jackie Blondell:
Germany had a huge coal industry until about the mid-1980s when its giant Zollverein and coal mine was shut down. That coal mine has since become a UNESCO listed tourist attraction. Now, not all coal mines can become listed tourist attractions. What else can they be transformed into?

Patrick Viljoen:
Yeah. So in terms of that whole conversion, usually when we have decommissioning happening, particularly within mining, there's a whole raft of activities that kicks off because there should be rehabilitation and just making sure that there's no scars left behind. It's beholden to organisations to do that.

Jackie Blondell:
That's the environmental side.

Patrick Viljoen:
That's the environmental side of it. So in isolation of society, but let's just look at the environmental stuff. As part of that, there's obviously then opportunities in terms of what you can do with that space in particular. So with the Zollverein, it was interesting in terms of creating that as part of a UNESCO world site. So they're using it in terms of saying get people in, get tourist money flowing in, and also showcasing a very good example of how you can change a mine or decommissioned mine into something good. So that's basically just this whole concept of making sure that if there's money flowing in from tourism, obviously coming back to the infrastructure, there's shops and other things, and you're driving that employment within that particular area. It's making sure that there is that continuation of society and livelihoods.

Jackie Blondell:
I've looked at the website and will in include the website in the show notes. There's stunning 1930s brutalist buildings that are an example-

Patrick Viljoen:
My favourite style.

Jackie Blondell:
Yeah. An example of the industrial revolution. But not all coal mining towns or mining towns have that kind of potential to have a UNESCO listed tourist site as a money generator. What else can these mining communities do?

Patrick Viljoen:
So just reflecting on what happens in the United States, and there were some statistics in terms of what happens to mines once they decommission. By and large, what you find is they talk about rehabilitation to grasslands. So it's just making sure that everything's flat, planting seed and creating a grassland. Now that in and of itself is an option. It's sort of a lazy option because what you are failing to understand is that there was topography that existed prior to the mine being there, and you're not replicating that. So you're creating something which is still artificial to that area. The second component that they talk about is creating opportunities for wildlife and fishery. So creating lakes, which also, if you go back to the rural valley, that's exactly what they did, right? There were lakes being created, which is now used for picnicking and other social kind of pursuits. So that can happen as well. The problem with that is there's no external assurance that's placed on the viability or the success of these kind of ventures.

So if you're talking about lakes, the first thing that comes to mind, and I grew up in a mining town myself, so I know sort of firsthand about these impacts, but there's acidic fallout as part of the mining which seeps into the water table. And it would be interesting in terms of if there's research out there that can start looking in terms of placing a value on that saying, is the soil yield that you can generate if you do go through that rehabilitation process, is it still viable? Can you actually sustain societies from that earth? A bigger problem, which is unseen, and it's pardon the pun, but it's below the surface, is the fact that if you go back to the rural valley example, they talk about the earth is actually Swiss cheese because there's so many tunnels and cabins and stuff which has happened, or part and parcel of the mining and excavation and extraction operations that causes the risk of sinkholes. So there's all these kind of things that you need to think about in terms of how you do that rehabilitation properly. But mostly it's creating grasslands and then creating opportunities for wildlife and for fisheries. Like I say, it does come at a risk.

Jackie Blondell:
What about the community around it? Because having grasslands, lakes, that sort of thing does provide a bit of recreation for people, but does it provide an income that can help prop up the community?

Patrick Viljoen:
And again, this comes back to what is the main driving source? It's always very risky, I think from a societal perspective, if a whole community is beholden to a single employer. If you think about, let's use a car manufacturer as an example. So if you've been to Sweden and you've been to Gothenburg, Volvo's main production plant is outside of Gothenburg. It's in a valley kind of area, and there's a whole community that was built around this factory. The problem is if you speak to the average person in Gothenburg, one out of let's say five, and I'm plucking these numbers out of thin air, but one out of five would say, "I either work for Volvo or I know of somebody that works for Volvo at that particular plant." If that plant was to fail, you can imagine what the kind of impact on society would be because overnight, people lose their jobs and livelihoods. So talking about rehabilitation of mines. And again, it sounds like we're having a potshot at mines. We'll talk about other industries in a minute. But unless we can have that transition switch over. So unless you have a situation where you're moving from coal and you're moving into, say for example wind generation or whatever, that falls by the wayside. So it's how do we make sure that we are not requiring those people to move either? So you're not saying uproot your whole life and move to another town.

Jackie Blondell:
That seems particularly heartlessly, really.

Patrick Viljoen:
Correct.

Jackie Blondell:
And that's why there's some pushback, I imagine.

Patrick Viljoen:
Yes. And so it's making sure that whatever we have as an alternative can make sure that the economy still happens or thrives within that particular space. And this is not something which you can leave till the very last minute because then it's too late. So it's about how do we start building in transition plans and look to the future to say potentially this could happen. You're not leaving people exposed by just sitting on your hands basically doing nothing.

Jackie Blondell:
What other industries are vulnerable in the future and how do the just transition principles apply to them?

Patrick Viljoen:
So if we think about other industries out there, and unfortunately, we have to talk about the heavier emitters, then you're talking about industries like steel, which uses carbon not only for heating, but it also uses carbon as part of the process of converting ore to steel. Another big one is cement production, which also releases CO2. And the third one is chemicals, so the kind of stuff that we use on a daily basis and how that is produced. Those three industries in and of themselves are susceptible to a risk because of transition to lower carbon because they still produce carbon in quite a big fashion. The problem is the demand for steel and the demand for cement is not going to wane any time soon.

Jackie Blondell:
I was going to time ask you that. What about the green alternatives, green concrete, green steel?

Patrick Viljoen:
There are alternatives. Look, I'm not a chemist or a scientist, so I'm not going to go down the avenue of trying to explain that because I'm bound to sort of get it wrong. There are alternatives and I've read about the alternatives that they speak about in terms of how do you review the process that you're utilising and make it more carbon, not as carbon intensive, let's phrase it that way. And they do exist. The problem is it's not at scale yet. So even if you do start shifting into that, there's no way that they will be able to fulfil the demand by only using things like recycled steel or whatever. It's just not possible.

Jackie Blondell:
Now what about on the other side of the equation? We've got new energy industries that we have started to use in solar and wind and so on. Are there opportunities for communities that may have had an old style industry to move to these new style industries, or is that just not possible?

Patrick Viljoen:
It is. But again, it's in terms of how do you plan around that? And if you look at the Powering Australia policy piece, and this was an election piece that labour went to the polls with. The Powering Australia policy also links to regional power generation. So basically, what we are saying here is there's a recognition that if you look at the regions or regional Australia more broadly, there is a proportionately higher instance of unemployment and lack of job opportunities. But what the government is actively trying to do is to push the power production back into the regions. So you're safeguarding, to a large degree, societies and the way that they live and produce and sort of get income. Then we're talking about solar, massive solar farms, we're talking about wind, power generation, all these kind of things. And it's how do we make sure that those people can draw down from that technology, also can provide their skills in terms of operating these kind of machinery and production plans and taking them along. So it can happen, but there's a lot of planning that needs to happen ahead of time. And again, this is the big problem. If you don't have a clear view of when all of these things will happen and plan around that, you run the risk of it being this mad rush at the end and we get it wrong.

Jackie Blondell:
Yeah, absolutely. So can we maybe talk about timelines? It took 50 years to get from horses to cars, dung to smog. So what sort of timeline are we talking now? Technology and the whole digital revolution is speeded things up so quickly. Imperatives around climate have caused us to have very squeezed timelines. How long should just transition take?

Patrick Viljoen:
I'm going to use a piece of terminology that I hate and I hate it when people tell me this because accountants like to operate in definitives. It depends.

Jackie Blondell:
I thought you were going to say it depends.

Patrick Viljoen:
It depends. There's a couple of drivers behind that. So we know in terms of the ambition that we have in terms of our own carbon emission targets as a country, we've upped that quite substantially from what it was in the past. So that ambition's been baked into the system. So that's good. Then you've got the regulation angle because we are aware of the fact that the International Sustainability Standards Board, they're producing their first two standards, which will be launched Q2, hopefully. And we are already starting to see the conversations from treasury saying, "How do we make that mandatory within the Australian environment? How do we roll that out?" So regulations coming and organisations are aware of this. So that's the push factor.

The other push factor that we find is from a stakeholder perspective, it's that discerning kind of purchasing decisions that we see happening. So people wanting to know how did this product arrive at this point of me purchasing it, how much carbon's been embedded in the process? Was there child slavery involved, to talk about modern slavery? There's that level of discernment in terms of how we purchase, where we purchase and looking at the product with more scrutiny. So all of these things combine to drive the momentum behind the change to that lower carbon state. The problem is if one of those spokes, if you want to view it in a wheel kind of fashion, if one of those spoke underperforming, it goes a bit wobbly. So it's making sure that from all of those kind of viewpoints, we're doing the right thing. And look, at the moment, I'm tentatively sort of happy with the way we are going because I think there's that drive from government, there's a drive from the regulators and you're seeing that sort of groundswell of support coming through.

Jackie Blondell:
Well, business has been on the front foot for for quite a few years, hasn't it, in terms of wanting to see clarity there.

Patrick Viljoen:
And even if you look at super funds and the way they in invest and they are thinking about ESG credentials and that's being built into parameters for investment decisions. So all of these things combine, but I don't have a crystal ball to say, "We'll reach point X by then." It does depend.

Jackie Blondell:
We hope you're enjoying INTHEBLACK. If you're interested in the latest news, analysis, policy updates, and business insights, you should check out CPA Australia's With Interest Podcast. Join us as we dive into the news and delve into the business issues of the day. Each week, we talk to thought leaders from across the accounting, finance, strategy, economic and business spectrum, and you get their expert opinions. Now, back to INTHEBLACK.

Jackie Blondell:
I don't know whether this can work as an idea, but let's take it to a community level, say, in terms of planning for just transition, we should obviously be starting now with these communities in terms of skills, new industries, environmental cleanup. Should that be something be starting now and should we be looking at a 50-year evolution?

Patrick Viljoen:
Yeah. I've been talking about planning and I've been talking about all these things and I just want to make it clear, I'm not saying that mining companies don't do that. They do, right? There are protections in place in terms of the legislative framework that says you can't just abandon a mine, right? So there has to be this rehabilitation work and all of these things. So they know. They know what the finite lifespan of that particular mine would be, and that factors into the way you plan. So Norway has got a very similar situation to Australia. They've got a dependence on a natural resource, oil, in their case, which they know they need to shift out of. What the Norwegian government has started doing is actively seeking education programmes to make sure that oil-rig workers have the potential to take their skills and transfer that into whatever this new world would look like. And even if they want to transfer out, to upskill them into something else if they wanted to move career-wise into something else. So that's being provided already and the government's proactively doing that. To a certain degree, and it's not my place to take potshots at the government, but that feels in the Australian context that it's missing, or we are not focusing on that as much is the training and the education piece that backs the just transition. I feel if we could quantify that and put money behind that, that would be great.

Jackie Blondell:
Now, accountants and business advisors are pretty locked into their communities. What can they do to support vulnerable businesses? And that doesn't mean we're talking about mines, we're talking about maybe retailers in a formally busy community. What can they do to help businesses or advise them and change hearts and minds in a community?

Patrick Viljoen:
I think one thing we need to understand about the accounting space is not all accountants work for large corporates. We do have a sizable SMP, small to medium enterprise population out there. One of the things that came out as part of the lockdown process that Victoria and Australia went through was that advisors, or accountants, when they were speaking to their clients, the clients would not even want to talk about business. They would want to talk about, "I'm not fine, I'm not okay, I'm struggling." And it was almost as if they used their accountants to also be therapists at that point in time. And that's the relationship piece. That's how accountants position themselves within the SMP space is they are advisors, they're trusted friends. There is a bond that happens there. If we look at the bigger end of town in terms of planning, so if we come back to the whole planning piece, I think accountants do have a technical baseline and we are beholden to the technical skills that we've been given and have developed over many, many years. On top of that, I think there's also the capability that accountants have a viewing problems holistically. We realise that it's not only about dollars and cents, we also factor in a whole host of non-financial information, and this has been part and parcel of being an accountant for many, many years.

So I think that ability to view the problem not only from a financial impact but also start thinking about social impacts is something which squarely sits with the profession, particularly if you're doing a project plan or thinking about how do we transition. Let's take a mining example to make it a bit more concrete. So if we're going through that stage of saying, this is the financial plan from decommissioning to rehabilitation and you're applying dollars to that, it's how do you start building into that particular plan societal considerations? And that's something which squarely with the accounting space, because we report not only on financials, we report on non-financial information as well. So I think that's an area where we can play. The other point I just wanted to raise was I spoke about the education piece. So how do we do that education piece? And I mentioned it would be good if there's a quantum apply to that. So if government can say, okay, fine, we're applying X amount of million of dollars to make sure that that education happens, accountants play in that field. It's up to us to define that number and to make sure that it's robust enough to cover this whole transition that we're trying to do. So again, we can play into that particular kind of field. But I think as an accountant, it's the advocacy that you can add as well. So starting to talk about these things, just in your normal kind of position, doesn't matter where you are on your career scale. It's having these conversations, making sure people are aware that it's a broader issue, than just money.

Jackie Blondell:
I know we talked a bit about government, but what else are they doing to ensure a just transition?

Patrick Viljoen:
As I mentioned before, there is a component of the Powering Australia policy is looking in terms of regional Australia. So there is that understanding that outside of the big metropoles, we need to think about how do we take the regions along because we are talking about substantial changes here. These are not just tinkering around the edges. We spoke about the education piece, which if government can get that right, that would be wonderful. There's also a recognition, I think more broadly, that it's not good enough for Australia to get it right as a country without thinking about our neighbors. We are based in Asia, we are also based in a Oceania. So therefore, we need to start thinking about how do we do this collectively. In Asia and in a Oceania, we have a bit of a disadvantage in as much as we don't have something like the EU or a comparable mechanism format.

Jackie Blondell:
Like a real economic community.

Patrick Viljoen:
Yeah. There's not that level of collective push. So it's how do we take everyone along in the journey. Now, if you think about our Pacific neighbors, so places like Fiji, Samoa, these kinds of jurisdictions are going to see and are already starting to see the biggest impacts from climate change, if you think about rising sea levels and all these kinds of things that impact on them. We're also aware that those jurisdictions don't necessarily have the deeper pockets that places like Australia and New Zealand has. And the government's made it abundantly clear that not only is it good enough for us to transition, we need to take our neighbors along on the journey. We know that adaptation is going to be the big issue for them in as much as how do you adapt your societies to living with less land? Because that's effectively what's going to happen. And how do you then back fund that? So it's how can Australia also be acting not only to its own benefit, but also to the benefit of the region more broadly. And the government's been very open about that is their focus and that is their approach. It's not only an Australia first perspective, it is more about our neighbours as well and making sure that all of us can move forward. Because it would be a crying shame if we could pat ourselves on the back and say, "Yay, we've done it."

Jackie Blondell:
We are actually part of an entire world that's being affected by climate change. We're not isolated.

Patrick Viljoen:
Correct. And it does come back to this, and again, I'm not going to say it's wrong or right, but it's just different. It does come back to this western concept of thinking, it's more about the individual. We have to break that because it's not about the individual, it's about the community and broader kind of thinking.

Jackie Blondell:
Absolutely. Lastly, can I just ask you, you are an accountant.

Patrick Viljoen:
I am, yes.

Jackie Blondell:
And you are passionate about ESG and sustainability issues. How would you encourage your fellow accountants to get excited about a carbon-neutral future for themselves, for their own businesses, and for their clients?

Patrick Viljoen:
My previous employer, and I'm not going to say who I previously worked for, you can find that online, but I remember the CEO at that point of the organisation, he used to say this 25 times a week, "There has never been a more exciting time to be an accountant." And we would always have a slight giggle at that because it's a bit blasé. But it's not. It's about the fact that accounting has moved on beyond just the numbers. That is still our bread and butter and that won't change in the foreseeable future. But what we are starting to see is the incorporation of more non-financial kind of information. And there's a need for accountants to play in that field of how do we bring all of these things together? And who would've thought that years ago when I was growing up, and I mentioned this earlier before we started this recording, I grew up in the era of Captain Planet, where I was wanting to be Captain Planet and all these kind of things, childhood fantasies. And now it's starting to become reality because my technical skills is now starting to intersect with my concern for nature, concern for people. Those two are now finding this happy marriage in between and that this is exciting. It's really exciting that you can bring passion outside of just the numbers and that absolute joy you have when a trial balance balances. But you can take that one step further and the broader kind of things that I'm thinking about now becomes part of my work. That's very, very exciting.

Jackie Blondell:
Patrick, thanks so much for joining us today.

Patrick Viljoen:
Thank you very much, Jackie.

Jackie Blondell:
For more information about just transition and the full story of Germany's Zollverein coal mine, don't forget to check our show notes for this episode.

Garreth Hanley:
If you've enjoyed this episode, help others discover INTHEBLACK by leaving us review and sharing this episode with colleagues, clients, or anyone else interested in leadership, strategy, and business. To find out more about our other podcasts, check out the show notes for this episode. We hope you can join us again next time for another episode of INTHEBLACK.