How CFOs can profit from Eskom’s failure

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Nashua Kopano MD Chris Kruger reveals how CFOs can benefit from the power crisis through ESG strategies.

Halfway through 2023, South Africa has already endured more hours of loadshedding than it did in 2022. This power crisis has emerged as the single biggest challenge that South African CFOs face, costing the economy as much as R900 million a day. Diesel for generators, lost productivity, and operational disruptions have shaved hundreds of millions of rands off the bottom line for companies like MTN and Spar.

With most energy experts forecasting that loadshedding will be with us until at least 2025, CFOs must prioritise investment into backup and alternative power solutions. At a time of slow economic growth, this has placed many organisations under strain. But despite the significant short-term pain, there is an opening for CFOs to turn the loadshedding crisis into an opportunity.

With the world facing growing concern about climate change, forward-thinking CFOs will look at loadshedding as an element of a broader corporate imperative – the need to become more sustainable.

Indeed, one way to look at the current power crisis in South Africa is that it’s partially the result of a high dependence on fossil fuels and a slow transition towards renewable power sources such as wind and solar.

Loadshedding and sustainable transformation

CFOs should consider their organisation’s strategy to mitigate load shedding in lockstep with their ambition to advance environmental, social and governance (ESG) goals. With regulators, shareholders and customers demanding more transparency and action around sustainability, companies that get it right could dramatically reduce their energy costs and strengthen their brands and reputations.

Sustainability can help companies to grow or retain their customer bases. South African consumers are becoming increasingly climate-aware, with 81 percent reporting in a recent survey that they feel sustainability is more important to them now than it was two years ago. In B2B procurement, companies are looking to reduce Scope 3 emissions (those produced in their value chain) to improve their ESG metrics.

ESG is an especially important factor for export-focused organisations targeting countries with more aggressive goals to reduce carbon emissions. Sound ESG credentials are also important when seeking finance since many institutions look at sustainability when approving loans or investments. Sustainable companies and projects are more likely to get capital on favourable terms.

Reduce scope two footprints with solar solutions

It’s worth noting that South Africa is the 12th-largest greenhouse gas emitter in the world, with per person emissions that are above the global average. Eskom’s ageing coal fleet produces around 80 percent of our nation’s electricity. That means most South African companies generate high levels of Scope 2 emissions associated with the purchase of electricity, steam, heat, or cooling.

On a national scale, accelerating the adoption of renewable energy is essential for South Africa to meet its 2050 net zero commitment. But for each company, solutions such as grid-tied or off-grid solar installations can help to dramatically reduce their Scope 2 emissions. This, in turn, can strengthen their ESG credentials.

There are also strong financial incentives for implementing renewables, especially with power costs rising. The government is gradually increasing carbon taxes and expanding its scope on a polluter-pays principle. It has also introduced a 125 percent deduction in tax in the first year for renewable energy projects. This accelerates the return on investment for putting solar in place.

Implementing a solar backup solution is essential for businesses that want to minimise the operational disruptions caused by daily loadshedding. Solar backup is cleaner than burning diesel and, in the long run, cost-effective. Solar installations also offer companies a path to becoming independent from the grid, in turn enabling companies to dramatically reduce their emissions and save money by using less grid power.

CFOs can lead the transition

Regulators, commercial customers, government, and other parties are looking to the companies they deal with to reduce emissions, with penalties for those who fall behind and incentives for those that lead the way. With prices of solar solutions decreasing and a range of innovative financing models, organisations can simultaneously reduce electricity costs and their carbon footprints while improving business continuity. With their stewardship of company data, responsibility in setting strategic and operational priorities, and ESG and triple-bottom-line reporting, CFOs have a key role to play in the transition.

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