Sugar cane is harvested on a farm in Bundaberg, Queensland. Picture: Bloomberg
Across the country, companies are adopting more sustainable business practices, exploring options in the renewable, “circular economy” as they await technological breakthroughs to drive the great leap forward to net zero carbon emissions by 2050.
While the need to curtail greenhouse gas emissions and limit global warming to 1.5C is paramount, it’s but one of a series of mega-trends.
Covid-19, for example, has accelerated digitisation and created massive pools of liquidity; supply-chain snarls have jammed up production processes, and the war in Ukraine has supercharged commodity markets and entrenched global inflation.
With a limited policy armoury, global central banks have responded by aggressively hiking official interest rates.
Suddenly, for the first time in years, there’s a price on capital.
Commonwealth Bank institutional boss Andrew Hinchliff says the shift in the business environment has been profound, requiring companies not only to adapt but to respond “really, really quickly”.
“What it means is that there’s now a hurdle rate (of return) for successful businesses.” he says.
“Unless you meet your cost of capital so that you can invite more capital (from investors), you don’t survive. And the cream will rise to the top, which means some countries will rise to the top, and I think that Australia’s got a great chance of joining that select group.”
The Weekend Australian joined Hinchliff and his management team on a tour of some of the bank’s institutional clients, each of them facing a transformational challenge in switching to green energy from gas-fired, emissions-intensive processes.
The plants visited included the Yarraville sugar refinery in Melbourne’s inner-west owned by Sugar Australia, which is majority-held by the Singapore conglomerate Wilmar International and the nation’s leading producer of sugar for the food and beverage industry.
Sugar Australia is among Victoria’s top-20 gas users, producing up to 300,000 tonnes of refined sugar a year at its Yarraville facility in Melbourne’s inner-west.
Raw sugar for the refining process is sourced from Queensland where it has been milled from sugar cane. The refined product is mostly delivered to customers in bulk road tankers in both crystal and liquid form, with packaged sugar products delivered in 15kg bags for the food service industry and 25kg and one tonne bulk bags for industrial customers.
On the circular economy, CBA helped to fund a four-way joint venture to build the nation’s biggest PET recycling facility in regional Australia at Albury, NSW.
The catalyst for the 2021 initiative, which brought together Cleanaway Waste Management, packaging company Pact Group and beverages groups Asahi and Coca-Cola, was an export ban implemented by the federal government on plastic waste.
This created a price signal to ensure the viability of the plant, which is partly powered by rooftop solar and has the capacity to recycle the equivalent of one billion PET plastic bottles. CBA and the Clean Energy Finance Corporation contributed equally to a $33m debt package.
Hinchliff, however, said that the circularity rate in the economy only stood at five per cent, leaving significant room for improvement.
There was an incremental gain in August when two of the Albury partners – Cleanaway and Pact – announced a second recycling plant in Laverton in regional Victoria, to be fully operational before the end of this year.
The SA Water solar farm at Happy Valley. Picture: Supplied.
Sugar Australia chief operating officer Paul Gregory says carbon emissions are measured rather than modelled, and watched and analysed “very carefully”.
While measures have been implemented to minimise gas consumption, prices would remain elevated and emissions had to be lowered. “I have to think 10, 20 or 30 years ahead,” Gregory says.
“We have very supportive shareholders who are willing to invest in the energy transformation journey – if there’s a viable solution with a long-term payback, the business case should stand up by itself.”
Gregory is canvassing options for a long-term solution, which will likely include hydrogen.
Andrew Forrest’s Fortescue Future Industries is aiming to produce zero-carbon green hydrogen from 100 per cent renewables.
Gregory has also raised his hand to the Victorian Government along with a handful of other industrial users to participate in any pilot program.
Sizing up the sustainability challenges, Hinchliff says some companies plotting their paths to net zero are heavily reliant on consistent and affordable energy.
“Another big theme is the high level of automation and technology because, where manufacturing exists in Australia, it has to be efficient and productive,” he says.
“And then there’s the hydrogen, which has a long way to run but there’s a real need for it and real money and expertise going into it. Part of the opportunity for (CBA) is to join the dots between our various clients and bring the ecosystem together.”
While the current environment is far from business as usual, Hinchliff says larger corporations are focused on the solutions.
“I‘m a big believer that constraints drive innovation, and there’s no substitute at the moment for consistent, high quality energy,” he says. “And I think the history of innovation shows that if we think things are going to take 10 years, they tend to happen in five years, so I‘m very bullish on capital, innovation and expertise providing good outcomes quicker than what we think.”
While the global challenge was to generate more efficient energy, there was now an energy security imperative, as well.
As prices spiked – and it was anyone’s guess for how long – there was an important signal to invest in sustainable energy to facilitate the transition to net zero.
Momentum is gathering in the renewable and circular economies, which will be helped by improved climate disclosure and accounting for carbon emissions.
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