Adopting ‘circular economy’ will make Thai energy firms more sustainable: PwC
Thai energy firms should transition to a “circular economy” to address the adverse impact of non-renewable resources and join the global race to end emissions, audit company PwC Thailand said recently.
Companies should also start trading in carbon credits, which would generate millions of baht in income yearly, especially since the Covid-19 pandemic is cutting down carbon emissions and diminishing demand for fossil fuels.
Amornrat Pearmpoonvatanasuk, energy leader and assurance partner for PwC Thailand, said energy firms across the world, including those in Thailand, are facing mounting challenges when it comes to addressing climate change in the wake of Covid-19.
The pandemic has brought attention to the need to reduce greenhouse gas (GHG) emissions, resulting in a change in product demand, market characteristics and business models. A growing list of governments and corporations have committed to tackling climate change through achieving net-zero carbon dioxide (CO2) emissions by 2050.
“A global movement to achieve a net-zero future by replacing fossil fuels – the major contributors to global warming such as oil, natural gas and coal – with renewable energy sources will lead to shrinking demand of these markets. Business leaders will increasingly transition out of traditional business models to a circular economy prioritising renewables and low-carbon energy sources that have less impact on the environment.
“Against this backdrop, we expect more oil giants and other energy businesses to profoundly shift the way they do business to boost competitiveness and efficiency, including offsetting the risk from a fall of non-renewables demand globally,” Amornrat said.
Recently major economies such as China, the US, Japan and South Korea set targets to achieve net-zero emissions by 2050. The European Commission also unveiled the European Green Deal, a roadmap for Europe to become a climate-neutral continent by mid-century.
More than 400 leading organisations, including PwC, have signed the United Nations Global Impact’s “Business Ambition for 1.5°C” commitment to limit the rise in average global temperature to 1.5°C and reduce net-zero global emissions by 2050.
Circular economy in energy, utilities and resources industry
Growing concerns over climate change will likely accelerate a transition to a circular-economy model aimed at recycling renewables to ensure maximum benefits and release zero or the least-possible waste across all industries, Amonrat said.
This shift will transform business models by using integrated technology to add value to an organisation’s supply chain, from production systems and raw material management to applying renewable energy and resources principles to expand new markets such as producing green hydrogen from waste.
Companies in the energy sector have a crucial role in the development of a circular economy, according to PwC’s “Taking on Tomorrow: The Rise of Circularity in Energy, Utilities and Resources” report. There are six steps companies can take to build a more sustainable future, namely:
• Mapping out circular opportunities
• Being clear about strategy and vision
• Planning your circular transformation route
• Developing circular collaborations and frameworks
• Measuring, reviewing and communicating progress
• Making moves before competitors, customers and regulators do.
Thailand’s commitment to the Paris Agreement to reduce GHG emissions by 20 to 25 per cent by 2030 in the area of energy, transport, industrial processes and waste management has prompted Thai energy, utilities and resources companies to shift their business models towards clean energy to ensure their financial performance is sustainable, Amornrat said.
Such efforts also help win trust from clients, communities, investors and stakeholders who increasingly pay more attention to environmental, social and governance (ESG) reporting, she continued.
Another option for the sector to reduce GHG emissions is through trading carbon credits. This tool is increasingly becoming popular overseas, where regulatory allowances for emissions can be bought or sold, she said. A few Thai energy companies generated up to Bt10 million per year from selling carbon credits to other companies, Amornrat added.
Combining this approach with the transition toward renewable energy would add value to business operations and create new revenue streams.
“Energy businesses should revisit their business and cost structures in the aftermath of Covid-19.
“This includes rethinking how to make the most of available natural resources and using this crisis as an opportunity to do more socially responsible business in order to build long-term sustainability and competitiveness,” she said.
