THE PROFILE
Who we are spending time with and why
The big-ticket item on Lisa Zembrodt’s agenda right now is the introduction of mandatory disclosure of climate-related financial information for businesses in Australia, starting with larger companies from 1 January 2025 onwards. Final legislation for this is now before the Australian Parliament.
Zembrodt is the principal and senior director of sustainability business for the Pacific Zone at Schneider Electric, which works in the digital transformation of energy management and automation space.
The company has shored up strong global recognition for its work, including the “World’s Most Sustainable Companies for 2024” list by Time magazine and Statista for its focus on goals to reduce its own emissions, while helping its customers to become more energy efficient and reduce emissions
Zembrodt is the kind of overachiever the energy transition needs. She has nearly 20 years of experience in energy and sustainability consulting holds the energy risk professional (ERP) and sustainability and climate risk certifications. and on the industry contribution front, she also holds non-executive director roles with the Australian Alliance for Energy Productivity, the Energy Efficiency Council, and the Energy Users Association of Australia.
THE SIT-DOWN – Q&A
Let’s get started, Zembrodt. Who are you? What does your trajectory look like?
I spent the first 10 years of my career in the US and then the last 10 here in Australia. In the US, I was forecasting global energy markets: electricity, gas, coal, essentially all of the supply and demand around those, including renewables, and also running hedging programs for large end-users and some smaller producers.
How are you going on your work-life balance?
I feel like a lot of people do currently, where there’s not really a great balance. There’s so much going on in the energy, sustainability, and policy space.
How does energy feature a core part of what you do?
We need experts in many niche areas, but the link between the energy system and climate impacts is so deep that having a good understanding of what’s happening in the energy system enables us to guide companies on the most urgent solutions to the climate change crisis.
About 75 per cent of our emissions in Australia come from the energy system. So if we’re trying to solve the issues around climate change, which we know also affect biodiversity, then energy is where it’s at. So that’s where I spend most of my day, just on that, supported by our wider team of experts in other areas.
How do you feel the renewables-led energy transition is going?
Sometimes, we focus a bit too much on the problems instead of focusing on the solutions. Here’s an example: instead of focusing on the things that we can and should do to deal with the intermittency of renewables, sometimes the media focuses on problems rather than solutions. This is the wrong way to think about it and the wrong way to drive a society towards a better outcome.
I saw you on a webinar recently, and you were talking about the mandatory climate reporting regime being introduced in Australia. It felt like this was your moment arriving, and it was making sense of your professional life.
That’s an interesting reflection of how my energy came across. The climate-related financial disclosures are very exciting for so many reasons. The key is that it’s going to provide a level of transparency to what companies are doing to manage climate risks that we’ve not had in Australia before.
You’ve said it’s a move from qualitative reporting to quantitative and allows comparison of “apples with apples” Can you expand on that?
Yes, absolutely, because everyone will be reporting under the same framework. This makes it much easier for stakeholders, whether that’s an investor or a customer. Having transparency into what a company is actually doing can help to speed up the realisation of some of the transition risks. And therefore, enabling companies to manage them.
I’m absolutely confident that I’m not alone in having been a critic of freestyle ESG reporting. Is this a cure for that?
This does cure the key issues that come out of freestyle ESG reporting, which tend to be that you can’t compare one business to another. And if you can’t compare one business to information, then you have this massive asymmetry of information and you can’t make decisions about who you want to buy from, who you want to supply to, or who you want to invest in.
Those are issues that make an economy, or any market does not work properly. We always want markets to work properly. If you remove the asymmetry of information, markets work better.
What are you seeing out there in the businesses that you deal with, in terms of apprehensions or otherwise about the new regime?
People are wanting to get the data right, which is understandable, because there’s a lot of data. Lots of companies are still doing it via spreadsheets, which is not only very difficult and time consuming, but it’s also a great way to create errors, right? Just like many things in business, moving to a digital solution removes the risk of human error. It creates better processes, and it makes life a lot faster and easier for these types of things. So, the first apprehension, I think, would be about getting the data right, and there are solutions for that.
But there’s more to be concerned about?
Another apprehension that is becoming very interesting to observe is this balance between “greenwashing” and “green hushing”. What’s the right balance? Because we want to tell people what we are aspiring to, but, at the same time, we don’t want to reach too high in case we miss [the target]. So, we don’t want to be greenwashing, and similarly, we don’t want companies to be doing all this amazing work but not telling anyone because they don’t want scrutiny.
Anything else?
The risk of civil penalty is something else that people are aware of but aren’t too concerned about just yet because there are allowances for data improvements through time.
The only other one that I can think of that’s big at the moment is: are we ready? The start date for the new reporting regime was moved from 1 July 2024, for large companies to January 1, 2025, because many companies weren’t ready.
They’ve known it’s coming in, and it’s not just in Australia
Europe has been on this path for many years now. The SEC in the US is requiring disclosures. Japan’s exchange requires disclosures. The SGX in Singapore requires disclosure. With the example of Europe, the disclosures are far greater, far broader than Australia’s.
There will be other things that come next. It’s TCFD style reporting now (Task Force on Climate-Related Financial Disclosures), and maybe soon it will become TNFD too (Task Force on Nature-Related Disclosures), where we’ll be looking at nature-related risks and how companies are dealing with them.
Were you disappointed that they didn’t include broader sustainability criteria in this?
I actually feel like the TCFD framework is a fantastic place to start. By the time you get all the pieces in place, you should be able to relatively quickly hit the button on some of these other things, such as biodiversity.
Is there any reason to be concerned that the introduction of the mandatory reporting regime will throw a blanket over sustainability innovation from companies?
That’s a good question. We should still see lots of great innovation. The typical profile of the people who are innovating to solve, for example, issues around intermittency of renewables and these types of things, they don’t tend to be the same person in an organisation who is responsible for financial disclosures. Not that we can treat this as “just financial disclosures”. This needs to be a whole of organisation approach and there’s meaning behind the data, which itself will drive action.
It’s a lot more than just reporting historical data? It’s also things like where are you going?
Yes, a transition plan is something that must be disclosed. Lots of companies today don’t even have a transition plan, so simply requiring a transition plan to be disclosed means that resources will be put into creating one, which is a fantastic outcome for a business because every business will be affected by climate change. Then, they can plan to manage, mitigate, and adapt to that new understanding.
I like the storm analogy you’ve been using to illustrate the point that there are multiple dimensions to this for companies. Can you share that again?
This is all about how there are many different ways that climate change and climate issues tie directly into the financial outcomes of a business. There are some things that happen that are just a blip on the radar or a blip on the financial outcomes.
A storm comes through and damages your facility or floods it; that’s a financial impact, but it’s a one-off. However, let’s say you are in a newly designated flood area because maybe you’re close to the shoreline. Or maybe you’re in an area where the risk of bushfires is now greater because of the way that the soil moisture is changing based on climate change. The issue becomes that the expectation of a chronic change in the climate, or in that weather situation around you, creates an expectation for more losses, and therefore, you pay higher insurance premiums.
Those are operational risks, but are there asset risks too?
Let’s say you have assets that are not necessarily compatible with a low carbon economy, like gas pipelines or coal mines, then those assets will decline in value or be more costly to fund. And some of these things might even become what are called stranded assets, which, while they still have life left in them, they’re essentially worth so much less because of the impact that they have on the environment. And that certainly has an overall impact on your ability to sustain a financial outcome.
It’s getting hotter as well?
That’s really important. The ambient temperature outside is becoming so hot that things don’t work. Whether those things are people, machinery, or batteries, all of these things have operating temperature ranges and we know that there are places that are getting too hot already now.
Businesses will be prompted to take a more holistic view of adaptation and mitigation how it can be managed, and how it affects value. They will be forced to understand how climate affects their business. That’s part of the exercise: to consider the climate risks that are material to your business.
Every day now we’re seeing how political all of this is, and we have an election coming up. So, at the time that the new reporting regime is going to be implemented, there will be manifest political uncertainty about what the goalposts are. Is that going to have an impact on the implementation?
I hope not because we desperately need transparency to ensure a properly functioning market, whether it’s capital flows in terms of investments or for consumers to make decisions that they want to make. This disclosure is so critical to ensuring that we have a functioning market and critical to businesses being able to sustain long-term financial outcomes. And, of course, it does give us visibility into what we need to do, as a collective, to combat climate change.
What does a typical client engagement look like for you?
Essentially, our business helps customers from any point in a sustainability journey. Let’s say you don’t yet have your emissions baseline. We’ll do that for you. And let’s say you might have that, but you don’t have a transition plan. We can do that for you. Let’s say you’re still doing all this in spreadsheets. We can solve that for you. We’ve got a platform that we use as Schneider Electric, and we have 150,000 employees worldwide. We’re operating in 100 countries, manufacturing components and software all around the world. So, we ourselves have a very complex supply chain and complex data, an enormous volume of data that needs to be pulled together so we can solve this, too.
There’s a lot on
There are also all the things that happen in between and are very detailed, which requires expertise, like internal carbon pricing and electric vehicle strategies. All these things require some connection to meeting the ultimate goal of reducing emissions improving social licence, or whatever your ultimate goal is.
That’s a good segue. On the heels of the introduction of mandatory reporting, scope 3 emissions from business value chains will also be brought into the picture. What’s that going to look like?
A fair amount of companies, the larger ones, seem to have a decent handle on scope 3 emissions using procurement spend. This is a great start, but it’s likely there are still many large companies that have not yet figured out scope 3, and the ripple effect on smaller companies is going to grow as the large companies look to mature their data away from procurement spend, and more towards activity-based spend, or having more granular data from their suppliers.
So, pretty quickly, the pressure is going to be pushed through to the supply chain to those smaller companies that may not really understand how to estimate their scope 1 (on-site) and scope 2 (electricity), and this is where digital tools are required because the scale is so big. You just can’t do this manually.
Spreadsheets aren’t going to cut it anymore?
Schneider Electric uses its tools in its own supply chain program. Although we’re working directly with 1000 suppliers, we actually have 53,000 in our full supply chain, but it’s the first 1000 that account for 80 per cent of our scope 3 supplier emissions. It’s a pretty decent chunk, right? And we recognise you can’t reach 1000 companies fast enough, but digital platforms make an enormous difference.
Consider this on a national scale in Australia: organisations can’t reach enough companies fast enough and certainly not without digital tools.
To wrap up, what is going to drive the corporate action we need?
Most companies appreciate that sustainability can be a competitive advantage and that energy efficiency also benefits the bottom line. It’s really important they do not see compulsory financial disclosure as only about competitive advantage, particularly here in Australia, where there still seems to be a little bit of resistance.
Another broader driver is eventually creating better outcomes in terms of climate change. That’s a slower benefit but one that is ultimately crucial to sustaining financial outcomes and quality of life.