Multinationals enlist local suppliers in carbon control
Kenyan firms are likely to lose $3.9 billion (Sh421.8 billion) worth of business as multinational firms move to tame environmental degradation by curbing carbon gas emissions.
According to a Carbon Dated report released by Standard Chartered yesterday, multinationals have a transition plan to decarbonise through a process called “net-zero” by 2025, and are now pressuring their local suppliers to tag along.
Net zero means not adding new emissions to the atmosphere, however, though the emissions will continue, a balance should be maintained by absorbing an equivalent amount from the atmosphere.
In what appears to be a carrot and stick approach to force compliance, the multi-nations have dangled a $1.6 trillion (Sh173 trillion) economy should suppliers comply, but failure to which will see them being replaced by those from other markets.
“In total, the multi-national companies (MNCs) expect to exclude 35 per cent of their current suppliers as they move away from carbon,” says the report in part.
“Decarbonisation is vital for the survival of the planet. Emerging markets are most at risk from climate change and are among the least prepared and represent the fastest growing sources of new carbon emissions,” said Kariuki Ngari, Standard Chartered Bank Kenya and East Africa chief executive.
Ngari said Kenya aims to achieve a net-zero carbon neutral economy by 2050. He said the government was in the process of setting up an emissions trading system to allow trade in emissions allowances to catalyse the net-zero initiative.
“This report will enable businesses to come up with innovative methods that will enable them champion green energy consumption, for a reproductive economy,” said Peter Odhengo Director of Climate Finance Unit at the National Treasury.
The report warns of the danger of non-compliance. However, Kenya is among the countries ahead of the pack in leveraging the green economy with the financial sector having a joint green finance initiative which brings together banks and regulators. Kenya has already issued new products like green bonds to help fight the impact of climate change.
Green bonds raise capital for projects in renewable energy, energy efficiency, green transport and waste-water treatment. The bond, worth 4.3 billion shillings ($42.5 million), was issued by Nairobi-based property developer Acorn Holdings last October to build student accommodation.
Kenya’s first green bond was listed for trading on the Nairobi Securities Exchange, offering investors the chance to put money into an environmentally-friendly fixed income security for the first time in the bourse’s 65 year history.
Speaking yesterday, KenGen Managing Director Rebecca Miano said climate change is one of the biggest global environmental challenges creating an urgent need for mitigating against its effects.
Miano said Kengen has made a lot of strides considering Kenya’ is powered by more than 80 per cent green energy.
She said: “We want to play big in this space,” adding that they will work closely with the community, suppliers and other stakeholders to mitigate climate change.
Kenya Electricity Generating Company (KenGen) green efforts will see it benefit from a Clean Development Mechanism (CDM) projects which was recently issued an additional 309,495 Certified Emission Reductions (CERs) for the organization’s Olkaria II CDM Project by the United Nations Framework Convention on Climate Change (UNFCCC), bringing the total amount of issued carbon credits to 550,981.