Transcript Rapid Climate Change and Energy Strategy for

An Introduction to Rapid Climate Change & Energy
Strategy for Business
Abridged Version for LSC 10062008
Photo: Manure Pit © 2008 Jay Moynihan
[email protected]
(715) 526 – 6136
“A corporate focus on reducing greenhouse gases
as quickly as possible is a good business
strategy. It will save money for our customers,
make us a more efficient business, and help
position us to compete effectively in a carbon
constrained world.”
Who said this?
• _______ (insert local name)
• Al Gore
• Lee Scott
• Arnold Schwarzenegger
“A corporate focus on reducing greenhouse gases
as quickly as possible is a good business
strategy. It will save money for our customers,
make us a more efficient business, and help
position us to compete effectively in a carbon
constrained world.”
Lee Scott
CEO of Walmart
Wal-Mart has over 60,000 suppliers. One or more might be in your county.
A carbon constrained world
is Wall-Street-ize for doing business in
a world where it is necessary to reduce,
then attempt to end release of “old
carbon” into the atmosphere.
How your business or organization
decides to live in that world, is its
carbon,
or rapid climate change strategy.
The Good News:
Since our system is based
primarily on fossil fuels, a climate
change strategy is the core of
your energy cost reduction
strategy.
Where does rapid climate change strategy
fit in the big picture ?
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Rapid climate change strategy, is the overall approach
developed by a business or other organization to the
current rapid climate change, and/or “peak oil”.
It comprises an integrated approach to dealing with the
risks and opportunities of:
• Regulation and taxation
• Liability
• Changes in weather (physical risks)
• Market risks
• costs
• Technological innovation
• Consumer attitudes and demand
• Carbon Markets/carbon credits/carbon sequestration
No! Not another business
planning technique…
Relax.
This is not separate from your business strategic plan.
It is part of it, integrated throughout your planning.
Excerpt from Lloyd's of London report (2006),
about climate change:
Carbon Strategy includes, accounting for:
Emissions (direct carbon contributions)
And
Indirect or Embedded Emissions,
such as:
•Supply chain
•Transport
•Customer use
•Product disposal
•Operations (travel, utilities, etc.)
Risks and Opportunities
Regulatory Risks
• Regulation of the products you make, or process you use
• Regulation of the same for your suppliers
• Increased regulation of fossil fuel use
Factoid:
As of this writing, the largest corporations in the U.S., corporations in nearly every
sector (apart from ExxonMobile operations in the U.S., and Coal companies) are
lobbying for mandatory federal regulation of carbon emissions.
Why?
•Big companies want to have an even playing field, and they prefer to deal with at
most 2 regulatory sets (U.S. and rest of world), instead of 52 sets.
•The legal legacy of the early shareholder actions vs Henry Ford (i.e., re the primary
duty of a board is to maximize (short-term) value for shareholders)
Supply Chain Risk
•along similar lines, and
•Higher transport costs for suppliers
•Geographical distribution of your
suppliers (higher transport costs, or
physical (weather) risk
Product and technology risk
• Not offering “carbon neutral” products, packaging
• Or services (lawn care, financial management,
restaurants etc)
Litigation Risk
• Mostly a concern of large corporations, and/or energy,
utility, transportation, and heavy manufacturing sectors
and suppliers to them.
• Similar to past litigation in areas of tobacco, asbestos,
pharmaceuticals
• In an opinion this year, the U.S. Supreme Court found
that climate change was occurring, and the primary
cause was human induced CO2 levels.
• In addition to actions against companies, their
directors, officers and management may be held
personally liable in shareholder actions (Swiss Review)
Reputation Risk
• Public opinion
• Shareholder opinion
Physical Risk
• The obvious one. Weather. Higher variability, new
conditions, more frequent and strong storms.
• Highly dependant on location
• Carries higher insurance rates (property/storm
etc)
• Increased health problems/costs----rates
Political risk
• CIA, pentagon professionals, and other organizations now
consider climate change induced destabilization as the major
threat of the 21st century, (drought, famine, migration, water
wars etc).
• Terrorism driver
• Can disrupt foreign manufacturers, suppliers, trade routes
• Disruption of
employees called
for service in
failed state
relief/occupations
Improving Your Competitiveness
Quantify your “Carbon Footprint”; measure, benchmark and inventory
Use carbon accounting tools (more on that later)
Energy efficiency
As your knowledge about climate change increases, leverage it to
develop new products and services
5. Figure out how to transition from carbon intensive products and services
that heavily contribute to your profits
6. Buy stock, supplies, parts, and feedstock as much as you can local
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Read:
“Competitive Advantage on a Warming Planet”, Jonathon Lash
& Fred Wellington, Harvard Business Review (March 2007)
And
• Include carbon strategy as an integral part of
your strategic planning process.
• Include carbon strategy in management training.
• Integrate the action steps from your planning
into employee training.
• Measure outcomes and evaluate.
• Is there a business case for the change, i.e. is
justified in terms of costs and benefits?
And
• Initiate change before the threats are too severe.
• Allow sufficient time, resources for change,
especially in regard to core or essential areas.
• Build internal knowledge, skill and capacity within
your company, instead of outside of it.
• Focus on the needs of key customers.
• Pay attention to “green” early adopters [lead
customers]
Potential Revenue Drivers:
Potential Cost Drivers:
• Customer demand
•Effect of regulations
• What percentage of related costs
can pass through?
•Effect of new taxes
• Revenue streams from new lowcarbon products and services
• Anticipate threats of competitors
low-carbon products and services
• Cost saving due to efficiency
•Capital Expenditures necessary to
meet regulatory measures, AND
your own new products and
services
•Higher costs for your materials,
transport, feedstock etc., and those
of your suppliers
• Weather patterns effect on
revenue
•Energy costs
• Carbon credits
•Weather pattern effect on revenue
“*ECO-EMBEDDED*
Sustainability will be on every
corporate agenda, for years to
come.
Forget 'recycling' though:
What’s Cool?
What’s Hot (not)?
we‘ve moved from well-intended DIY
to 'Eco-Chic' to the emergence of
an entire ECO-ECOSYSTEM
(highlighted in our previous report)
to what we've dubbed ECOEMBEDDED: no need for
consumers to worry about
environmental consequences any
more, as forward-looking brands
have already done the work. Learn
how to apply this trend within your
own industry.”
“Cool” Existing Companies and Sectors
(near term winners – next 25 years)
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Nuclear power
Renewable energy
Bio-fuels
Green builders
New technology vehicles
Agriculture (depending where, but like here for example)
ATV’s (assuming they develop new power schemes)
Battery/energy storage companies
Bio-technology
Genetics
Biomemetics
Nanotech
Information industry
Eco-industrial manufacture
Bio-plastics
Pyrolisis reactors
“Local”
“Organic”
“Hot” Existing Companies and Sectors
(hard adaptation curves)
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Most vehicle manufacturers
HVAC
Watercraft
Snowmobiles
Tourism
Mall retail
Box stores
Fast Food
Grocery
Lawn Care
Anybody making any material out of petroleum
Learning from Investors about carbon strategy
They are interested in a
company’s
•Governance
•GHG Management
•Method
01 February 2007:
Worlds Largest Investor
Coalition representing $41
trillion Seeks Further
Disclosure on Climate Change
and Shareholder Value From
World's Largest Corporations
• GHG Emissions
• Risks-opportunities-strategies
(for the 5th year running)
From article about the CDP
Carbon Disclosure Project 2007 Questionaire
Governance:
• Who is responsible within the company?
• The board or committee with overall
responsibility for climate matters?
• Progress and status re climate of methods, and
who is the review party?
• Incentives/Bonus structure as related to climate
matters?
• What are your GHG reduction targets?
Carbon Disclosure Project
GHG Management
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Direct and/or indirect?
Baseline year
Direct: air emissions, fuel consumption, operations.
Indirect or “Embedded”: supply chain, product use, disposal
Reduction targets / over time
Renewable energy activities
Energy efficiency activities
Emissions in terms of intensity/history/targets
Cost of energy consumption
Amount in fossil fuels
Amount in electric
Investments made
Investments required
Savings achieved
Estimated future savings
Carbon Disclosure Project
Methodology
• Estimation of emissions, w/details
• Relationship between cost of future emissions
and capital expenditure planning
• Investment decisions and the impact of them
Carbon Disclosure Project
GHG Emissions:
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Accounting year
Calculation method
External verification or auditing?
Direct and indirect
Customer use and disposal of products/services
Supply chain data
External distribution and logistics
Employee business travel
% of electricity from renewables
Carbon Disclosure Project
Risks
• Similar to what is covered above except expression in
terms of IPCC publications
Opportunities
• Similar to above except divided in to existing or new
products / services
Strategy
• Objectives, targets, in place, planned, and plan details
Carbon Disclosure Project
Tools
Baselines, Inventory and Accounting
• the Carbon Disclosure Project
http://www.cdproject.net/carbon-disclosure.asp
• The GHG Protocol and tools
http://www.ghgprotocol.org/
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In Shawano County, contact: [email protected]
Adaptation tools……
Energy Efficiency
• The strategic and tactical combination of energy
conservation and technological innovation.
Full Cost Accounting
• Full Cost Accounting, or “FCA”, is the analysis of all the
costs, as well as the advantages, of all proposed
alternatives, and the presentation of those findings to
decision makers. In FCA, “cost” is not just the monetary
cost to the organization making decisions. It also
includes the social and environmental costs to anyone
else affected by the decision. This process can be
especially useful for government agencies that represent
a variety of interests when deciding how to allocate
public funds and/or other resources. Organizations that
use FCA have experienced budget savings.
Life Cycle Analysis
• AKA “Life Cycle Assessment” is the assessment of the
environmental impact of a given product or service throughout its
lifespan. This includes all production inputs through use and
disposal.
Ecological Design
• Design process that integrates the result in both the human and
non-human aspects of the world.
Ecological, and Carbon Footprints
• A carbon footprint is the total amount of CO2 and other
greenhouse gases, emitted over the full life cycle of a product or
service . An ecological footprint.
• An ecological footprint is the measure of total human demand for
natural capital {raw goods and services before anthropogenic
manipulation}
Industrial Ecology
• The shifting of industrial process from linear (open loop) systems,
in which resource and capital investments move through the
system to become waste, to a closed loop system where wastes
become inputs for new processes. Important for future planning,
zoning, permitting etc.,
and economic development assistance.
Green Building
• Increasing the efficiency of buildings {use of energy, water, and
materials} and reducing impacts on health and the environment,
through design, placement, construction, operation, and
maintenance.
Indicator design
• Designing indicators to measure impacts and outcomes of policies
and activities. Indicators measure in cultural, economic and
ecological terms.
The Natural Step is a framework
for working towards sustainability.
It is based on sound, basic science. It is in use by various
corporations, governments, communities and small
businesses around the world. It provides an understandable,
shared “compass” for a systemic view of the “forest”, so that
you can work down to the “trees”, and reach your goals.
www.naturalstep.org
Also makes a great “plug-in” to most management methods!
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1. Develop a Rapid Climate Change Strategy.
2. Learn about the current “voluntary” reporting framework.
(CDP/GHGP)
3. Learn how to use the tools relevant to your operation.
4. Develop an action plan to carry out your strategy.
5. Measure your performance.