Transcript 3 - Build credibility and increase market share Action

The Business of Climate Change
WHAT A MESS!
Australian
Business
Business Leaders
The Carbon Economy is real?
US$ 3.1 trillion by 2020
Two Challenges
International Experience
Indications of things to come
EU ETS began 2005
• Now in 2nd phase, tougher targets & pressures
•
Real outcomes
• It is working
• Environmental policy is highly valued
• Greener supply chains
• Consumer sentiment changing
• Mitigating future cost increases
Good carbon management
can reduce costs, help create more
efficient and resilient
organisations whilst delivering a
competitive advantage
Today’s focus
Legislation
• Compelling analysis from McKinsey
• Reasons for you to act
• Case studies
• Next steps
•
Carbon Planet
•
Carbon management solutions
•
Expert scientific and strategic advice
•
1 million tonnes of GHG “assessed”
Legislation
Federal Government and the Carbon Economy
NGER - National Greenhouse and Energy Reporting
• Commenced July 2008
• First Reports were due by 31 October 2009
CPRS - Carbon Pollution Reduction Scheme
• Draft exposure legislation released
• Due to start July 2011
NGER Compliance
Act Requirement
Penalty Units (PU)
Penalty $
PU/Day
overdue
$/day
penalty
12.1
Requirement to apply to register
2000
$220,000
100
$11,000
19.2
Report to be submitted
2000
$220,000
100
$11,000
20.4
Liability of other persons to provide information
Individual
400
$44,000
100
$11,000
Organisation
2000
$220,000
100
$11,000
21.4
Reports content relating to GHG projects
1000
$110,000
22.1
Group members activity reports to be kept
1000
$110,000
22.2
Reports to be kept of a persons activities
Individual
200
$22,000
Organisation
1000
$110,000
61.3
Response to questions of Authorised officer
10
$1,100
69.2
Failure to provide facilities assistance
10
$1,100
71.3
Power to request information - compliance
50
$5,500
71.4
Power to request information - misleading information
60
$6,600
73.5
External audit - compliance
1000
$110,000
Act Ref
Case Study: Knowledge
Major Transport Company
Leading carrier servicing Adelaide, Melbourne and
Sydney. Completed 2008 GHG Assessment and
developed Carbon Management Plan.
Outcomes
• Exceeded NGER threshold and avoided $220,000 fine
• Opportunity to offset all emissions via embedded
carbon pricing (less than 1.8% increase)
Source: Carbon Planet
CPRS snapshot
• Action on climate change crucial to economic prosperity
• Encourage polluters to a cleaner future
• Prices will rise
• Covers 75% of Australian emissions
• Broader offset strategies allowed
• Permits treated as financial products
• EITE industry given greater support
• Households given support
McKinsey Report
Key findings
• Significant GHG reductions to 30% below 1990 levels by
2020 and 60% by 2030 are achievable without major
lifestyle changes or technology breakthroughs
• Reducing emissions is affordable $A290 per household
• Achieving significant reductions requires prompt action
• Failure to do so will have real consequences in upcoming
commitment periods
Cost Impact
Source: McKinsey Australia Climate Change Initiative
Cost Impact
Source: McKinsey Australia Climate Change Initiative
Carbon Action
Meet the challenge of the Carbon Economy
Reasons to Act
1 – Compliance
2 - Reduce energy use, emissions and costs
3 - Build credibility and increase market share
4 - Recognise and account for new carbon costs
Carbon Action - ROI
2. Reduce energy use, emissions and costs.
Pathways
Behavioural change - minimal cost, immediate return
Minor infrastructure - low cost, quick return
Major infrastructure - higher cost, long-term sustainability
Case Study: Quick Return
Scan Conversion Services
Quality assured company that delivers highly effective
document and drawing management solutions.
Completed a GHG assessment in 2008 and
commenced a range of environmental programs.
Outcomes
• Reduced emissions by 55%
• Reduced energy use by 18%
• Implemented new lighting and water saving systems
• Substantial staff engagement
Source: Carbon Planet
Carbon Action - Opportunity
3 - Build credibility and increase market share
Action
Identify clients that are greening their supply chains
Build credibility with carbon business planning
Communicate and promote carbon credentials
Supply Chain
Govt
ASX
M/L
SME
Actual tender questions
• What is your environmental policy?
• What are you doing to reduce your carbon footprint?
• Has your company set targets for reducing emissions?
• 20% of tender weighting based on carbon neutrality
“We will only deal with
organisations that have their
own green policy in place and
are aiming to reduce their own
carbon footprint”
Source: James Scott, CIO, Toyota Motor Corporation Australia
Case Study: Supply Chain
Macquarie Telecom
Recently awarded $1 million Information Communication
Technology (ICT) contract to Sun Microsystems over
long time incumbent Hewlett-Packard due to their;
“solid environmental credentials”
and their ability to
“really deliver on their green promises”
Source: Business Review Weekly
…and remember
If you’re involved in a supply chain ensure you have
included a “Carbon Variation Clause” in your supply
contracts if they extend into 2011.
Carbon Action - Risk
4 - Recognise and account for new carbon costs
Focus
Identify increasing prices and measure the impact
Explore alternatives, cleaner and cheaper options
Implement changes
Embedded cost of carbon
CPRS early estimates
Electricity
Gas
Steel
Aluminum
Flights
Cement
Petrol
Diesel
Potential Increase
Permits @ $23
Permits @ $40
11%
19%
8%
14%
4%
8%
67%
116%
3%
5%
4%
7%
6%*
10%*
5%*
8%*
* Fuels prices to be offset via reductions in fuel taxes for first 3 years
NB - Due to free permits final cost impacts may vary
Source: Carbon Planet
Carbon Impact On Profits Case
Study: Innovation
Manufacturing sector example
As % of turnover
Electricity
Gas
Steel
Aluminum
Net Profit8%
4%
3%
30%
10%
CPRS
11%
8%
4%
67%
Runaway costs
Electricity
Gas
Steel
Aluminum
4.4%
3.2%
31.2%
16.7%
Cost Increase Net Loss (0.5%)
Case Study: Early Adopter
Best International
Technical service provider to leading Tier 1 vendors like
Dell. Conducted a GHG assessment and designed an
embedded carbon strategy.
Outcome
• 20 cents was added to the cost of their service calls
• This generated enough revenue to offset all emissions
• Now recognised as a green service provider
Source: Carbon Planet
Carbon Action
Three clear steps
1 - Reduce energy use, emissions and costs
- save money
2 - Build credibility and increase market share
- win more customers
3 - Modify business to account for new carbon costs
- make money
The Big Picture
Investor Risk
“Investors will consider a range of factors, such as a
credible mitigation strategy, when assessing the
impact of an emissions trading scheme on the value
of a company.”
Source: Carbon Disclosure Project Report 2008 Australia & New Zealand
(On behalf of 385 investor groups with assets of $US57 trillion)
Strategy for business
“Your company needs to beat
competitors in 2 areas:
Reducing exposure to climate
related risks and find business
opportunities within those risks.”
Source: Harvard Business Review: Fred Wellington, Jonathon Lash
Benefits of Acting
Where to from here?
Measure your carbon footprint
&
Do something about it
Carbon Management Planning
Grant Assistance
Take advantage of Government funding
Clean Business Australia Initiative
• $240 million fund
• Four year period
• Improve energy and water efficiency
• Increase sustainability
Key elements
• Australian Carbon Trust
• Re-Tooling for Climate Change
• Green Car Innovation Fund