Carbon Confusion

You can't open a newspaper, watch the news or listen to radio news without hearing about the political wrangling over the Federal Government's carbon trading scheme (called the Carbon Reduction Scheme - CPRS). Despite all the lobbying from the big end of town, business needs certainty, it needs the CPRS legislation to be passed soon so that it can work out how a market price for carbon will affect their businesses.

I have just read an excellent book** published by Harvard Business Press that puts current climate confusion into perspective. The authors argue that like it or not business needs to accept that climate change has moved beyond a public debate. Business needs to think about climate change as a market transition in which controls on carbon pollution will affect the price of energy, products and services. All sectors of the economy will be affected as the price of carbon ripples through the economy right down to your business' bottom line.

We are facing a future carbon constrained world which will drive the biggest market transition in living memory. There will be winners and losers, some industry sectors will be impacted more than others. The authors argue that you must separate your business acumen from your feelings about climate change, whether you believe it or not. You must face up to this market transition by understanding the risks but more importantly seeing the business opportunities that it will throw up. You must take action now and start preparing for the market shift that a price signal for carbon will create. You need a strategy to help you navigate your way through the turbulance and opportunites ahead.

Using the insights from reading the Harvard publication, I have come up with a practical process you can use to develop a carbon strategy for your business. The carbon strategy must form an intergral part of your overall business strategy. Think of it like your marketing or OH&S strategies, critical elements that must be managed to drive your business. The steps are:

1. Measure your carbon footprint - you can't improve what you can't measure
2. Determine your carbon risk and liability. This comes out of the carbon footprint analysis and will show you whether you have liabilities to report emissions to the Government or get caught up under the CPRS. It will help you work out whether you are exposed to supply chain of customer risks.
3. Develop a carbon reduction plan. Develop a plan to reduce emissions by developing low carbon products and services and driving waste and inefficiency out of your business. The good news is that these activities will also save you money.
   

Simple in theory, but hard to do I hear you say! It's worth the effort however. Work done by McKinsey has shown that most businesses could reduce their carbon emissions by 20 - 30% at minimal or not cost. In fact many of these initiatives will save money!

In future posts, I will discuss how you can work your way through the 3 steps in developing your carbon strategy.

Michael du Plessis
www.greenice.com.au

**For further reading see "Climate Change. What's Your Business Strategy?" by Andrew J. Hoffman and John G. Woody, Harvard Business Press.