The Business of Climate Change

WHAT A MESS!

Australian BusinessBusiness Leaders

US$ 3.1 trillion by 2020

The Carbon Economy is real?

Two Challenges

International Experience

• EU ETS began 2005• Now in 2nd phase, tougher targets & pressures

Indications of things to come

Real outcomes• It is working• Environmental policy is highly valued• Greener supply chains• Consumer sentiment changing• Mitigating future cost increases

Good carbon managementcan 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”

LegislationFederal 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 Ref Act RequirementPenalty 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

20.4Liability 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

22.1Group members activity reports to be kept

1000 $110,000

22.2Reports to be kept of a persons activities

Individual 200 $22,000

Organisation 1000 $110,000

61.3Response to questions of Authorised officer

10 $1,100

69.2 Failure to provide facilities assistance 10 $1,100

71.3Power to request information - compliance

50 $5,500

71.4Power to request information - misleading information

60 $6,600

73.5 External audit - compliance 1000 $110,000

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

Case Study: Knowledge

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

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

McKinsey Report

Cost Impact

Source: McKinsey Australia Climate Change Initiative

Cost Impact

Source: McKinsey Australia Climate Change Initiative

Carbon ActionMeet 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 - ROI2. 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

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

Scan Conversion Services

Source: Carbon Planet

Carbon Action - Opportunity3 - 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

ASX

Govt

M/L

SME

Supply Chain

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 ChainMacquarie 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: World Environment Centre

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 - Risk4 - 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

* Fuels prices to be offset via reductions in fuel taxes for first 3 years NB - Due to free permits final cost impacts may vary

CPRS early estimates

Source: Carbon Planet

Potential IncreasePermits @ $23 Permits @ $40

Electricity 11% 19%Gas 8% 14%Steel 4% 8%Aluminum 67% 116%Flights 3% 5%Cement 4% 7%Petrol 6%* 10%*Diesel 5%* 8%*

Carbon Impact On Profits Case Study: Innovation

As % of turnover

Electricity4%Gas 3%Steel 30%Aluminum 10%

Net Profit 8%

CPRS

11%8%4%67%

Cost Increase

Runaway costs

Electricity4.4%Gas 3.2%Steel 31.2%Aluminum 16.7%

Net Loss (0.5%)

Manufacturing sector example

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 providerSource: Carbon Planet

Carbon ActionThree 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)

“Your company needs to beat competitors in 2 areas:

Reducing exposure to climate related risks and find business

opportunities within those risks.”

Strategy for business

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

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

Take advantage of Government funding