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The Business of Climate Change

The Business of Climate Change. WHAT A MESS!. Business Leaders. Australian Business. 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 2 nd phase, tougher targets & pressures.

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The Business of Climate Change

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  1. The Business of Climate Change

  2. WHAT A MESS!

  3. Business Leaders Australian Business

  4. The Carbon Economy is real? US$ 3.1 trillion by 2020

  5. Two Challenges

  6. 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

  7. Good carbon managementcan reduce costs, help create more efficient and resilient organisations whilst delivering a competitive advantage

  8. Today’s focus • Legislation • Compelling analysis from McKinsey • Reasons for you to act • Case studies • Next steps

  9. Carbon Planet • Carbon management solutions • Expert scientific and strategic advice • 1 million tonnes of GHG “assessed”

  10. 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

  11. NGER Compliance

  12. 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

  13. 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

  14. 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

  15. Cost Impact Source: McKinsey Australia Climate Change Initiative

  16. Cost Impact Source: McKinsey Australia Climate Change Initiative

  17. 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

  18. 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

  19. 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

  20. 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

  21. Supply Chain Govt ASX M/L SME

  22. 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

  23. “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

  24. 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: World Environment Centre Source: Business Review Weekly

  25. …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.

  26. 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

  27. Embedded cost of carbon CPRS early estimates * 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

  28. Carbon Impact On Profits Case Study: Innovation Manufacturing sector example As % of turnover Electricity 4% Gas 3% Steel 30% Aluminum 10% Net Profit 8% CPRS 11% 8% 4% 67% Cost Increase Runaway costs Electricity 4.4% Gas 3.2% Steel 31.2% Aluminum 16.7% Net Loss (0.5%)

  29. 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

  30. 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

  31. 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)

  32. 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

  33. Benefits of Acting

  34. Where to from here? Measure your carbon footprint & Do something about it

  35. Carbon Management Planning

  36. 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

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