03/03/2011 - 00:00

Leading businesses taking a green approach

03/03/2011 - 00:00

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What are the risks and opportunities for business as Australia moves towards a low carbon economy?

Leading businesses taking a green approach

BIG businesses are embracing green business and placing pressure on their supply chains to comply.

GE (General Electric), a company whose operations span aviation, energy, oil and gas, media and entertainment, healthcare and financial services began, in 2005, a ‘green business’ arm called ecomagination. ecomagination is all about clean and green technology and services from renewable energy systems to electric motors and energy efficient light globes. GE invested $5 billion in this business unit between 2005 and 2010 and it generated revenue of $70 billion. It plans to double its investment by 2015.

Unilever, the global giant that owns well-known Australian brands such as Dove, Flora, Streets, Continental and Lipton plans to ‘decouple’ growth from its environmental impact. In November 2010 CEO Paul Polman declared: “Growth at any price is not viable”. Unilever plans to halve the total carbon, water and waste impact of its products by 2020.

Walmart, the world’s biggest company with more than 100,000 direct suppliers (who in turn have millions of their own suppliers), has a Sustainable Product Index. It requires its suppliers to provide detailed information on the greenhouse gas emissions, materials, water, natural resources and community impacts of the products they supply. Westpac does a similar thing with some of its 10,000 suppliers.

These are only a few examples of millions of companies worldwide embracing a future that values low-carbon footprints, sustainability, energy efficiency, reduced use of natural resources and lower social impacts. These companies wield tremendous power and their actions, policies and requirements directly influence millions of smaller companies in their supply chain.

The message here is that green business is less and less about ‘doing the right thing’ (although that should always be a consideration) and more about being a smart business. If you are not prepared to adapt to supply chain requirements, you risk losing business. If you are well prepared for these emerging impacts, you are more likely to attract new business and open up new opportunities.

Low-carbon economy

Prime Minister Julia Gillard announced last week that the federal government intends to implement a carbon price scheme in mid-2012 with the support of the Greens. This will come as no surprise to many, especially companies such as BHP Billiton, which has been vocal in its support of such a scheme.

While the details still need to be agreed upon and the legislation passed, companies can be sure, we are already operating in a low-carbon economy. Since 2008, as a country we have been committed to reducing our emissions growth to achieve our targets agreed under the Kyoto Protocol.

Both major political parties also agree on a minimum reduction target of 5 per cent below year 2000 levels by 2020.

There are several policies already existing or on the horizon designed to help Australia reduce its greenhouse gas emissions, and which place pressure on businesses either directly or indirectly. These include the Energy Efficiency Opportunities program, the National Greenhouse and Energy Reporting Act, mandatory disclosure of energy efficiency in commercial buildings, 2020 Renewable Energy Target and the expected carbon price scheme in 2012.

There are also voluntary drivers that put pressure on businesses. Many companies and also government agencies, departments and local governments are voluntarily reducing their impact on the environment and making sure their supply chain is on board too. Just like the big corporates noted above, Australian companies are sourcing products and services from companies that are sustainable and many are writing these requirements into their tenders and supply contracts. This is the low-carbon economy.

Risk v opportunity

Climate change presents a range of risks to businesses. These include physical risks (e.g. increased extreme weather events), litigation for non-compliance, shareholder resolutions, increase in costs of materials and damage to reputations.

There is also the risk of increasing legislation aimed at reducing emissions. However, smart businesses can turn these risks into opportunities if they can get ahead of the curve. If your business is running efficiently, using less energy per unit of product and reducing waste, you’ll be less exposed to expected increases in electricity, petrol and raw materials prices.

If your business is already measuring and reporting its carbon footprint and other environmental impacts, you’ll be prepared to submit that information in tenders and contracts and win the business. If you are already reducing your greenhouse gas emissions and other impacts, when your customers begin to demand products that are sustainable, you’ll be able to retain them and attract new ones.

Research company Nielsen has mapped 4.6 million eco-minded consumers in Australia who are actively supporting products and services of environmentally committed companies that demonstrate corporate responsibility. The vast majority of these will avoid buying from those that are not. (Nielsen Panorama, Most Important Social Issues in Australia, May 2009). That’s a quarter of the population. Can you give them what they want?

Your business

Are you a laggard with a high-risk profile, perhaps oblivious of impending compliance requirements? Is yours a company that is unaware of what’s on the business horizon waiting to be forced to be more sustainable and likely to miss the opportunities for early movers?

Are you a complier, a company that is doing the bare minimum required, is lower risk than a laggard but isn’t positioned for the big opportunities?

Or are you a leader, a company going beyond compliance, well aware of the changing business environment, embedding sustainability in its culture, engaging staff and key stakeholders and winning new business?

I know where I’d like to be.

• Chris Doherty is business development manager at Carbon Neutral Ltd, a West Perth-based non-profit environmental organisation.

 

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