Carbon Price 2012: What CEOs need to know

12 Oct 2011Archived News Climate Change Matters

The passing of the Clean Energy Future legislation represents a structural shift for Australian businesses. CEOs will need to lead their businesses to the new carbon economy.

A CEO's strategic views consider multiple impacts and business opportunities. There will be a cost and profit impact. The carbon price will also affect your customers, the supply chain and shifts in your competitive position. There are also opportunities for energy efficiency, carbon credits, low carbon product design, new technologies (renewable energy, control systems) and new services.

Identifying and capitalising on the opportunities for your business is part of the strategic response to this new carbon world.

Protecting your profits requires positive action now

Carbon is a major new cost. The mechanisms for passing the cost onto your customers are not simple, nor are they homogenous. You need to understand how to pass on the cost increase in order to protect your profits, and to do this, your contract and pricing arrangements should be reviewed.

Understand your future carbon costs and how they will impact your business. Review your budgeting and forecasting systems to make sure they reflect the new reality of carbon costs and energy costs.

The low carbon economy brings opportunities

Major change always brings opportunities for the well informed and well prepared. There will be opportunities for your company to adapt and thrive in this new carbon business world. Opportunities include:

  • abatement opportunities though energy efficiency and renewable energy
  • new products or services - creation of markets
  • new customers, new sectors and new business areas
  • carbon reduction projects and carbon credits

From the very start of the carbon price mechanism, Australian carbon credits can be used to reduce carbon costs. Once trading starts, a whole range of local and overseas credits may potentially provide a cheaper way to meet carbon costs. Companies will explore these opportunities now and prepare a plan for utilising these credits.

Managing your stakeholders – what are your investors wanting to know?

Clearly communicate the actions you are taking to your investors, and be aware that the Australian Stock Exchange and ACCC will scrutinise carbon impact statements to ensure they are accurate.

Ensuring your organisation is prepared

Business systems: what do each of your function units / General Managers need to be focused on? 

Function Key focus areas Questions
Chief Financial Officer Costs Who is responsible for carbon costs, carbon trading, carbon strategy and carbon pricing? Where does carbon management fit in your executive team and who is ultimately responsible? Do you possess sufficient knowledge of the different types of carbon credits and what they might offer your business?
Operations Risks and opportunities What are the areas of greatest carbon intensity? Where are the energy savings opportunities? Have the payback periods changed for key capital projects?
Company Secretary Governance structures (policies) and compliance. Have you reviewed your risk policies to determine where carbon fits? Think about what you will need to manage carbon risks. Do you understand the reporting and compliance requirements that will come with a price on carbon?
Chief Sustainability Officer Vision, targets, goals and strategic opportunities arising from the carbon scheme. Where can you identify areas of competitive advantage?
Chief Information Officer Systems requiring a carbon "line item" Have you started to plan to update your IT, management and accounting systems?
Human Resources Carbon skills Do we have the right people? Are they equipped to handle these changes?

 

With less than a year until the carbon scheme comes into effect, now is the time to focus on the opportunities, and understand where your business can innovate and achieve a competitive advantage. 

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Dr Peter Holt

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