Force of nature

02 Apr 2007Archived News Energetics in the News

PUBLISHED: BRW Magazine - By Kate Burgess - Tony Cooper, Managing Director, Energetics Pty Ltd is asked by BRW Magazine to talk about what is driving business to measure their carbon footprint.

 

The threat of climate change is forcing companies to recognise the social and environmental effects of their actions, paving the way for consultants.

The campaign to reduce carbon emissions has seen consultants of all shapes and sizes emerge, providing a sophisticated array of services. But a lack of federal government regulation is limiting their effectiveness as uncertainty mounts over exactly how emissions will be controlled.

“There has been an influx of interest from people wanting to gain competitive or first-mover advantage,” the managing director of boutique environmental consultancy Energetics, Tony Cooper, says. “The most talked about thing is the desire for [client] products to be tagged ‘carbon neutral’.”

Climate change has implanted itself on the political agenda after a series of events in October last year, that included: the release of the report by Sir Nicholas Stern on the economics of climate change, the documentary An Inconvenient Truth by former United States vice-presidcoent Al Gore, and the admission by Prime Minister John Howard that climate change could pose a threat to the Australian economy.

As the issue has gained political momentum, it has become a fledgling business issue. In the absence of regulation on greenhouse gas emissions, companies realise they cannot simply wait for regulators and must measure the environmental impact – or carbon “footprint” – of their operations. Carbon-neutral policies involve companies offsetting the carbon dioxide emissions they produce by reducing their energy consumption or by engaging in activities such as tree planting. “Companies are considering their carbon footprint as part of their long-term investment decisions between 10 and 15 years out,” PricewaterhouseCoopers partner Leigh Minehan says.

Enter the armies of consultants to advise companies of any sector or size on the many of implications of regulating greenhouse emissions and what can be done to turn potential risks into opportunities. Advice on sustainability issues has been around for some time. Energetics has been running for 23 years and another consultant, Ecos Corporation, for 12. Carbon-intensive companies such as miners and utilities were early movers on the issue, at first to avoid trouble from anxious stakeholders. But other sectors including manufacturing and, to a lesser extent, services have sat on the fence until recently.

Action was previously seen as compliance, whereas many companies now recognise the potential to drive cost savings through energy efficiency and opportunities associated with leading the pack in reducing their carbon footprint.

KPMG partner Rob Hogarth identifies two types of companies. “First, there are high-emissions companies who have been doing this kind of work for some time. Then there are companies that don’t have such a large carbon footprint but realise they need to do something and they’re not sure what it might be.”

This awakening has changed the way consultants engage with clients on environmental issues, Hogarth says. “In the past we predominantly engaged with the environmental officer or sometimes the person in charge of external reporting. In the last 12 months we like to say it has moved ‘down the corridor’ to the chief financial officer, and I believe that over the next 12 months we will be engaging the chief executive.”

Consultancies are evolving to meet the demand. Professional services firms joined incumbent specialists such as Energetics and Ecos some years back when triple bottom line reporting – measuring environmental and social as well as financial outcomes – became recognised. Professional services firms now assist clients with everything from environmental audits, governance and internal controls to tax issues arising from emissions trading.

PricewaterhouseCoopers has more than 50 staff dedicated to climate change-related work spread across all four of its service lines. KMPG recently opened an internal climate change centre. Deloitte has hired a former sustainability manager at Origin Energy, Lorraine Stephenson, to lead a new team of climate change specialists.

Small consultancies say there are involved in an evolution of their own. “We started off helping people understand the issue,” Ecos managing director Paul Gilding says. His firm has shifted from preparing environmental reports to advising companies on sustainability issues affecting high-level business strategy in the US.

“We evolved into strategic work very much in the US,” Gilding says. “We have moved on from environmental reporting. We now focus on the relationship between sustainability and business growth plans over a long-term horizon.”

Cooper says Energetics is receiving more requests from companies wanting to produce triple bottom line reports that provide added transparency for stakeholders. Carbon risk assessments, which involve measuring the carbon impact of a company’s products and services, have grown in popularity. But Cooper adds that Energetics has had to exercise discretion in selecting clients. “There has been such a rush of interest in the marketplace I have had to decline some requests because some companies don’t want to do what is physically required to meet a lower emissions standard. I have had to develop a screening tool to cope with these enquiries,” he says.

Consultants point to big differences in the level of education within companies on the effects of climate change. They distinguish between those that are keen to measure the carbon effect of their activities and those that are prepared to adopt internal strategies to abate emissions. Cooper refers to this as the “carbon footprint” versus the “carbon toenail”.

“Working out your footprint and doing something about it are two different things,” EMIT principal Matthew Dever says. “Trying to understand the impact of a company’s carbon footprint is essential to its strategy. But we’re not seeing a reduction across the board in terms of carbon footprints.” Action on carbon emissions is still a “fledgling issue”, Minehan says, adding that companies are still three to five years from recording a direct financial impact.

Consultants may have some of the answers, but many companies are not yet ready to fund potentially expensive re-engineering of business processes to become more energy efficient. Much of the work of consultants at present is of an educational nature. Rather than implementing strategies on how companies can save on power and water usage, for example, companies are asking how they can plant trees or purchase other carbon offsets.

Any inertia on the part of corporate Australia to actively reduce its carbon footprint stems partially from the absence of any regulation on emissions and an involuntary carbon trading market. “What is still unresolved is the government position on this,” Minehan says. “Until the issues are resolved, you can’t really do much.”

Even companies factoring the effect of carbon emissions into investment decisions are hamstrung. There is no certainty as to the cost of carbon so modellers are resorting to guesstimates of roughly $25 a tonne.

“At the moment there is a lot of uncertainty,” Hogarth says. “That is what is bothering industry the most.” He concedes that “we are getting an increase in work from all this uncertainty, but I think that if there were certainty we would probably get even more work”.

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