It’s goodbye GFC but hello climate crisis

01 Dec 2009Archived News Energetics in the News

PUBLISHED: Ethical Investor, by Tony Cooper, Chief Executive Officer, Energetics Pty Ltd. The CEO of consultancy Energetics and sponsor of the Special Award for Environment advises businesses act now, and not only because of the inevitability of legislation.

It has been a challenging year for business across the world courtesy of the great global financial crisis. Australia has narrowly avoided a recession and we can finally see signs of at least a turnaround. While many companies and governments around the world have halted their response to climate change, instead concentrating their efforts on surviving the GFC, finally we are starting to see some climate action.

Government administrations are showing that they’re not only committed to turning around the financial crisis, but also the climate crisis. On 26 November, US President Barack Obama announced he would take to the Copenhagen talks a commitment to reduce US emissions "in the range of 17 per cent below 2005 levels in 2020 and ultimately in line with final US energy and climate legislation".

The Obama administration has also made a clear commitment to re-energising the American economy by boosting the green economy through a pledge of US$100 billion towards sustainable technologies. China's State Council also announced on 26 November that China will trim its carbon intensity by 40 to 45 per cent by the year 2020 as compared to 2005 levels. China also plans to spend US$200 billion and G20 industrialised nations some US$400 billion.

So how does Australia shape up alongside some of its global counterparts?

Although the Australian government announced a delay in the commencement of an emissions trading scheme (ETS) by one year (now planned introduction in 2011), some businesses are nevertheless taking action to manage their impact on climate change.

In its May budget the federal government announced a number of new energy efficiency programs to be funded by the Climate Change Action Fund (CCAF). Corporate Australia is waiting with baited breath for the funding to be released. The funding will include up to $100 million for Early Action Energy Efficiency Strategies for Business, and $80 million for capital investment grants for businesses and community organisations.

These initiatives will support businesses that have significant energy costs, but do not receive emissions-intensive trade-exposed assistance. The assistance will encourage businesses to take steps to reduce carbon pollution through energy efficiency before the planned commencement of an ETS.

What do these signals mean for corporate Australia’s response to climate change, especially in tough financial times? Should businesses prepare for the green economy of the future and, if so, where should they start?

Companies have three choices: do nothing until action is mandatory; wait for more signals from the government to show their commitment to climate change; or act now.

Of course, with sound conviction, it is recommended that all businesses act now, and not only because of the inevitability of legislation.

There are many other convincing market signals: the GFC has changed the rules of business – market differentiation is essential; climate change is a reality with impacts on business – for example rising energy costs passed down the supply chain; stakeholders (consumers, investors, employees, community) demand good corporate citizenship as standard business behaviour; and scarcity of resources (energy and water) - preparation for a low carbon economy should be business as usual.

Any organisation that is not vigilant of these points will not survive, especially in tough economic times. The Harvard Business Review says, “There is no alternative to sustainable development … In the future only companies that make sustainability a goal will achieve competitive advantage”.

Many companies are already well ahead of this debate, by adopting a corporate sustainability strategy that aligns with their overall business strategy. Yet the majority of other companies are merely on the cusp of their low carbon transition. Where should they start? Strategy development: get it right; align strategy to the business; gain leadership commitment; translate strategy into action.

One Australian company that has sought out competitive advantage around climate change is Woolworths (ASX: WOW).

In 2007, Woolworths announced their long-term goal “to be recognised as the leader in sustainable retailing in the Australian retailing sector”. Their call to action was well articulated in their published Doing the Right Thing: Sustainability Strategy 2007-2015. At the forefront of Woolworths’ strategy was their commitment to reduce carbon emissions by 40 per cent on projected growth levels by 2015, bringing emissions back to 2006 levels.

Woolworths’ long-term goal clearly articulates their intended response to climate change and leaves stakeholders with little room for ambiguity. It provides staff, suppliers, analysts and other interested stakeholders with key ingredients in their intended approach to this challenge – strong leadership and commitment.

Showing strong leadership is an essential factor in any well-articulated strategy and clearly communicating reduction targets and funding gives a strategy substance and demonstrates commitment.
Through strong leadership, Woolworths has continued with the practical steps of integrating the principles and practices of sustainability into their business. Woolworths is a signatory to the Carbon Disclosure Project (CDP) and was featured in the Global Carbon Disclosure Leadership Index (CDLI) for the first time in 2009.

A strategy is meaningless if not turned into action. But translating strategy into action is the biggest challenge for organisations, no matter their size. Most companies find this difficult when their business systems are not set up to allow achievement.

Legendary management consultant Peter Drucker didn’t name or blame individuals but saw root causes in the design of organisations – in their structures, processes, norms, and routines. Business leaders need to consider the question: what systems can I use to translate strategy into successful implementation?
Implementing a structured process that revolves around key management areas provides tactical tools to ensure organisations can meet their corporate objectives.

While we wait for the Australian government to pass legislation that will provide business with a clear direction for its response to climate change, should businesses do nothing, wait for clarity or act now? Without a shadow of a doubt, there is enough compelling evidence for businesses to take immediate action on climate change, transition now for a low carbon economy or face competitive disadvantage, and prepare for increasing energy prices now, notwithstanding a price on carbon.

Energetics’ 10 principles for success
With many years of experience in helping companies to achieve their strategies through successful implementation, some essential learning and principles are apparent:

  • Board and executive buy-in is critical to a successful strategy, i.e. strong leadership and commitment.
  • Understanding the impact that your business has on climate change and the impact that sustainability has on your business.
  • Establishing priorities and providing a critical action plan to improve business performance.
  • Building climate change capacity and mobilising the workforce across all divisions and sites of the business.
  • Realising savings through efficiency and productivity gains, and financial opportunities through voluntary and mandatory carbon markets.
  • Understanding and managing the supply chain.
  • Managing inefficiencies through effective maintenance and management of operations.
  • Investing in technologies and innovations for the future.
  • Being transparent in measurement and verification of reports.
  • Enhancing market position and brand reputation through sustainable management principles.
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