No planet, No profits

27 Mar 2007Archived News Energetics in the News

PUBLISHED: Sydney Morning Herald - By Louise Williams - Linda Funnell-Milner, Energetics' National Director Sustainability & Reporting, is asked by Sydney Morning Herald what business Australia is doing to combat climate change.

 

Businesses now realise that sustainable practice can be lucrative as well as noble.

Take a trip to your local rubbish dump and glimpse the future of Australian business. At municipal tips dotted all over Australia, teams from a company called Landfill Management Services are installing pipes to suck methane from the inner core of decomposing waste. The methane, a greenhouse gas far more potent than carbon dioxide, is burned at extremely high temperatures on site, preventing it from entering the atmosphere. This same process can produce electricity, which would have otherwise been generated by coal-fired power stations.

The environmental benefits are audited by the Australian Greenhouse Office and LMS gets a pile of carbon credits; to date a saving of more than 5 million tonnes of CO2, which is the equivalent of taking more than 1.1 million cars off the road.

But there's more. LMS sells the credits to BP Australia, which is building its own portfolio of pollution offsets. The offsets allow BP to market a product called Global Choices, which offers corporate customers "carbon neutral" fuel for their vehicle fleets. Every litre of diesel costs nearly two cents more but BP guarantees the emissions are entirely offset by credits from LMS, or other companies which combat CO2 emissions by planting trees. So far, the cut to emissions is equivalent to garaging 320,000 cars.

Then a Perth freight company, Simon National Carriers, puts a new product, Clean Freight, on the market. This offers clients trucks filled with BP's carbon neutral fuel for a small premium. Or in the case of freight company WA Freight, which runs prime movers back and forth across the Nullarbor, the company offsets part of its emissions and absorbs the extra cost itself. But its business expands anyway because more and more customers like green transport.

This chain of commerce is a showcase of where Australian business ought to be heading. About 80 per cent of Australia's greenhouse gases are produced by business and government, so what business does really matters.

Since late last year, a time referred to by executives as "around the screening of Al Gore's film, An Inconvenient Truth", there's been a big shift in attitudes towards green issues among Australia's corporate leaders.

Environmental measures that were once bemoaned as a punitive cost are, increasingly, seen as inevitable. Partly it's pragmatic; energy and water prices must rise and businesses must find ways of improving efficiencies. Partly it's because the Australian public ranks the environment as its top concern and there's marketing value in being seen to be green.

"Climate change used to be a scientific blur that no one really understood and everyone thought would just cost us money," says Linda Funnell-Milner, national director of sustainability and reporting with the Energetics consultancy.

"I think we are moving very quickly to a situation where the biggest issue is no planet, no profits. Companies failing to address the environmental challenge will be seen to be failing to manage their businesses appropriately."

For all the talk, where is the action? Australia is not a signatory to the Kyoto Protocol on greenhouse gases, has one of the lowest renewable fuel targets in the world (2 per cent), no national carbon trading market and no enforceable target for emissions reduction. Apart from the NSW government scheme for electricity retailers, much of corporate Australia can pollute with impunity.

Yet, Australia has more companies on the ¬global Dow Jones Sustainability Index (5 to 6 per cent of places) than the size of our economy would suggest. And last year, the Australian Business Roundtable on Climate Change published a devastating investigation into the economic costs to industry and agriculture of doing nothing as the climate warms. Its corporate members - Westpac, Visy, Origin Energy, Insurance Australia Group, BP and Swiss Re - formed an alliance with the Australian Conservation Foundation. Their pledge: to clean up their acts and lobby the Federal Government to establish a market signal for carbon emissions, so businesses can factor in the future cost of emissions.

Others, too, are jumping in early. Fosters has reduced the amount of water used to produce each litre of beer to 2.3 litres, against an industry standard of six litres, and Boral has figured it's smarter to be upfront about the high emissions associated with cement and building material production and has set itself a voluntary target.

"Australia's report card is mixed. There are some fantastic corporate leaders and some real laggards," says Amanda McCluskey, sustainability manager at Portfolio Partners.

"Increasingly Australian companies are seeing the value of getting in first, not just because it enhances their image, but because they'll be prepared for a future when carbon [emission] is a cost."

But, going green can be complicated and costly. First, businesses have to engage consultants to audit their emissions: how big is their ecological footprint when industrial emissions, office energy consumption and car and air travel are all added up? Then they have to work out what they can do to tighten their environmental belts: use less paper, turn out the lights, make more phone calls, take fewer flights and run smaller cars, for example. What's left has to be offset, by paying someone else to reduce pollution elsewhere.

Just as important is what a business does with its money. It's no use going green if you are ¬investing in, and profiting from, dirtier ventures elsewhere. This is where a load of new investment criteria comes in.

Globally, more than $10 trillion has been committed to sustainable investments. Westpac and ANZ have agreed to invest only in projects that meet environmental and social standards. Other financial institutions are creating green products, such as cheaper loans for vehicles with low emissions.

"The finance sector has the ability to drive change through the entire economy. What we've found, though, is too few finance planners have a long-term vision of a sustainable Australia," says Charles Berger, a lawyer who rated the finance sector for the Australian Conservation Foundation. Frustrating change is the way businesses reward executives for short-term gains, he says.

Corporate Australia's green report card also shows big discrepancies between industries. Many miners and some banks are way ahead, commercial property managers are just starting to count the cost of blazing lights and inefficient air-conditioning but many manufacturers, the pharmaceutical industry and big retailers "are not even talking about it",Funnell-Milner says.

What businesses are doing isn't easy to pin down because Australian companies are not required to publish environmental accounts. However, about a quarter of companies have begun to release this information voluntarily. For example, anyone can check how many pieces of paper Westpac used per employee last year, how many kilometres a litre its fleet cars achieved, or its CO2 emissions a person (down 45 per cent in a decade).

The Federal Government has set a deadline of March 31 for Australia's top 250 companies to ¬submit proposals for saving energy. No action is yet required but once potential emissions ¬reductions have been measured and costed it will be difficult for companies not to act, says one consultant.

Francis Grey, research manager at the Australian SAM Sustainability Index, argues change doesn't necessarily weigh down the balance sheet.

"A market leader has already grasped the concept that sustainability will improve the bottom line and it is ignorance that costs money; like continuing to use inefficient technologies or wasting energy," Grey says. "Capitalism isn't about doing good; it's about competition. Sustainability is a tool to be used to beat your opponent."

Even if the relatively cheap costs of water and energy in Australia don't rise sharply in the near future, the rest of the industrial world is facing serious supply constraints, especially in China, India and Europe. This means our global competitors are already developing more and more efficient industrial and business models, he says. Unless Australia keeps up it will be left behind.

Grey also believes US companies have reached a tipping point on environmental policy.

"Companies like Wal-Mart and General Electric are moving very fast, that's the way the global game is going. The US is the corporate leader of the world, whatever it does will be taken very seriously."

In the short term greening businesses can cost more. Why, then, does WA Freight absorb the cost of offsetting part of its emissions?

"We are not a large company and we know what we do won't save the planet. But we use 10 million litres of diesel a year. We contribute to the problem and we believe we should do something to counteract it," says health and safety officer Stewart Beard.

"A lot of customers have reacted favourably. There's a growing concern about the environment and if it's a choice between us and another company they'll want to do the right thing."

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