Succeeding in a low carbon economy. How effective carbon management can benefit the supply chain

Transcription

1 Succeeding in a low carbon economy How effective carbon management can benefit the supply chain August 2011

2 The transition to a low carbon economy is happening now. In response to this, leading companies are implementing strategies which push the responsibility of carbon throughout their supply chains, making this issue relevant to businesses of all industries and sizes. Increasingly, companies will need to have effective and credible strategies to ensure success in a world constrained by carbon. 2

3 Introduction In the transition to a low carbon economy, carbon management represents a new and fundamental challenge for business. How companies respond to this challenge is fast becoming a strategic issue. In the Carbon Disclosure Project s 2010 report on the Global 500, 48% had integrated climate change risks or opportunities in to overall business strategy and 85% said climate change governance sat at board or executive level. Over 50% of an average corporation s carbon emissions are typically from the supply chain. As these companies implement strategies to manage emissions, the responsibility for carbon is pushed throughout their operations and supply chains. Over 50% of an average corporation s carbon emissions are typically from the supply chain 1, increasing the pressure on all businesses to understand and respond to the climate change challenge. Whilst only 12% of the Carbon Disclosure Project s Supply Chain program would deselect a supplier for failing to meet carbon management criteria today, 56% of them state it will be a selection factor within five years 1. The business drivers for taking action on climate change now go beyond risk management and compliance to include brand management, product differentiation and employee engagement. Companies that respond effectively and credibly to meet emissions targets, agreed not only at national level but by an increasing number of industry bodies, such as IATA 2, will increasingly have a competitive advantage over their peers. It is increasingly being recognised as a business opportunity to drive top line growth: the Carbon Disclosure Project s Supply Chain program reports that all of its 57 member corporations and half of their suppliers now have a formal strategy for climate change 3. 3

4 The global challenge Each business faces the same challenge: how to grow profitably whilst reducing emissions. The prevailing scientific and economic consensus is that an absolute reduction of 80% in global greenhouse gas emissions is required by mid-century to prevent material damage to the world s economy. The International Panel on Climate Change (IPCC) calculates that an annual emissions reduction of 3.9% is necessary to deliver this target. Change in emissions from 2009 levels 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% S&P 100 Utilities S&P 100 Companies Obama target IPCC target Years S&P 100 Utilities Emissions Increase: 1.64% Annually S&P 100 Average Emissions Increase: 0.36% Anuually Required Reduction for US 2020 Target: 1.05% Annually Required Reduction for IPCC Target: 3.9% Annually Fig.1 S&P100 Emissions Tragectories Global emissions reported by the USA s 100 largest companies are increasing despite the global downturn. Source: Carbon Disclosure Project 4

5 A low carbon economy - the future is now The world s largest companies are on track for an annual emissions reduction of just 1.9% 4, reaching the recommended level of greenhouse gas cuts by 2089, 39 years too late. The global economy is transitioning to a world constrained by carbon. The UK Government will drive investment in low-carbon technologies by introducing a carbon price floor of 16 per tonne in 2013, rising incrementally to 30 per tonne by Australia set a carbon price in July 2011, and Japan and China look likely to implement cap and trade schemes. Public opinion is also driving opinion. 65% of consumers now think it s important to buy from environmentally responsible firms 6 and businesses are responding with low carbon brands, products and services. The environmental agenda is a key area where businesses can differentiate their offerings. 5

6 Oppurtunities through early adoption Companies with credible and effective carbon management strategies seek to reduce emissions while improving business performance. To achieve this, many businesses are realising the environmental and commercial value of implementing offset inclusive carbon management programmes as they represent: The most efficient way to reduce emissions beyond the constraints of current infrastructure (e.g. leased offices, mature manufacturing facilities) and business models (e.g. a dependence on air travel to visit clients) For many the only way to reach emission reduction targets A cost-effective way to present limate change credentials to customers that will drive revenue and to stakeholders that will enhance corporate reputation A cost benchmark against which to measure the efficiency of all internal reduction opportunities A driver of operational behavioural change to adopt energy efficient working practices.

7 Incorporating offsets into a carbon management strategy Companies implementing an offset inclusive carbon management strategy work through a five step process. An integrated carbon strategy combines a programme of internal emissions reductions with offsetting. Offsetting is an essential tool as it can be implemented immediately and guarantees reductions, enabling organisations to meet emissions targets. Importantly, investments in quality offsets are funding real and permanent reductions within the global economy. As far as the climate is concerned, where reductions take place is of no consequence. Roughly one third of CO2 emissions related to the consumption of goods and services in industrialised countries are emitted outside their national borders 7. Yvo de Boer, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) estimated that if developed economies commit to reduce emissions 60-80% by 2050, and if half of the emission reductions were met through investment abroad, it could generate up to $100 billion per year in green investment flows to developing countries. Without this flow of investment to enable developing countries to grow using alternative technologies and energy, we will not reach the global emission reduction target. Offset inclusive carbon management allows your business to participate in this investment flow, becoming part of a global climate solution that greens economic growth world-wide. 7

8 Realising the benefits from carbon management Delivering reductions is only one element of corporate carbon management. Business value comes from carbon management strategies that differentiate products and services, manage costs and meet stakeholder demand. Marks and Spencers have proved the commercial benefit in environmental programmes, with their Plan A programme delivering net benefit of 70m in 2010/11. In 2011/12 the retailer will aim for carbon neutrality and work to embed this principle in its supply chain 8. Winning business through a strong carbon position 56% of consumers would be prepared to stop purchasing a brand if it didn t measure its carbon footprint, up from just 22% a year ago 9. Implementing an offset inclusive carbon management programme is a simple and immediate way to demonstrate leadership in your market and differentiate from less environmentally responsible brands. Meet stakeholder demand The emergence of the Carbon Disclosure Project, which acts on behalf of institutional investors holding $64trillion in assets under management, confirms that the extent to which a company mitigates its climate impact is now a key measure of business performance. Increasingly companies need to take action now to be compliant or prepared for future compliance. A lack of action around climate change puts your brand reputation at risk financially and commercially. In addition, the need for effective management of carbon is increasingly driven by issues such as employee expectations and talent management. Drive down costs An offset commitment as part of a carbon management framework helps you drive out cost faster and deeper by capturing the benefits of bottom-up initiatives that engage employees, suppliers and customers to bring about significant reductions in emissions by changing their working practices, commuting habits and product choices. 8

9 Companies like Avis, Arinc and Atos Origin have already implemented offset inclusive carbon management strategies. This approach not only delivers emissions reductions, but tangible business benefits including revenue growth, increased market share, improved corporate reputation, stakeholder engagement and costs management.

10 About The CarbonNeutral Company The CarbonNeutral Company () is a world leading provider of carbon reduction solutions. It works with more than 500 companies in 32 countries to develop carbon offset inclusive carbon reduction programmes. Since 1997, it has purchased carbon credits from over 200 projects in 24 countries. CarbonNeutral is the registered trademark of The CarbonNeutral Company and is a global standard to certify that businesses have measured and reduced their CO2 emissions to net zero for their company, products, operations or services. The CarbonNeutral Company is a founding member of The International Carbon Reduction and Offset Alliance (ICROA), which provides leadership and a unified voice advocating for rigorous industry standards org. To find out more about how an offset inclusive carbon management programme can benefit your business, please contact Richard Smith or call or call References 1 - Carbon Disclosure Project Supply Chain Report Global Approach to Reducing Emissions, IATA 3 - Global 500 Report, Carbon Disclosure Project Carbon Disclosure Project Supply Chain Report HM Treasury Press Release, March Greening Your Business For Growth, June 2011, The Carbon Trust 7 - Proceedings of the National Academy of Sciences, March Edition 8, Marks and Spencers Plan A Financial Review, Low carbon products in demand despite challenging economic climate, 1 July 2011, The Guardian 10