Thursday, 20 January 2011

Why managing your carbon impact is inevitable

I believe that every business in the UK will be managing its carbon impact in 5 years. Many companies are already doing so, but there are many that are not. Those against it usually argue that investment in non-core activities is difficult, especially in this time of fiscal austerity. While this may be an understandable response, I believe it is short-sighted. Reducing your carbon impact will save you money and strengthen your business, and the sooner you do it, the sooner you can build expertise and enjoy the benefits.

Let’s look at the business case for a moment. Carbon management consultants like us have been harping on about cost savings for years. It’s not just rhetoric, nor is it rocket science. Any organisation that can work out ways to use energy more sensibly will knock a massive chunk off its electricity, gas and fuel bills. As energy prices won’t be going anywhere but up in the future, the savings accumulate accordingly.

Then there is legislation. The coalition turned the CRC Energy Efficiency scheme into a tax as part of its Comprehensive Spending Review, with the additional tax bill for the smallest participants now estimated at over £40,000 a year from 2012. On top of that they face fines for non-compliance if they don’t accurately measure their emissions. So the better you manage your carbon, the smaller your tax bill. And it’s unlikely to stop there. A recent government consultation on corporate law and governance is the first part of the coalition’s commitment to ensure that social and environmental duties are included in company reporting.

The good news is that consumers like to see companies ‘doing their bit’. They might not want to make massive changes in their own lifestyles or pay a premium for green credentials, but they do show a preference for sustainable products and services. A 2009 Europa survey found that more than 8 in 10 EU citizens felt that a product’s impact on the environment is an important element when deciding which products to buy. Brands embracing the low-carbon agenda are associated with a ‘can do’ approach, social responsibility, and innovation.

The flip side of this is, of course, that companies not tackling their environmental impact are at risk of losing out to their more forward-thinking competitors. In a 2010 PwC survey of the FTSE 350, 85% of companies are now disclosing their carbon emissions. They need to, because ethical and environmental procurement is becoming mainstream. So even non-consumer-facing businesses are vulnerable to loss of competitiveness if they supply, for example, to a major retailer such as a supermarket, or to the public sector.

Not convinced? You won’t be alone. But in 5 years time I believe you will be at a disadvantage if you don’t take these messages seriously. I think there is a good chance you’ll wind up managing your carbon anyway, eventually. Best practice suggests adopting a low-carbon approach to build value and bring in new business today. Why wait?

Mark Chadwick is CEO of Carbon Clear, a London-based carbon management consultancy.