Karen Dearne | August 19, 2008
AS pressure builds on climate change, early adopters of green technology, and investors in it, are discovering new opportunities, leading chief financial officers told an SAS business forum in Sydney last week.
Gillian Larkins, of Westpac's institutional banking unit, says the bank's embrace of carbon constraints more than 10 years ago has given it a strong advantage in the emerging emissions trading market.In 1996, Westpac promised to reduce its direct carbon impacts by 40 per cent within 10 years.
"Our early start means we're not facing the same compliance costs others in the sector are facing under the National Greenhouse and Energy Reporting Act," she says.
"Instead, we're focusing on the commercial opportunities for us, rather than dealing with the compliance costs.
"We're well positioned to make money from carbon markets, which is simply an extension of our energy trading business.
"We have a solid understanding of the market and how to help our customers."
In May, Westpac conducted the first trade under the coming Australian Emissions Trading Scheme, buying 10,000 tonnes of carbon dioxide equivalent from AGL for delivery in early 2012 at a price of $19 per tonne.
The trade set the first price for carbon in Australia.
Larkins says a company's carbon accounts will provide a strong indicator of sustainability, because "carbon has a direct financial impact" on long-term share performance.
"Carbon is now on the balance sheet," she says. "The train has left the station on this and there will be severe repercussions for those who fail to see the inevitable coming.
"No one says it's easy, but carbon will have to be managed as just another business issue."
PricewaterhouseCoopers chief financial officer Wayne Twomey says the partners' efforts to become carbon neutral within a year proved more difficult than expected. As Australia's largest professional services firm, with more than 5000 staff located in CBD offices nationwide, PwC knew its main environmental impact derived from buildings and travel.
"We understood what it meant to measure our carbon footprint, it was extremely difficult to get landlords to change their behaviour," Twomey says.
"We ended up spending the money ourselves to install sensors in offices, change our light bulbs and employ our own cleaners so we could recycle."
PwC cut the power bill at its Sydney Darling Park premises by 20 per cent within 12 months using these simple measures; the cleaning bill dropped as desk bins were removed and staff were encouraged to recycle rubbish. A switch to double-sided printing cut paper consumption by about 35 per cent.
Some things cost more, Twomey warns. PwC moved buildings in Melbourne and Brisbane during the period and, unable to find what it wanted, became involved in building construction and fitout. The higher initial costs will deliver a long-term payback.
"It was also a challenge convincing suppliers that we were serious about the carbon impact of production processes in our purchasing decisions," he says.
"We made a conscious decision to pay more for more efficiently produced consumables, and to include the long-term carbon impact in equipment running costs."
PwC had less success in reducing its business travel. Although an ambitious 30 per cent reduction in flights was targeted, only a 20 per cent cut was achieved.
Freight behemoth TNT has a massive direct carbon footprint of 1000 kilotonnes annually, according to local financial director Stewart Cummins.
It then went further and calculated that suppliers and contractors contributed an additional 1000kt, while its employees and their families worldwide represented some two to three times the company's direct footprint.
Cummins says TNT has instituted mandatory policies aimed at reducing greenhouse emissions at all its businesses.
Famously, TNT's global chief is a mate of Al Gore, and many years ago traded his Porsche for a Prius. Now the company's executives all drive hybrid or diesel cars, the 17,000 global truck fleet is being similarly converted, and TNT's 50 freight planes are being upgraded for greater fuel and carbon efficiency.
The company has also installed 54 videoconferencing units worldwide in a bid to clamp down on unnecessary business travel.
Cummins warns that demand for green-friendly transportation has so far outstripped the capacity and vision of truck makers to switch.
"TNT has the largest fleet of diesel electric vehicles in Australia - we bought the whole production line from Japan of 10 vehicles last year, but we have 1500 trucks in our fleet," he says.
"So it's going to be some time before our suppliers can produce enough trucks to satisfy the demand."
Cummins also warns that TNT's carbon footprint will not shrink; rather it will continue to grow in response to changing trade patterns.
China now manufactures consumer products for the whole world, and its high-value exports are increasingly freighted by air instead of by sea.