Cleaning up Australia’s readiness for a low-carbon future A report from the Economist Intelligence Unit Commissioned by Cleaning up Australia’s readiness for a low-carbon future Contents Preface Executive summary Introduction The Australian Low-Carbon Readiness Barometer: Baseline expectations 10 Corporate sentiment towards a low-carbon future 13 Pricing carbon: How to reduce carbon emissions 13 Threat or opportunity? 14 Risks from going clean 17 Impact on competitiveness 18 Impact on operating costs and profit 18 Corporate preparedness for a low-carbon future 20 Modelling the impact of carbon prices 20 Reducing carbon footprints 21 Proactive planning 23 Targeting targets 24 Capitalising on opportunities in a low-carbon economy 25 Conclusion: Getting ready 28 Appendix: Survey results 31 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Preface C leaning up: Australia’s readiness for a low-carbon future is an Economist Intelligence Unit report, commissioned by GE The Economist Intelligence Unit (EIU) conducted the survey and interviews independently and wrote the report The findings and views expressed here are those of the EIU alone Elizabeth Fry was the author of the report and Sudhir Vadaketh was the editor Gaddi Tam was responsible for design The cover image is by David Simonds We would like to thank the following interviewees for their time and insights (listed alphabetically by organisation): • Tim Nelson, head of economic policy and sustainability, AGL • Peter Burn, policy director, Australian Industry Group • Craig Roussac, general manager of sustainability, safety and environment, Investa • James Kell, CEO, Kell & Rigby • Peter Shields, economics and sustainability team, Macquarie Generation • Robert Poole, general manager, industry and government affairs, Murray Goulburn • Carl McCamish, executive general manager of policy and sustainability, Origin • Rob Kella, formerly chief risk officer, Qantas • David Plunkett, general counsel, Qenos • Susie Smith, manager for climate change and sustainability, Santos • Armineh Mardirossian, group manager, corporate responsibility, Woolworths May 2011 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Executive summary A lthough corporate and public opinion in Australia is, by and large, in favour of lowering carbon emissions, there is much debate about how to it Although it seems somewhat inevitable that Australia will eventually transform into a low-carbon economy—thereby reducing its dependency on carbon for economic growth—the roadmap for this transition is not yet clear The current government has announced plans to implement a carbon-pricing scheme from July 2012, but politicians have yet to achieve consensus on the finer details In this uncertain environment, Australian businesses must design and implement corporate strategy How prepared are Australian corporations for a low-carbon economy? What are the biggest threats posed by Australia’s shift to a more sustainable model? What is industry’s preferred option for pricing carbon, and why? And, crucially, have Australian firms identified opportunities for growth or alternative markets that are emerging or may emerge from a low-carbon economy? This report, based on a survey of over 130 senior executives in Australia, attempts to answer these questions The key findings of the research include: • Corporate strategy on carbon reduction is being held back by a lack of policy clarity, and companies are unsure when a clear policy will be implemented For the majority of firms, the current uncertainty around Australia’s future environmental policies is hindering the development and implementation of corporate carbon-reduction strategies Almost two-thirds of respondents to the survey consider the unclear regulatory environment the primary barrier to making further progress on reducing carbon emissions Carbon reduction has moved up and down the corporate agenda over the past few years, partly in tandem with the perceived political commitment towards combating climate change The years of political paralysis have also led to some corporate scepticism—just 16% of respondents believe that the Australian government has the political will to push through a carbon price.1 This uncertainty has already hampered corporate strategy and decision-making, particularly with regards to potential new investments in Australia Some firms, for instance, believe they are making poor investment decisions—investing in emissions-heavy capital equipment and infrastructure— because they still not have the certainty of a carbon price, which will make low-carbon technology more attractive © The Economist Intelligence Unit Limited 2011 The survey was conducted in January and February 2011, before the prime minister, Julia Gillard, announced plans for a carbon tax Cleaning up Australia’s readiness for a low-carbon future This suggests that Australia must resolve the current impasse over carbon pricing in order for corporations to design more effective long-term strategies, ultimately improving the economy’s competitiveness • The majority of Australian firms are doing something to address carbon emissions, but only a minority have detailed strategies for a low-carbon future Some 70% of firms say that they have a strategy in place for reducing their carbon footprint More than two-thirds of firms have specific, measureable targets for reducing their overall energy usage However, some of these efforts may be quite basic Only 21% of respondents, for instance, say their companies have a clearly defined carbon reduction programme for their entire supply chain Less than one-third of firms have modelled the impact of different carbon prices on their business operations Clearly, Australian firms are at many different stages of preparedness for a low-carbon future Some have developed thorough, holistic strategies; many have not done much at all, perhaps waiting for concrete legislative changes before acting • Australian firms see opportunities in a low-carbon future, and some have already started capitalising on them More than one-half of respondents believe that the need to cut carbon emissions is a driver of process innovation, and is an opportunity to gain a competitive advantage by creating new or more marketable products Meanwhile, more than one-half of the respondents believe that a corporate carbon tax will improve innovation and investment in clean technology More than one-half also say their companies are ready to capitalise on growth opportunities in a low-carbon economy More than one-third of respondent companies have created new dedicated roles or teams to identify green products or services • The biggest perceived risk in a low-carbon future is increased costs When asked to identify the biggest risks to their business posed by Australia’s shift to a more sustainable economy, almost threequarters of respondents say a major risk is added costs arising from compliance with regulations In addition, more than one-third of respondents believe that a carbon price will harm their international competitiveness unless their foreign counterparts are subject to the same requirements These worries may be partly driven by uncertainty around carbon pricing—companies are still unsure of the exact cost to their business They also not know what, if any, compensation they will be entitled to Ross Garnaut, the government’s chief climate-change advisor, believes that a carbon price will affect the international competitiveness of some companies, and recommends that trade-exposed industries receive compensation—varying depending on the industry—for three years from mid-2012 Still, the prevailing uncertainty suggests that the public and private sectors need to invest more in carbon research to deepen Australia’s collective understanding of the potential impact of a carbon price • There is little corporate consensus about the impact of climate change Surprisingly, there are many executives who still question the science of climate change—40% of respondents say that the impact of carbon emissions on global warming hasn’t been sufficiently established to warrant wholesale © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future changes in corporate strategy or behaviour This indicates that broader, deeper climate-change education is necessary Similarly, there is a broad variation in assessment of the business impact of Australia’s shift to a low-carbon economy, with some respondents viewing it more as a threat to their business, and others more as an opportunity They are similarly split on whether the opportunities created by introducing a carbon price will outweigh the risks in the long run More than two-thirds of respondents do, however, feel that cutting Australia’s carbon emissions is principally a matter of changing corporate behaviour Put together, these findings portray the uncertainty, doubt and confusion in Australia’s private sector towards climate change and carbon reduction This suggests that the national discussion and debate about sustainability is still in its infancy • The majority of respondents favour some sort of carbon-pricing scheme, but they disagree about which one One-quarter favour a carbon cap-and-trade scheme, while 20% prefer a simple tax on the carbon footprint of their operations A further 12% want a consumer tax on the carbon footprint of goods and services consumed Many of the companies interviewed for this report approve of the government’s idea of introducing a carbon tax—which gives them price certainty—followed later by a market-based pricing mechanism Nevertheless, they are doubtful about the perceived accelerated timeline They would also like more detail on the impact on trade-exposed and emissions-intensive industries; the provision of incentives, allowances and a transition period; the potential for unintended consequences; and a host of other uncertainties surrounding any scheme This suggests that the Australian government must carry out further research and analysis into carbon pricing, as well as broad-based communication and dialogue, in order to secure buy-in from Australian corporations and society By building a broader consensus behind its carbon-pricing policies, the government will encourage more firms to make low-carbon investments in the country, and spur clean-product innovation within local firms This should help to position Australian companies for success in low-carbon economies around the world • Large firms are more prepared for a low-carbon future The survey results suggest that bigger companies have invested more into preparing themselves for a low-carbon future For instance, 41% of firms with more than 10,000 employees globally have assessed the impact of different carbon prices on their business operations This compares with just 23% of firms with 10,000 or fewer employees globally Meanwhile, amongst firms with more than 10,000 employees globally, 34% have a carbon-reduction strategy in place that covers the whole business, including external partners and supply chain This compares with just 15% of firms with 10,000 or fewer employees globally These findings indicate that larger firms feel a greater imperative to prepare for a low-carbon future This could be because they worry more about the possible impact of a carbon price on their profitability Large firms also have more resources to dedicate to a carbon-reduction strategy © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future About the survey The research involved surveying 131 Australiabased senior executives who are familiar with their companies’ sustainability strategy Many of the respondents are in senior management—57% are in the C-suite or sit on the board In terms of size, 47% work at companies whose global headcount exceeds 1000 people Some 45% of respondents work at firms whose global annual revenues exceed US$1bn The respondents work in a broad mix of industries—23% work in the energy and natural resources sector; 18% work in construction and real estate; 11% are in the telecommunications industry; 11% work in transportation, travel and tourism; 10% are in the agriculture and agribusiness sector; and the remainder work in logistics and distribution; IT and technology; manufacturing; consumer goods; retailing; healthcare, pharmaceuticals and biotechnology; professional services; and education © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Introduction A s the world’s hydrocarbon reserves continue to be depleted, all countries will have to reduce their carbon intensity—the amount of carbon required per unit of GDP This shift is being accelerated by concerns about climate change, which have led to global agreements, commitments and efforts to reduce carbon emissions Some countries, including Denmark, India, and the Netherlands, have already implemented a carbon tax, largely with the intention of reducing carbon emissions This issue is particularly important for Australia, the world’s top coal exporter, which generates more than 80% of its electricity from coal and has per-capita CO2 emissions that are the highest in the developed world.2 Most other developed countries now have falling or steady emissions but, partly as a result of its resources boom, Australia’s emissions continue to increase rapidly Australia’s robust economic growth drove energy demand from 2007 to 2009 Yet emissions grew only two-thirds as much as energy demand during that period, and four-fifths as much as GDP, reflecting a drop in Australia’s carbon intensity Nevertheless, in the absence of further policy action, Ross Garnaut, the government’s chief climate-change advisor, estimates that total emissions will increase by 24% from 2000 levels by 2020.3 This represents an upward revision of four percentage points from 2010 projections, largely owing to the emissions from opening new coal mines and liquefying natural and coal seam gas for export These findings are fuelling a growing awareness in Australia about the need to continue reducing its carbon intensity Australians have also suffered from tragic weather-related disasters recently, from the suffocating droughts in the decade up to 2009, to the devastating floods in Queensland in 2010-2011 These have heightened criticism of carbon emissions and the role they play in climate change According to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia’s national science agency, there is a 90% chance that greenhouse gas emissions resulting from human activities caused most of the global warming since the mid-20th century CSIRO believes that future climate change in Australia will depend on the level of carbon emissions in the country If emissions are low, CSIRO expects warming of 1-2.5 ºC by around 2070, with a best estimate of 1.8 ºC If emissions are high, CSIRO expects warming of 2.2-5 ºC by around 2070, with a best estimate of 3.4 ºC.4 Although public opinion in Australia is, by and large, in favour of lowering carbon emissions, there is much debate about how to go about it Australia’s politicians have been unable to achieve consensus on the issue, largely because opinion is so divided © The Economist Intelligence Unit Limited 2011 The Global Carbon Project, 2009 The Garnaut Climate Change Review Update 2011 “Climate change in Australia: technical report 2007”, Commonwealth Scientific and Industrial Research Organisation Cleaning up Australia’s readiness for a low-carbon future Throughout the paper, we will refer to the current government’s proposed plan—for a carbon tax in 2012 followed by an emissions-trading scheme in 2015—as a carbon-pricing scheme “A 2012 Carbon Price for Australia?”, Reputex In 2007, the Labor Party, led by Kevin Rudd, swept into power partly because of his commitment to reducing carbon emissions In 2008, Mr Rudd’s administration ratified the Kyoto protocol and outlined a proposed Carbon Pollution Reduction Scheme (CPRS), a cap-and-trade scheme intended to cut Australia’s greenhouse-gas emissions by 5% over ten years However, the proposal was defeated three times in Australia’s Senate (the upper house of parliament) Each time, members of the Australian Greens party opposed it on the grounds that the scheme would be too ineffective in reducing carbon emissions, while the opposition Liberal-National coalition claimed that it would unfairly harm tradeexposed industries like the mining sector The Copenhagen climate conference in 2009, meanwhile, indicated that international enthusiasm for combating climate change had waned, and that a binding global pact was less likely to be agreed Mr Rudd hence delayed implementation of the CPRS until 2012 This policy retreat, amongst other things, lost him his party’s support, and hence his job as prime minister In June 2010 Julia Gillard, his Labor Party colleague, took over as prime minister, and soon after called an election, which resulted in a parliament With the support of four MPs—one Green and three independents—Ms Gillard was able to form a minority-led government Soon after Ms Gillard’s ascension, a renewed global commitment towards combating climate change emerged While the Copenhagen climate conference in 2009 had failed to deliver any international agreements, the subsequent Cancun conference in December 2010 produced some concrete policies (albeit with vague details) These included US$100bn a year for developing countries by 2020 as climate assistance; a climate fund, partly under the direction of the World Bank, through which much of the money might flow; and a deal on the conditions under which countries may be paid to decrease the damage being done to their forests In February 2011 (after the survey for this paper was conducted), Ms Gillard announced plans to introduce a fixed price on carbon from mid 2012, ahead of a full emissions-trading scheme in 2015 Under the new carbon-pricing scheme, Australia’s biggest polluters will be required to purchase fixedprice permits for each tonne of pollution they produce.5 The permit price will be fixed for each year but will increase annually at a pre-set rate In effect, the price of the permit will be the carbon price Despite these plans, there is still uncertainty about Australia’s climate-change policies Ms Gillard, after all, does not have a widespread electoral mandate Building a consensus is difficult owing to the unstable nature of the ruling coalition Ms Gillard’s Labor Party and the opposition are committed to reducing Australia’s emissions by 2020 to at least 5% below 2000 levels The Greens, meanwhile, want cuts of 25-40% below 2000 levels They are also against generous compensation to the coal industry and the heaviest-polluting power generators As such, the federal government could fail to win support for its proposed carbon emissions tax In addition, powerful stakeholders, including the mining industry, are lobbying for or against a carbon price Export-dependent companies are worried about a loss of competitiveness internationally Operating costs will probably rise—RepuTex, a Hong Kong-based consultant specialising in carbon risk analysis, estimates that if the government sets the carbon tax at A$25 per tonne, although nearly one-half of the A$3.3bn cost would be passed on to consumers, the top 200 companies by market capitalisation would be left with a net liability of A$1.75bn.6 Amongst © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future consumers, meanwhile, there is some opposition to the scheme as people are increasingly worried about rising gas, electricity, water and food prices All this suggests that the Australian government must carry out extensive further research and analysis into carbon pricing, as well as broad-based communication and dialogue, in order to secure buy-in from Australian corporations and society Australian corporations ultimately need policy clarity They are concerned that the different political parties will never be able to agree on emissions targets and carbon-reduction policies The years of political inaction have also led to some corporate scepticism—just 16% of survey respondents believe that the Australian government has the political will to push through a carbon price This uncertainty around Australia’s future environmental policies is holding back corporate carbonreduction strategies Policy clarity will also allow Australian firms to capitalise on any opportunities that might emerge in a low-carbon economy Though carbon reduction is often framed as an effort to control climate change and reduce fossil fuel dependency, from a corporate point of view, it is as much about developing innovative products and exploiting new growth markets In this report we examine corporate Australia’s readiness to face both the risks and opportunities of a low-carbon future © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Conclusion: Getting ready F or the majority of firms, the current uncertainty around Australia’s future environmental policies is holding back implementation of corporate carbon-reduction strategies Almost two-thirds of respondents consider the unclear regulatory environment the primary barrier to making further progress on carbon reduction in their respective companies (see Chart 11) Other hurdles include a lack of international standards (41%) and the availability of relevant technologies at an acceptable cost (37%) Carbon reduction has moved up and down the corporate agenda over the past few years, partly in tandem with the perceived political commitment towards combating climate change What this means is that if Australia finally does decide to price carbon, only slightly more than one-half of Australian firms believe they are ready to capitalise on any opportunities that arise For the other firms, they Foggy road Chart 11: What are the primary barriers to making further progress on carbon reduction in your company? Select up to three (% respondents) Unclear regulatory environment 64 Lack of international standards (eg, an agreed method of calculating carbon emissions) 41 Availability at acceptable cost of relevant technologies 37 Risk that environmental practices will raise your costs in comparison to competitors 30 Difficulty in developing relevant targets and measures 16 Difficulty in funding environmental efforts 15 Lack of client engagement/ demand 14 Lack of systems and tools to monitor and enforce compliance with the company’s environmental policies 11 Lack of buy in and commitment from senior management Lack of employee engagement Other, please specify There are no barriers to making further progress Source: Economist Intelligence Unit 28 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future risk missing out on new growth opportunities, both in Australia and in other countries that are transitioning to a low-carbon economy The specific details of Australia’s proposed carbon tax have yet to be decided, including the level of the fixed price, the rules for the tax-to-trading transition, the cap for the trading phase, compensation for emissions-intensive, trade-exposed firms and electricity generators, and generally how and to whom the tax will apply Without complete clarity, it is not possible for firms to accurately assess the impact of an Australian carbon price The only guidance companies have is the proposed CPRS, including the treatment of major export industries, the coal industry and power generators Big emitters such as Macquarie Generation fear they will not be compensated because they failed to qualify under the CPRS Respondents are particularly concerned about potential unintended consequences of any carbonpricing scheme This suggests that the Australian government must carry out extensive further research and analysis into carbon pricing, as well as broad-based communication and dialogue, in order to secure buy-in from Australian corporations and society By building a broader consensus behind its carbon-pricing policies, the government will be able to attract more low-carbon investment into the country, and drive clean-product innovation within local firms This will position Australian companies for success in low-carbon economies around the world ”Will there be phase-in arrangements, what kind of transitional arrangements will there be, what will the cost be, will there be assistance?” asks Mr Kella at Qantas Qantas is hoping for credits as well as incentives to accelerate existing initiatives to cut emissions through increased fuel efficiency “We could use more time to transition We are hoping the new regime builds in some transitional arrangements not dissimilar to those made in the EU where the aviation industry was given an opportunity to transition into a 100% scheme within an eight-year period,” he says According to Mr McCamish at Origin, the uncertainty has not only stalled investment in the electricity sector but it has encouraged the wrong kind of investment “Instead of laying out the billions of dollars to build a new gas-fired or coal-fired power station, we build smaller power stations that are cheaper to build, more expensive to run and have higher carbon emissions What we need is the certainty to invest in power stations that are efficient and modern,” he says AGL’s Mr Nelson agrees “The longer we wait for certainty, the more bad investment decisions are being made Energy firms will minimise their capital at risk by deploying the lowest-cost electricity generation equipment, which is generally the least efficient It does, however, minimise the chance that any capital outlay will be stranded through a subsequent decision on emissions trading,” he says AGL’s research shows that the uncertainty has cost the economy as much as A$2bn a year in additional electricity costs Moderate emitters like Murray Goulburn and Woolworths will face rising energy costs with or without a carbon price, and so have an incentive to improve their energy efficiency regardless Nevertheless, Ms Mardirossian says that a price on carbon would drive more investment in lower-emitting infrastructure that currently does not meet the company’s current hurdle rate © The Economist Intelligence Unit Limited 2011 29 Cleaning up Australia’s readiness for a low-carbon future Until there is policy clarity and action, much of the potential opportunity in a low-carbon future will remain unexplored Compared with Australian companies, how ready is your firm for a low-carbon future? To find out, please visit http://digitalresearch.eiu.com/cleaningup/benchmarkingsurvey, where you can fill out a short, quick benchmark survey, which will reveal how your firm measures up to other firms in your sector 30 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Appendix Survey results Appendix: Survey results Are you familiar with your company’s strategy regarding sustainability? (% respondents) Yes 100 Please rate the overall readiness of each of the following for minimising their carbon footprint Rate on a scale of to 5, where 1=Excellent, 3=Average and 5=Very poor (% respondents) Excellent Your company 19 Average 35 Your industry 34 17 50 The Australian economy 12 Very poor 10 23 31 40 14 Please rate the overall readiness of each of the following to capitalise on growth opportunities in a low-carbon economy Rate on a scale of to 5, where 1=Excellent, 3=Average and 5=Very poor (% respondents) Excellent Your company 20 Your industry 34 31 24 The Australian economy 4 Average 12 44 17 Very poor 23 35 31 13 Is there a link between financial performance and carbon intensity reduction? Rate on a scale of to 5, where 1=Strong link, 3=Average and 5=Weak link (% respondents) Excellent Your company 18 30 Average 24 13 Very poor 16 Your industry 15 The Australian economy 13 25 22 © The Economist Intelligence Unit Limited 2011 32 13 39 15 13 13 31 Appendix Survey results Cleaning up Australia’s readiness for a low-carbon future What you think is the best option for pricing carbon? (% respondents) Carbon doesn’t need to be priced; green technology or behaviours should be subsidised instead 36 Carbon cap and trade scheme (eg, CPRS) 25 Corporate tax on carbon footprint of operations 20 Consumer/sales tax on carbon footprint of goods/services consumed 12 I don’t know Please indicate your level of agreement with the following statements Rate on a scale of to 5, where 1=Strongly agree and 5=Strongly disagree Strongly disagree Strongly agree (% respondents) A carbon cap and trade scheme is unworkable because it unfairly penalises companies in certain sectors of the economy (there would be no level playing field) 25 27 15 10 14 The government should impose a scheme to force businesses to reduce carbon emissions 19 34 12 Cutting carbon emissions is principally a matter of changing consumer behaviour 26 Cutting carbon emissions is principally a matter of changing corporate behaviour 23 A consumer/sales carbon tax is politically unworkable 22 19 34 15 21 44 21 11 24 29 7 21 A carbon cap and trade scheme would not sufficiently change consumer behaviour to make any difference to national carbon emissions 16 34 31 12 A corporate/consumer carbon tax would not sufficiently reduce carbon emissions 11 32 24 The Australian government has the political will to push through a carbon price 11 30 23 34 Any carbon pricing must involve a global agreement; Australia has no obligation to act unilaterally 27 22 18 32 22 A carbon cap and trade scheme is unworkable because companies cannot pass on the full cost of carbon permits to consumers 15 27 24 21 21 15 18 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Appendix Survey results How you think the introduction of a national corporate carbon tax will affect your company in the following areas? Pick the most likely impact for each of the following variables (% respondents) Improve Operating costs Stay the same Don’t know Deteriorate 33 62 Efficiency 21 62 16 Profits 34 56 Competitiveness within Australia 13 69 Competitiveness internationally 10 17 48 38 Brand value/reputation 43 47 61 Employee engagement 29 Innovation/investment into clean technology 56 32 11 Risk management 25 58 12 Transparency 23 61 8 Do you think that the opportunities created by imposing a carbon price will outweigh the risks in the long term? (% respondents) No 44 Yes 44 Don’t know 12 In your scenario planning, have you assessed or modelled the impact of different carbon prices on your business operations? (% respondents) Yes 29 No, but we are planning to so 33 No, no plans to so 31 Don’t know © The Economist Intelligence Unit Limited 2011 33 Appendix Survey results Cleaning up Australia’s readiness for a low-carbon future 10 Does your company have a strategy in place for reducing its carbon footprint? (% respondents) Yes, it covers the whole business, including external partners and supply chain 21 Yes, it covers the business, including our supply chain, but not our external partners 15 Yes, it covers the business, including our external partners, but not our supply chain Yes, it covers only our own business 31 No, but we are currently developing one 17 No, and we have no plans to develop one 11 Don’t know 11 What have been the primary drivers for developing this strategy? Select the top three (% respondents) Desire to the right thing ethically 54 Need to comply with laws and regulations 46 It is a part of ongoing corporate risk management 46 Need to meet demands of customers 26 Desire to discover new markets 20 Need to upgrade the company’s image 19 Need to improve the bottom line 14 Need to support recruitment and retention of employees Response to pressure from NGOs and citizen lobby groups Response to criticism in the media Other, please specify 12 Why not? (% respondents) My company is too small for it to be affordable or practical 36 My company does not consider it as necessary 14 The cost involved is too high There has been insufficient support for such a strategy at senior management level My company should focus on making money, not saving the environment Our competitors have yet to, so we see no need Other, please specify 36 34 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future 13 Does your firm have specific, measurable targets for reducing its carbon footprint in the following areas? (% respondents) Yes Overall energy usage No Appendix Survey results Not applicable 68 28 Green building technology (eg, lighting) 58 37 IT Systems (eg, data centres) 38 54 Staff practices (eg, commuting, recycling) 60 35 Core products and services 50 44 Suppliers 31 61 Partners 25 65 Customers 27 65 New investments 48 42 14 Do you agree with the following statements? (% respondents) Yes All senior executives in my company are aware of our sustainability agenda No 10 Not applicable 74 19 The board should lead initiatives to cut carbon emissions 73 19 Carbon reduction will become increasingly crucial to all aspects of corporate strategy 67 28 Carbon reduction is a short-term concern 22 76 The impact of carbon emissions on global warming hasn’t been sufficiently established to warrant wholesale changes in corporate strategy or behaviour 40 58 31 61 15 Has your organisation implemented the following measures? 25 (% respondents) 65 Yes Employee incentives to encourage “green” process innovation 27 37 Employee education and training 48 No Not applicable 65 58 42 62 34 10 37 55 Means to track and analyse efficiency of resource usage 59 Clearly defined carbon reduction programme (internal) 40 Clearly defined carbon reduction programme (supply chain) 23 70 Renewable energy use targets 31 63 Transparency with regard to carbon cost of business operations (internal disclosure) 36 Transparency with regard to publication of carbon footprint (eg, in annual report) 28 Climate change risk management: Insurance against potential impacts 22 © The Economist Intelligence Unit Limited 2011 56 61 11 70 35 Appendix Survey results Cleaning up Australia’s readiness for a low-carbon future 16 What are the primary barriers to making further progress on carbon reduction in your company? Select up to three (% respondents) Unclear regulatory environment 64 Lack of international standards (eg, an agreed method of calculating carbon emissions) 41 Availability at acceptable cost of relevant technologies 37 Risk that environmental practices will raise your costs in comparison to competitors 30 Difficulty in developing relevant targets and measures 16 Difficulty in funding environmental efforts 15 Lack of client engagement/ demand 14 Lack of systems and tools to monitor and enforce compliance with the company’s environmental policies 11 Lack of buy in and commitment from senior management Lack of employee engagement Other, please specify There are no barriers to making further progress 17 What you think are the biggest risks to your business posed by Australia’s shift to a more sustainable economy? Select up to three (% respondents) Imposition of large costs through compliance with regulations 73 Loss of competitiveness 49 Creation of an uncertain investment environment 42 Risk of brand/reputational damage through non-compliance 27 Loss of strategic focus on enhancing corporate value 16 Enhanced supply-chain risk 15 36 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future Appendix Survey results 18 What you think are the most crucial policies the federal government should pursue to encourage the reduction of carbon emissions? Select up to three (% respondents) Subsidies for clean technology investments by companies 44 Imposition of a fair carbon pricing scheme 37 Establishment of incentives for green corporate behaviour 35 Establishment of national carbon emission reduction goals 34 Subsidies for clean technology usage by consumers 27 Establishment of environmental reporting standards 24 Provision of education on green practices for consumers 18 Establishment of penalties for lack of compliance by companies 11 Provision of information on sustainable practices for companies Establishment of penalties for lack of compliance by consumers None of the above: government can help most by doing nothing and letting the market come up with solutions 19 Please indicate on this scale the extent to which you see Australia’s shift to a more environmentally sustainable economy as a threat or an opportunity to your business 60:40 50:50 90:10 70:30 100:0 80:20 (% respondents) Opportunity 40:60 13 17 30:70 11 20:80 0:100 10:90 24 2 20 Please indicate your level of agreement with the following statements Rate on a scale of to 5, where 1=Strongly agree and 5=Strongly disagree Strongly disagree Strongly agree (% respondents) Cutting carbon emissions is a driver of process innovation 26 37 22 Cutting carbon emissions is an opportunity to gain a competitive advantage by creating new, or more marketable, products/services 15 43 24 11 Cutting carbon emissions is an opportunity to find new clients in Australia 25 13 29 65 17 65 13 Cutting carbon emissions is an opportunity to find new clients internationally 27 15 22 33 29 21 Cutting carbon emissions is an opportunity to gain a competitive advantage in terms of cost reduction 48 11 22 29 Cutting carbon emissions is a necessity driven by government regulation 17 33 20 27 Cutting carbon emissions is a necessity driven by customer and other stakeholder demands/need to maintain reputation 31 31 © The Economist Intelligence Unit Limited 2011 42 10 18 17 21 11 37 Appendix Survey results Cleaning up Australia’s readiness for a low-carbon future 21 What you think are the biggest opportunities to your business in taking steps to reduce its carbon footprint? Select up to three (% respondents) Developing new products and services 47 Improving relationships with customers 47 Risk mitigation (eg, in supply chains) 34 Improved employee engagement/commitment 26 Access to new markets 25 Cost reduction 22 Improving relationships with suppliers 22 What steps has your company taken to make the most of these opportunities? Select all that apply (% respondents) New dedicated roles/teams to identify “green” products or services 38 Customer/client focus groups to identify level of demand for “green” products/services 37 New dedicated roles/teams to identify “green” markets 22 Hired external consultants to help identify opportunities 21 Government lobbyist/liaison to maximise available support or subsidies 18 Other, please specify 17 23 Which of the following have been the primary drivers for the development of new “green” products/services in your business? (% respondents) Increased regulatory demands that are likely to come into place 20 A belief that relevant innovation in this area will be crucial to our ongoing business success 18 Increased customer demand (or belief that there is pent-up demand) for "green" products/services that use less carbon emissions in their creation 14 A desire to be first to market with a new product/service in our industry A belief that “green” products/services can improve your company’s productivity Increased regulatory demands already in place Increased customer demand (or belief that there is pent-up demand) for new "green" products/services that help cut users’ carbon emissions The need to keep up with our industry competitors Other, please specify Not applicable—we don’t currently provide "green" products/services 15 38 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low-carbon future 24 In which regions does your company have operations? Select all that apply (% respondents) Appendix Survey results 26 How many people work at your organisation globally? (% respondents) 1-10 Asia-Pacific 98 North America 11-50 15 51-100 37 13 Western Europe 101-200 201-500 501-1,000 34 Middle-East and Africa 27 Latin America 24 Eastern Europe 20 1,001-10,000 13 Over 10,000 34 25 What is your primary industry? (% respondents) Energy and natural resources 23 Construction and real estate 18 Telecommunications 11 Transportation, travel and tourism 11 Agriculture and agribusiness 10 Logistics and distribution IT and technology Manufacturing Consumer goods Retailing Healthcare, pharmaceuticals and biotechnology Professional services Education 27 What are your organisation's global annual revenues in US dollars? (% respondents) $500m or less 47 $500m to $1bn $1bn to $5bn 11 $5bn to $10bn 12 $10bn or more 22 28 Which of the following best describes your job title? (% respondents) Board member CEO/President/Managing director 28 CFO/Treasurer/Comptroller CIO/Technology director Other C-level executive 11 SVP/VP/Director Head of Business Unit Head of Department Manager 18 Head of Sustainability Other © The Economist Intelligence Unit Limited 2011 39 Appendix Survey results Cleaning up Australia’s readiness for a low-carbon future 29 What are your main functional roles? Choose up to three (% respondents) General management 46 Strategy and business development 31 Operations and production 30 Finance 20 Customer service 15 Marketing and sales 14 IT 11 Risk Supply-chain management Information and research R&D Human resources Procurement Legal Other 40 © The Economist Intelligence Unit Limited 2011 Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out herein Cover image - David Simonds LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: london@eiu.com NEW YORK 750 Third Avenue 5th Floor New York, NY 10017, US Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 9347 E-mail: geneva@eiu.com [...]... Limited 2011 Cleaning up Australia’s readiness for a low- carbon future case study AGL Tim Nelson, head of economic policy and sustainability at AGL, an Australian energy firm, believes that the global economy is moving towards a low- carbon future, and hence Australia “cannot isolate itself from the rest of the world” However, he says that a carbon price will have a much bigger impact on Australia than it... firms appear to be very well prepared, with a carbon- reduction strategy that covers external partners and their supply chain These findings indicate that Australian firms are at many different stages of readiness for a lowcarbon future Some have developed thorough, holistic strategies; many have not done much at all, perhaps waiting for concrete legislative changes before acting Many firms may also... because they worry more about the possible impact of a carbon price on their profitability Large firms also have more resources to dedicate to a carbon- reduction strategy Smaller firms, by contrast, may have less time and money to invest in planning for an uncertain low- carbon future Susie Smith, manager for climate change and sustainability at oil and gas company Santos, says that the company has... internationally Some have complained that this will ultimately lead to job losses in Australia Almost one-half of respondents feel that any carbon pricing must involve a global agreement; they say Australia has no obligation to act unilaterally These critics say that any carbon tax will have a negative impact on all trade-exposed industries because those firms will be unable to pass on the cost of the tax... have a carbon- reduction strategy in place and have no plans to develop one This is often because they are small, and do not consider it affordable, practical or necessary This suggests that there may be a minority of firms who will never make significant efforts to reduce their carbon footprint, even as Australia transitions to a low- carbon economy Amongst firms that do have a carbon- reduction strategy... proactive in trying to understand opportunities and risks in a low- carbon future: analysing the possible pricing impacts on their business, identifying costs of abatement and exploring projects that Santos can implement to reduce its carbon emissions “Australia’s abundant reserves of natural gas provide a lower -carbon alternative to coal, and have the capacity to generate substantial employment and... chain and to identify vulnerabilities The reason they are moving slowly, says Mr Burn, is that they are assessing the likelihood and materiality of a carbon price against the cost of doing something about it “They’re making very 22 © The Economist Intelligence Unit Limited 2011 Cleaning up Australia’s readiness for a low- carbon future rational bets and looking at different scenarios If the carbon tax... price carbon too low, and it may not have much impact on corporate behaviour Proactive planning Craig Roussac, general manager of sustainability, safety and environment at Investa, a commercial property owner, believes that many Australian companies are focussed on short term energy-reduction strategies—simple changes that save them money—rather than a long-term plan to set their business on a clean trajectory... Australia overall, on a scale of 1 to 5, with 5 denoting excellent readiness. 6 In turn, perceptions of low- carbon readiness at the company, industry and national level are measured by averaging respondents’ scores for two questions—“Please rate the overall readiness of each of the following for minimising their carbon footprint” (see Chart A) ; and “Please rate the overall readiness of each of the following... Cleaning up Australia’s readiness for a low- carbon future Similarly, for nearly ten years, all of Origin’s investments have been subject to a carbon- price analysis “Every time we make a new investment, build a new plant, or develop a new product we look at the carbon cost,” says Mr McCamish “It is built into everything we do much the same as the cost of funding.” Woolworths, a supermarket chain, factors ... The survey was conducted in January and February 2011, before the prime minister, Julia Gillard, announced plans for a carbon tax Cleaning up Australia’s readiness for a low- carbon future This... Australia’s readiness for a low- carbon future Corporate preparedness for a low- carbon future Modelling the impact of carbon prices A bout one-third of Australia’s top companies are already assessed.. .Cleaning up Australia’s readiness for a low- carbon future Contents Preface Executive summary Introduction The Australian Low- Carbon Readiness Barometer: Baseline expectations 10 Corporate