cima carbon presentation 250510 docs/cima... · the eu emissions trading scheme (ets): kyoto and...
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CIMA25 M 201025 May 2010
Carbon and SustainabilityCarbon and Sustainability Considerations for Accountants
Jan Fitzgerald
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Sustainability and accountants
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Sustainability and AccountantsSustainability and Accountants
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What is Sustainability?What is Sustainability?
Sustainability doesn’t just = EnvironmentEnvironment, Social, Economic
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What is Sustainability?What is Sustainability?
Sustainability doesn’t just = EnvironmentSocial, Environmental, Financial inter-relatedHolisticLong-termLong-term
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What is Sustainability?What is Sustainability?
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Business case for sustainabilityBusiness case for sustainability
What’s in it for me (and my business)?
Decreased costsDecreased costsIncreased revenuesIntangible benefits
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Decreased costsDecreased costs
Resource efficiencyWaterEnergyPaper
Packaging
Waste
Staff
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Staff absenteeism and turnoverStaff absenteeism and turnover
Feel good factorIndoor Environment Qualityy
LightingFresh airFresh airElectro-magnetic radiationColoursColoursChemicals (VOCs)
W k t ti t t fitWorkstations, carpets, retrofit
Productivity gains plus health benefits
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CH2 benefitsCH2 benefits
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Increased revenuesIncreased revenues
New service opportunities, where you’re in the same market you’ve always been but you ‘green’ your service offering, resulting in more customers New market opportunities – how could you tap into a completely new and different market through sustainability related products and services? But beware Greenwash!
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IntangiblesIntangiblesR t ti h tReputation enhancement
Increased staff satisfactionIncreased staff satisfaction
Better community relationsBetter community relations
Improved customer relationsImproved customer relations
Better ability to recruit staffy
Future supply chain security
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Wal MartWal-Mart
Wal-Mart
walmartstores.com/download/4055.pdf
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NestleNestle
Greenpeace campaign against Nestle for using palm oil from Indonesian rainforestsWhat’s wrong with palm oil?
Deforestation of rainforestsHome of orangutanDigging up peat
http://www.youtube.com/watch?v=VaJjPRwExO8
Digging up peatNestle agreed to stop sourcing palm oil from Indonesian rainforestsIndonesian rainforests
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ReportingReporting
GRI (Global Reporting Initiative)
Generic framework as well as sectorGeneric framework as well as sector supplements
I t t t d l l t i di t fImportant to develop relevant indicators for your business
Link reporting to planning, to close the loop and make sense
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In summaryIn summary
Sustainability is about thinking of broader issues for your organisationIts about costs and benefits – but looking at TRUE costs and benefitsMake sure it’s embedded, not an add-onAccountants have a pivotal role to playAccountants have a pivotal role to playBe your company’s sustainability champion!
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Carbon price considerations for accountants
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Why a carbon price?Why a carbon price?
To address climate change
Is it really happening?
Science speaks for itself
IPCC errorsIPCC errors
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Business costsBusiness costs
Even without a specific carbon price climate change is going to cost g g gbusinessesEnergy and infrastructureEnergy and infrastructure
Resources
Tourism
M f t iManufacturing
Food processing and related businesses
Insurance – business premiums rose 6.4% last year!
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What is ‘carbon’?What is carbon ?
Carbon dioxide = Co2
6 greenhouse gasesg gCarbon dioxide equivalentCarbon = Co -eCarbon = Co2-e
Therefore… “carbon” = all 6 greenhouse gases
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6 Kyoto Greenhouse Gases6 Kyoto Greenhouse Gases
Source: DCC NGA Factors November 2008
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Why carbon trading?Why carbon trading?Seen as most efficient least costSeen as most efficient, least cost
Ability to set targets AND priceAbility to set targets AND price
Carbon tax = price only, outcomes not guaranteed
Energy efficiency only part of the solution
Offsets not enough
Carbon Trading responsive to change in circumstances
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How does carbon trading work?How does carbon trading work?Set targets (‘cap’)Set targets ( cap )
Issue permitsp
Reduce or buy
Trading occurs
As cap reduces, so do number of permits = higher price
Offsets permitted but from non-covered sourcesOffsets permitted, but from non-covered sources
Companies will evaluate least cost solution to emission reductionreduction
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Does carbon trading work?Does carbon trading work?EU ETS some criticismsEU ETS – some criticisms
Over-allocation of permits in first periodPrice volatilityToo many offsets permittedy pWindfall gains to electricity sector
Positive aspectsVerified emissions in 2005 were 3 4% below projected emissionsVerified emissions in 2005 were 3-4% below projected emissions Climate Change and
the EU Emissions Trading Scheme (ETS): Kyoto and Beyond U.S. Congressional Research Service (2008)
Notwithstanding price volatility, producers and consumers in those markets responded rationally and effectively to price signalsLeakage restricted to 1% in several sectors (aluminium, cement, steel, pulp) (Carbon Trust 2009) In 2007, a group of environmental economists published an independent study of the EU ETS in the Review of Environmental Economics and Policy, concluding that the scheme was reducing emissions and was “by far the most significant accomplishment in climate policy to date” worldwide
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Who’s covered by a carbon price?Who s covered by a carbon price?
I A t li di t ill b t 1000In Australia, direct coverage will be top 1000 emitters (at this stage), which accounts for approximately 70% of emissionsapproximately 70% of emissionsIndirect coverage = everyone!
National Greenhouse and Energy Reporting S t (NGERS) id tifi d t 1000 ittSystem (NGERS) identified top 1000 emittersNGERS requires mandatory reporting
i t f t i l l f i irequirement for certain levels of emissionsMandatory Scopes 1 & 2, voluntary Scope 3
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National Greenhouse and Energy Reporting System
Approx 20Gw of electricity
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GHG ProtocolGHG Protocol
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Why Scope 3?Why Scope 3?
Reputex Dec 2009: 60% indirect (down from 76% the previous year) http://reputex.com.au/
UK NHS 60% indirect from procurement http://www.resource-i k/ l d /R /NHS C b E i i d lli O 08 dfaccounting.org.uk/uploads/Reports/NHS_Carbon_Emissions_modellingOct08.pdf
KPMG & Qld Government: “Carbon Outlook”KPMG & Qld Government: Carbon OutlookSME impact of carbon price through the supply chainchainAssumed $23 per tonneAverage fall in EBITDA 18 7% across a range ofAverage fall in EBITDA 18.7% across a range of businesses
http://www.industry.qld.gov.au/dsdweb/v4/apps/web/content.cfm?id=14733
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Carbon Price sensitivitiesCarbon Price sensitivities
http://203.210.126.185/dsdweb/v4/apps/web/secure/docs/4045.pdf
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Carbon Price Readiness checklistCarbon Price Readiness checklist
Identify your emission sourcesCalculate your emissionsyDetermine reporting liabilitiesAnalyse potential cost impacts both directAnalyse potential cost impacts, both direct and indirectIncorporate future cost impacts in profit andIncorporate future cost impacts in profit and cash flow forecastsStay updated on energy price forecastsAssess industry/competitor initiatives
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Carbon Price Readiness checklist ( )Carbon Price Readiness checklist (cont)
Develop a carbon management strategyIdentify direct emission reduction opportunitiesImplement energy efficiency measuresEngage suppliersg g ppEducate employees
Establish a reporting framework
Incorporate carbon price into risk framework
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In SummaryIn Summary
Carbon price seen as best method for reducing Co2-e emissionsCarbon trading seen as the least cost, most effective means to achieve thisBusinesses should identify emission sourcesBusinesses needs to address direct andBusinesses needs to address direct and indirect carbon price – 60% through the supply chainsupply chain
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Pale Blue Dot
Earth, as captured by V 1 iVoyager 1 in 1990, 6 billion kms in space
Jan Fitzgerald 0439 891 331 [email protected]