Carbon Sunday changed the game for businesses in Australia. Regardless of the various positions on the policy itself, it did bring certainty to business – something that has been lacking in Australia as we have gone back and forth on carbon pricing for many years.
Finally, we have a compromise which will allow us to get on and move towards a lower-carbon future.
This transition should be addressed by business like any other business issue; it’s both an opportunity and a potential threat. Businesses routinely react to externally-imposed changes like this by minimising the downside – mitigating the risks – and by maximising the upside; positioning the company to best capitalise on the opportunities that will arise.
Contrary to what many commentators may have us believe, you do not have to choose between operating economics and the environment. There are many examples of companies, and countries, which have successfully chosen both.
Business now needs to act; inaction is rarely a good strategy. Successful businesses don’t sit on the sideline hoping an issue will go away. If you fail to act, you’ll be left behind.
The same goes for nations; it is important that Australia acts now. Australia is far from leading the world in the low-carbon transition, but we now have an opportunity to catch up by locking in a low-cost system to help us achieve the bipartisan carbon reduction targets. The costs of action increase with every additional delay.
We’re already well behind the required run rate and rather than rely on lots of boundaries in the last few overs we should lift the run rate steadily starting now. It’s the Michael Bevan approach: not as exciting, but much more effective.
Clearly there are industries that will be more affected than others, and those that are heavily emissions-intensive have the most to do, but perhaps also have the greatest opportunities to differentiate themselves from competitors.
I recently hosted an international business panel of companies speaking about their actions to be successful in the low-carbon global economy. Among them was Korean steel maker POSCO. Founded in 1968, it is one of the world’s top four steel manufacturers with $US30 billion annual revenues. POSCO is ranked as the world’s most competitive steel company by World Steel Dynamics.
Korea plans to have an ETS starting in 2015 and is targeting a 30 per cent reduction in CO2 emissions by 2020.
POSCO has invested heavily and proactively in carbon reduction since 1990. It invested $US1 billion leading to savings of seven million tonnes of CO2 emissions in 10 years. The investment included the creation of a small hydroelectric plant and the development of a new low-carbon steel making process which is now being exported to other countries.
As a result of this investment it has achieved significant efficiencies and maintained its position as one of the most competitive steel companies in the world. It has been ranked as a leading sustainable company for the last six years by the Dow Jones Sustainability Index.
And far from being done, POSCO is currently in advanced R&D to develop a hydrogen-fuelled steel making process which would result in zero process emissions.
It’s a great example of a company inventively finding new ways of operating, both to protect its business and to differentiate itself, improving competitiveness and profitability.
There are myriad other companies that have embraced carbon reduction, saved costs and created innovative alternatives to legacy practices. Picking out just two: logistics company Linfox is looking at tyre and aerodynamic technology to cut fuel consumption on its trucks, and Beluga Shipping is trialling huge kites that use wind to power their freight liners. Beluga is looking at as much as 50 per cent in cost savings on fuel as a result.
Carbon Sunday changed the game for businesses in Australia. Regardless of the various positions on the policy itself, it did bring certainty to business – something that has been lacking in Australia as we have gone back and forth on carbon pricing for many years.
Finally, we have a compromise which will allow us to get on and move towards a lower-carbon future.
This transition should be addressed by business like any other business issue; it’s both an opportunity and a potential threat. Businesses routinely react to externally-imposed changes like this by minimising the downside – mitigating the risks – and by maximising the upside; positioning the company to best capitalise on the opportunities that will arise.
Contrary to what many commentators may have us believe, you do not have to choose between operating economics and the environment. There are many examples of companies, and countries, which have successfully chosen both.
Business now needs to act; inaction is rarely a good strategy. Successful businesses don’t sit on the sideline hoping an issue will go away. If you fail to act, you’ll be left behind.
The same goes for nations; it is important that Australia acts now. Australia is far from leading the world in the low-carbon transition, but we now have an opportunity to catch up by locking in a low-cost system to help us achieve the bipartisan carbon reduction targets. The costs of action increase with every additional delay.
We’re already well behind the required run rate and rather than rely on lots of boundaries in the last few overs we should lift the run rate steadily starting now. It’s the Michael Bevan approach: not as exciting, but much more effective.
Clearly there are industries that will be more affected than others, and those that are heavily emissions-intensive have the most to do, but perhaps also have the greatest opportunities to differentiate themselves from competitors.
I recently hosted an international business panel of companies speaking about their actions to be successful in the low-carbon global economy. Among them was Korean steel maker POSCO. Founded in 1968, it is one of the world’s top four steel manufacturers with $US30 billion annual revenues. POSCO is ranked as the world’s most competitive steel company by World Steel Dynamics.
Korea plans to have an ETS starting in 2015 and is targeting a 30 per cent reduction in CO2 emissions by 2020.
POSCO has invested heavily and proactively in carbon reduction since 1990. It invested $US1 billion leading to savings of seven million tonnes of CO2 emissions in 10 years. The investment included the creation of a small hydroelectric plant and the development of a new low-carbon steel making process which is now being exported to other countries.
As a result of this investment it has achieved significant efficiencies and maintained its position as one of the most competitive steel companies in the world. It has been ranked as a leading sustainable company for the last six years by the Dow Jones Sustainability Index.
And far from being done, POSCO is currently in advanced R&D to develop a hydrogen-fuelled steel making process which would result in zero process emissions.
It’s a great example of a company inventively finding new ways of operating, both to protect its business and to differentiate itself, improving competitiveness and profitability.
There are myriad other companies that have embraced carbon reduction, saved costs and created innovative alternatives to legacy practices. Picking out just two: logistics company Linfox is looking at tyre and aerodynamic technology to cut fuel consumption on its trucks, and Beluga Shipping is trialling huge kites that use wind to power their freight liners. Beluga is looking at as much as 50 per cent in cost savings on fuel as a result.
Fifty-four per cent of Australian businesses believe the opportunities from the transition to a low-carbon economy outweigh the threats. Many are already responding by reducing their carbon emissions and their costs and are already capitalising on the opportunities. It is really promising to see that 70 per cent of businesses already have a carbon reduction plan in place. Certainty in the regulatory environment will increase this, unlock investment, and drive innovation into cleaner technologies.
You may not hear much about it in the media but the silent majority is acting as you’d rationally expect and getting on with business.
Ben Waters is ecomagination director, GE Australia and New Zealand. Follow Ben on twitter @BenWatersGE