'Businesses will have to pay for Carbon' experts say

24th August 2010

Most finance heads at the UK’s largest companies anticipate that all businesses will be required to measure their carbon footprint (72%) and pay a price for the carbon they emit (76%), according to research announced today by the Carbon Trust Standard Company. 40% expect this to happen within the next decade, whilst 16% believe this will be the case within five years.

It discovered that despite expecting an increase in legislation related to carbon and energy use, a surprising proportion of finance heads do not have a clear picture of where their businesses stand today on carbon emissions. Nearly half (48%) do not have a clear corporate target for carbon reduction and a further 16% don’t know if their company has a target or not.  In addition, three quarters (74%) of finance decision makers admit that their business does not currently measure its carbon footprint.

The research is timely, coming six weeks before the registration deadline for the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.

Under the terms of the CRC around 5000 large businesses will need to purchase carbon allowances to cover their emissions from April 2011. CRC participants that take early action to reduce their footprint and that achieve the Carbon Trust Standard – or equivalent – by March 2011 will benefit from higher placement in the initial CRC league table and reduce their costs of compliance.

When will the switchover to the low carbon economy happen?
Finance heads are agreed that the switchover to the low carbon economy will happen – only one in ten doubts this – but the research highlights uncertainty on when it will take place. The majority of respondents (59%) believe that it will happen over the next decade; with just over a quarter (28%) thinking it will take place in the next five years and 10% believing that it has already taken place. Despite these predictions, only 26% believe their organisation is prepared for the change and just over a quarter (27%) don’t know if their company is prepared or not. 

Is the low carbon economy an opportunity for business?
When asked if they believe the low carbon economy provides an opportunity for their business, 43% of finance heads take a positive view for their companies but the differences between industries are marked. For example technology and communications organisations and FMCG companies are the most positive, with 88% and 63% respectively viewing the low carbon economy as an opportunity. This contrasts with only 22% of professional services firms, 30% of financial services organisations and 31% of retailers. 

Rachel Sinha, Sustainability Manager, Institute of Chartered Accountants of England and Wales (ICEAW) commented:
“ICEAW thinks addressing climate change is one of the most important concerns for business and society today and that businesses should be actively working to promote a low carbon economy. We see finance heads having an increasingly important role to play in guiding their organisations’ carbon management strategy, not only in terms of setting budgets for purchasing carbon allowances and investment, but also in terms of managing carbon data as it becomes a regulatory requirement. They, therefore, need to be prepared to provide the evidence base and framework for their organisations to be able to turn this time of change into a competitive advantage.”  

What are the most important business drivers in the switchover to the low carbon economy?
When thinking about the switchover to the low carbon economy, respondents rated the following as either ‘very important’ or ‘quite important’ drivers for their business:

• The opportunity to increase efficiency and cut costs by reducing energy use = 97%
• To comply with carbon legislation = 95%
• To meet customer expectations = 78%
• To meet employee expectations = 76%
• To protect corporate reputation = 74%
• To create new market opportunities = 48%
• Reduce carbon emissions to win business = 48%

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