business case for carbon management.docx

business case for carbon management.docx

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businesscaseforcarbonmanagement

Content

Abstract:

2

1.Introduction2

2.Driversofcarbonmanagement3

2.1Fuelandenergyprices3

2.2Governmentregulations4

2.3Corporatereputation4

2.4Investors4

2.5Employees5

3.Processesofcarbonmanagementimplementation5

4.Barriersofcarbonmanagementandwaystoovercomebarriers7

4.1Barriersofcorporatecarbonmanagement7

4.2Waystoovercomebarriers8

5.Conclusions10

References11

Drivers,processesandbarriersofcarbonmanagement

Abstract:

Nowadays,theclimatechangeandenergycrisisaregraduallybecomingthebiggestbusinessrisks.Anumberofcorporationsencounterthepressurefromthesocietytodotheirenvironmentaldutyandtakeupcarbonmanagement.Moreandmoreenterprisesrealizethatcarbonmanagementisnotonlyanimportantmanifestationofcorporatesocialresponsibilitybutalsoshouldbetreatedasacorporatestrategyforsustainabledevelopment.Althoughtherearestillsomebarriersimpedingcarbonmanagementimplementation,itcannolongerstopdevelopingcorporatecarbonmanagement.Thisarticlefirstproposesthenecessityofundertakingcarbonmanagementforcompaniesthroughanalysingthedriversofcarbonmanagementwhichcanhelpcompanytotransformpotentialrisksintobusinessopportunities.Then,itbrieflypresentsthestagesofcarbonmanagementimplementation.Next,itliststhebarrierswhichhindercarbonmanagementimplementation.Finally,itsuggestsseveralwaystoovercomebarriersinordertoencouragecorporatecarbonmanagementandimprovecorporatelong-termdevelopment.

1.Introduction

Carbonmanagementisamajorpartofenvironmentalinitiativesinrecentyears.AsshowninBusinessInsight（2010）thenatureofcarbonmanagementisthemanagementofgreenhousegasessincethemajorcontributorofgreenhousegasestoclimatechangeiscarbondioxide.Themainfocusofcarbonmanagementisemission-reductionandenergy-saving.

Itcanbeseenthatmassivegreenhousegasesfromhumanactivitiesalreadyhasnegativeimpactsonenvironment,thus,thefirmsshouldundertakeenvironmentalresponsibilitywhichisamainpartofcorporatesocialresponsibilitythroughcarbonmanagement（Clapp,2005）.Moreover,accordingtoLeeandBeresford（2010）,carbonmanagementshouldbetreatedmorethancorporatesocialresponsibilityissue,italsoshouldbeconsideredasacorporatestrategybecauseofthefinancialandreputationalriskpresentedbycarbonregulationsandthestrongrelationshipbetweenemission-reductionandenergycosts.

Firstofall,thispapergivesfivedriversofcarbonmanagementwhichembodytheimportanceofcarbonmanagementimplementation.Secondly,itpointsoutthethreeprocessesofcarbonmanagementprogrammeimplementation.Afterthatthearticlediscussesseveralbarrierstocorporatecarbonmanagement.Atlast,itindentifiesthesolutiontothebarriersothatcarbonmanagementwillbeimplementedmoresmoothly.

2.Driversofcarbonmanagement

2.1Fuelandenergyprices

Thefirstfactorthathasthepotentialtoimpelfirmstoundertakecarbonmanagementisfuelandenergyprices.Itisknownthatfuelandenergyaretheinimitablelifebloodofindustrialeconomy,meanwhile,alargenumberofbusinessoperationsintimatelydependonfuelandenergyconsumption.AccordingtoArnbergandBjorner（2007）,fuelandenergyrelatedexpenditureoccupiesalargepercentageofcorporateannualregularspending.Whenthefuelandenergypricesgoup,corporatecapitalexpenditurewillincreaseandprofitswillbereducedaccordingly.ItisalsopointedoutbyLeeandBeresford（2010）thatthefuelandenergypricevolatilityplaysanimportantroleindrivingcarbonmanagement.Thus,itisessentialforcompaniestoundertakecarbonmanagementsothattheycanachievecostsaving.

2.2Governmentregulations

Aseconddriverforcorporatecarbonmanagementisgovernmentregulations.Regulationsfromnationsandgovernmentsdirectlyurgecompaniestoundertakecarbonmanagement.Forinstance,carbontaxeswillresultinhigherfuelandenergycostswhicharerelatedtothefirstdriversothatcompaniesshouldtakeclimatestrategy.Moreover,asitisshownbyOkereke（2007）,nearlyallthereportsprovidedbyUKFTSE100corporationsstatethatthecurrentandfuturegovernmentregulationsareacrucialdriverofcorporateactionstoclimatechange.

2.3Corporatereputation

Athirdandapparentdriveriscorporatereputation.ItispointedoutbyLingietal.（2010）thatcompanieshaveopportunitiestoenhancecorporateimagethroughtakingactiontoreducetheirgreenhousegasemissions.Agoodreputationisacrucialstrategicassetwhichcanencouragecompanybuildingandattractmorecustomers.Moreover,accordingtoGalbreath’s（2010）,corporatesocialresponsibilitywillsendsigntostakeholdersapositiveviewofcorporatebehaviourtherebyimprovingcorporateimage.Carbonmanagementasasignofcorporatesocialresponsibilityhaspositiveinfluenceoncorporatereputationaccordingly.Therefore,companiesshouldundertakecarbonmanagementtoimprovetheirlong-termdevelopment.

2.4Investors

Thefourthdriverisinvestors.Inrecentyears,investorsaregraduallyawareofclimatechangerisksexposure.Theyaskfirmstodiscloseinformationthroughprojectssuchascarbondisclosureproject.AccordingtoCarbonDisclosureProject（CDP2010）,theresponseratewashighat82%whichclearlyshowedthatinvestors’awarenesshadimprovedcomparedtoearlieryears.Atthesametime,CDPhadmobilized534investorswithassetsofUS$64trilliontopressurecorporationsattheendof2010.Asaresult,duetohigherinvestors’concernaboutclimatechangerisk,itisusefulforcompaniestoundertakecarbonmanagementprogramtoattractmorenewinvestors.

2.5Employees

Withregardtothefifthdrivers,employeesshouldnotbeignored.Recently,companieswhichhavepoorrecordsonclimatechangeactionencountermoreandmorechallengestorecruitnewemployees.Theyareafflictedmoreemployeeturnoverduetoemployeediscontentwithcorporatefailuretotakeclimatechangeactionandhigheremployeecostsasaresultoflowerproductivity.Hence,companiesshouldtakeclimatestrategiesthroughestablishingsustainableprogramsormotivatingemployeeinnovationwithclimatechangeactivities.

3.Processesofcarbonmanagementimplementation

Theimplementationofcarbonmanagementisalwaysdividedintothreeprocesses:

carbondisclosurestage,carbonreductionstageandcarbonneutralstage.

Incarbondisclosurestage,companiesshouldfocusonestablishingagreenhousegasemissionsinventory.Tobemoreprecise,companiesshouldcollectandprovideinformationaboutcorporatecarbonemissionswhichisthedatabasisoffuturecarbonmanagementactivities.Inaddition,carbondisclosureincludesinformationonanextensiverangeofclimate-relatedactions,suchasmeasurementofgreenhousegasemissions,organizationalpreparations,technologicalinvestments,andsoon（Kolk,Levy&Pinkse2008）.Meanwhile,companiesshouldalsoprovidemorespecificbutnarrowerinformationfortheinstanceofcorporategreenhousegasaccountingandreporting.Thecarbonaccountingandreportingshouldcomplywiththeprinciplessuchastransparencyandaccuracy（WBCSD&WRI2004）.Moreover,companiesshouldvoluntarilydisclosetheircarbonemissiontopublicinordertoacceptexternalsupervision.

Withregardtocarbonreductionstage,itisthemostcrucialpartofcompanies’carbonmanagementprogram.Itisimpossibletoresolvetheproblemcausedbyclimatechangewithoutthisprocess.Throughgreenhousegasreduction,companiescannotonlydecreasetheirownclimateimpactbutalsoenablethemselvestorecognisethepotentialbenefits.

Turningtocarbonneutralstage,themainfeatureofitisreducingcompanies’overallclimateimpacttozerothroughcarbonoffsets.Itenablestherecoursesofcarbonmanagementtobeallocatedrationally.

Inthecurrentandfuturestandards,someareservingtowholecarbonmanagementprocess.Firstly,ISO14064-1rendersaservicetocorporatedisclosure.Moreover,PAS2050,ISO14067andstandardsofLifeCycleAnalysisISO14040/14044servetostage2–carbonreductionstage.Furthermore,ISO14064-2andPAS2060whichwasrealisednotlongagoareservingtocarbonneutralstage.Thus,whencorporationswanttoundertakecarbonmanagementprogrammes,itisessentialforcompaniestounderstandtheabovestandardstoensuretheeffectiveimplementationofcarbonmanagement.

4.Barriersofcarbonmanagementandwaystoovercomebarriers

4.1Barriersofcorporatecarbonmanagement

Thefirstbarrieristhatsomecompaniesstillnotclearlyrecognisethevalueandimplicationofgreenhousegasmanagement.Althoughsomecompaniesrealizedthatgreenhousegasmanagementprogrammecanenablethemtomeettheneedsofcustomersandrequirementsofgovernmentdepartmentsandsustaingoodimageofactivelyundertakingcorporatesocialresponsibility,theyhavenotunderstandtheimportantvalueofcorporateinternalemission-reductionandenergy-saving.

Thesecondbarrieristhatcorporationsarelackofplantoprepareagreenhousegasemissionsinventory.Therearestillmanycorporationsallocatingtheiroperatingscheduleaccordingtocustomer’srequirement.However,thisbehaviourmaycausesomeproblemswhenbeappliedingreenhousegasinventoryreporting.Thisisbecauseperforminggreenhousegasinventoryshouldbebasedonalargenumberoforiginallyresponsiblestatistics.Thesedatashouldalwaysbecollected,retainedandgatheredconsciously,thus,companiesshouldestablishagreenhousegasinventoryteam（Leering2010）.However,itwilltakealongtimetocreateacomprehensivegreenh