Session 1 - Understanding the Carbon Economy Understanding the Why How and Value of Carbon Management in Balancing Environmental and Financial Sustainability Supply Chain & Procurement Roundtable and Supply Chain Logistics Association of Australia July 15th 2008 Trevor Barrows Principal Consultant
[email protected]
© Supply Chain Consulting
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Trevor Barrows
15-Jul-08
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AGENDA
•
The status of the Carbon Economy in Australia
•
How to get started in Carbon Management
•
Session review and Q&A
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Trevor Barrows
15-Jul-08
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AGENDA
•
The status of the Carbon Economy in Australia
The Case for Change
Why Carbon Management •
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Business Drivers, including review of NGER legislation, Garnaut interim report and emission trading
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Drivers for Change
Economical
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Drivers for action on Climate Change
Ecological
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Humanitarian
Climate change Legislation
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Why all the fuss? Whether you are a believer in green house gas emissions and global warming or not, the focus on mitigating future risks is a real business and social issue…..
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An Introduction to Climate Change
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An Introduction to Climate Change (Natural System)
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An Introduction to Climate Change (Enhanced System – Human influence)
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Kyoto Protocol
•
The Kyoto Protocol is a protocol to the international Framework Convention on Climate Change
Objective of reducing Greenhouse gases that cause climate change.
As of today, 176 countries have ratified the protocol. •
39 developed countries are required to reduce greenhouse gas emissions to the levels specified for each of them in the treaty – representing over 61.6% of emissions
•
137 developing countries have ratified the protocol – including Brazil, China and India, – no obligation beyond monitoring and reporting emissions.
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The Six Kyoto Gasses
•
Non-CO2 gases are compared to CO2 through Global Warming Potentials (GWPs)
•
GWP is a relative scale which compares the impact of one tonne of a non-CO2 gas to one tonne of CO2 over a specific time horizon – typically 100 years
•
GWPs depend on the heat absorbing ability of the gas as well as how long it lasts in the atmosphere
•
The Intergovernmental Panel on Climate Change (IPCC) sets the GWPs for reporting of greenhouse gases in national communications to the United Nations Framework Convention on Climate Change (UNFCCC) to ensure that there is consistency in each country’s calculations
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Six Kyoto Gases - Example emissions
Methane Waste (Landfills, natural activity)
Fuels for Energy and Transport, Manufacturing Processes © Supply Chain Consulting
Refrigerants, chemical manufacture, foams & aerosols
Chemical manufacture and agriculture
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Magnesium smelting, high voltage switchgear, electronics manufacturing
Aluminium manufacture, electronics manufacture
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What the Future Holds
Garnaut Report 2008
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What the Future Holds
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What does this have to do with Supply Chains? A product level carbon footprint requires full accounting of emissions from raw material production through to waste disposal
Indirect
Direct
Indirect
…...which corresponds to how we view the supply chain Source: The Carbon Trust: Footprint in the Supply Chain © Supply Chain Consulting
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Green Supply Chain – Positive impact in the production of potato chips 75 grams of CO2 per packet of crisps
The overall supply chain saved 9,200 tonnes of CO2 and AUD$4M pa by simply changing the way that potatoes are traded, reducing emissions at the frying process by up to 10%
Source: The Carbon Trust: Footprint in the Supply Chain © Supply Chain Consulting
www.carbon-view.com
Trevor Barrows
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AGENDA
•
The status of the Carbon Economy in Australia
The Case for Change
Why Carbon Management •
© Supply Chain Consulting
Business Drivers, including review of NGER legislation, Garnaut interim report and emission trading
www.carbon-view.com
Trevor Barrows
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The Carbon Age – Key Business Drivers Cost Saving
Legislation
•Reduced operational cost •Reduced energy consumption
Competitive Advantage •Fulfil conscientious consumer demand •Product/Service innovation leadership •Market social & environmental conscience
Employee Moral •Staff retention •Socially responsible employees
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•NGER •Emission Trading Schemes
Carbon Management Business Drivers
Carbon Market •Opens new markets •Stimulates new product/service innovation
Stakeholder Value Brand Image •Reputation by being carbon responsible •Lower carbon brand footprint •Carbon labelling
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•Mitigation of risk •Reduced exposure to carbon liabilities •Corporate Social Responsibility (CSR) •Affect on Leading indexes (i.e. ASX100, FTSE, etc) Trevor Barrows
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Why Carbon Management – Key Business Drivers Revenue Increase Overall carbon business drives bottom line contribution
Legislation
Cost Saving Competitive Advantage
Carbon Management Business Drivers
Employee Moral Reputation
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Carbon Innovations
Stakeholder Value
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Why Government is Introducing Emissions Legislation
Government Environmental Action
Emissions
•
Business as Usual
National Greenhouse Energy Reporting (NGER) Act commences July 2008
Creating an Australia Emission Trading Scheme (AETS) by 2010
Setting a Greenhouse Gas Emission Reduction Target of 60% (Garnaut report 90%) by 2050
Setting a Renewable Energy Target of 20% by 2020
Bali result •
Ratified Kyoto protocol
•
Road map commitment to post Kyoto 2012
Reduction Goal 2008
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Time
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2050
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Existing programmes with greenhouse and/or energy reporting requirements
Source: Department Climate Change: NGER Act Explanation.pdf
EPA - Environment and Resource Efficiency Plans (100TJ electricity and or 120ML water) - http://www.epa.vic.gov.au/bus/erep/ © Supply Chain Consulting
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Interim Garnaut Report June/July 2008
•
Professor Garnaut has advised that Australia faces a 92 per cent reduction in irrigated agriculture in the Murray Darling Basin, catastrophic destruction of the Great Barrier Reef and critical water shortages.
•
But in addition, Professor Garnaut has confirmed that unless we take strong and decisive action, there is a high probability that by 2100 Australia faces:
A reduction of GDP of 4.8 per cent (some $425 billion);
A reduction of household consumption of 5.4 per cent; and
A reduction in real wages of 7.8 per cent.
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National Greenhouse Energy Reporting System Air Conditioned Office Block energy consumption emits 220kg per sq M per annum
72,000 MwH $7.2M @ 10cent/KwH
41,000 MwH $4.2M @10cent/KwH
http://www.climatechange.gov.au/index.html http://www.comlaw.gov.au/
102,000 MwH Or $10M @ 10cent/KwH
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Some CO2e Emissions by Perspective
Source: Carbon Trust
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GHG Protocol Scope 1, 2 and 3 Boundaries
www.wbcsd.org/
www.climatechange.gov.au/index.html
http://www.ghgprotocol.org/
http://www.carbontrust.co.uk/
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Scope 2
Scope 1
Scope 3
Emissions from the generation by another party of electricity that is purchased and consumed by the company.
Emissions occur from sources that are owned or controlled by a company, such as combustion of fuels in transportation (e.g.: trucks, aircraft, ships, trains), manufacturing, and physical or chemical processes
All indirect emissions (other than from purchased electricity) that occur from sources that are not owned or controlled by the company. For example subcontracted air freight, haulage, business travel and employee commuting in vehicles not owned or controlled by the company
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Australian Emissions Trading System (AETS) – Cap & Trade System being introduced in 2010 CompanyAA Company
CompanyBB Company
Reduces emissions below cap by X% Trades X$ of Carbon Credits
Cannot reduce emissions below cap by X% Buys X$ of Carbon Credits
•
How will it Work (Awaiting ‘Green Paper’ from Canberra 16/07/08)
•
Who monitors and sets the Caps
•
Emission caps need to be based on creditable GHG emissions and energy consumption reporting
•
What is the trading mechanism
•
International Emission Trading Protocol (India, China refuse, USA sitting on fence)
•
Will there be protection for
For trade exposed, emission intensive industries and
For disproportionately affected industries
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Carbon Trading (Tax) Potential Bottom Line Cost Impact
RepuTex
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Carbon Discolsure Project (CDP) - Cost of Emissions at $10 p Tonne as a % of Company EBITA 5%
10%
15%
Blue Scope Steel quoted in AFR 30th April 2008 that a $10 carbon tax would effectively shut the company down together with up stream industries i.e. EBITA impact of 17% CDP 2007 ANZ Report
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Customer & Stakeholder Demands
ANZ Carbon Disclosure Project (CDP) Key Opportunities Identified by Respondents 2006 to 2007 CDP5 Australia and NZ Report 2007 www.cdproject.net
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Australian Food & Grocery Council (AFGC) & Woolworths jv on Carbon Labelling Study •
Woolworths & AFGC examining the benefits of carbon labelling, which allows customers to see at a glance how much greenhouse gas was used to produce the product. "We will explore the costs and benefits of carbon labelling, to see whether it could provide a consistent, transparent and easily understood measure of climate impact across different products," Council Chief Executive Dick Wells.
www.mobium.com.au
http://rydercenter.fiu.edu/greensupplychain
Lifestyles of Health and Sustainability (LOHAS) Australian Consumer Trends Report © Supply Chain Consulting
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TESCO Products Carbon Footprint Boundaries
• • •
Tesco is to test putting "carbon labels" on its own-brand products. Chief executive Sir Terry Leahy said: "We will give the carbon content of the product and the category average." "It has not been simple.” The UK's biggest supermarket first announced its intention to put carbon counts on up to 70,000 products some 15 months ago. Guardian April 16 2008: http://www.guardian.co.uk/environment/2008/apr/16/carbonfootprints.tesco
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WalMart Strategy to Product Carbon Footprinting
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Wal-Mart has teamed up with the UK-based Carbon Disclosure Project not to calculate the footprints of each product, but to measure the energy use of each supplier.
•
This is, at least in theory, a much simpler task.
•
Wal-Mart has almost as many suppliers (60,000) as Tesco has UK food products (70,000)
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By reading the electricity and gas meters at 60,000 factories is a minute fraction of the effort that would have gone into carbon labelling. http://www.washingtonpost.com/wp-dyn/content/article/2007/09/24/AR2007092401435.html
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Australian Competition and Consumer Commission (ACCC) Checklist for Green Marketers (Green Washing/Carbon Neutral)
•
When making environmental claims on your products or in your advertising, you should check the following: •
Avoid using terms like ‘safe’ and ‘friendly’ and unqualified pictures or graphics. At best they are unhelpful and encourage scepticism; at worst they are misleading.
•
Spell out exactly what is beneficial about a product in plain language that consumers can understand.
•
Link the environmental benefit to a specific part of the product or its production process, such as extraction, transportation, manufacture, use, packaging or disposal.
•
Make sure any claims you make about your product can be substantiated. Think about how you would answer a query regarding the environmental benefits you are claiming about your product. For example, what scientific authority could you use to justify the basis of your claim? For more guidelines visit www.accc.wa.gov.au
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WalMart ASDA UK
•
Asda has made reductions in Carbon Dioxide a priority, with a train and new seaport taking the load off the roads.
•
Reduced the number of U.K. road miles travelled by its fleet transport by 6 million miles between 2003 and 2006
•
Equates to a 5 percent overall reduction in GHG and has been achieved during a period of growth for the business.
•
A deep seaport established in 2006 in Teeside allows products to be delivered directly to the North, avoiding Southern ports and saving additional 2 million road miles per year.
http://walmartstores.com/
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Woolworths CEO Michael Luscombe •
“Australia needs efficient, direct, 21st century transport links to major cities rather than a mix of single carriage ways and laneways built last century, built for yesteryear”.
•
“We need the holy grail of logistics – an inland rail link from Melbourne to Queensland, both for our manufacturing and production reasons in the south to take food to the north, but also to return with produce from the fertile Queensland agricultural regions”.
•
“My request today to the Federal Government is to take a long term and holistic view of Australia’s port, road and rail networks and quickly commit to investment and eliminate bureaucratic red tape”.
•
“Our transport network is the very thing that unifies this country, in fact it’s the cause of economic division and inconsistency”.
•
“If government is serious about tackling climate change, making investment in infrastructure is the first card in the pack”. Feb 2008 Australian Logistics Council forum in Canberra speech by CEO of Woolworths Australia, Michael Luscombe
(May 13th Federal Government Budget 2008: $2.3B Climate Change, $3B Sustainability and announce $20B ‘Build Australia Fund’ for road rail port developments) © Supply Chain Consulting
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Food Miles of a 21 kg Food Basket in Victoria Australia (Produce Transportation)
•
Scenario A – Route by road network 940g GHG
•
Scenario B – Route by road network and existing intermodal railway hubs & network 570g GHG (39% reduction on A)
•
Scenario C – Route by road network and hypothetical extra intermodal railway hubs on existing rail network 451g GHG (51% reduction on A)
•
Scenario D – Hypothetical all rail network with new track connecting all producers to nearest population centres (52% reduction on A)
•
Conclusion – Build more intermodal railway hubs on existing rail network, cost of which is less than extending rail or road networks Food Miles in Australia, A comparison of emissions from road and rail transport, Sophie Gaballa Liam Cranle, CERES Community Environment Park 21 kgs – 25 food items from rural source, through processing centre to Melbourne CBT based on 4 scenarios
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Melbourne versa London Land Transportation Comparison
Due to campaigns and investment to bolster public land transportation, GHG emissions have risen only 1% since 1990 in London compared to a 27% increase in Melbourne Bus Association of Victoria http://www.busvic.asn.au/publications/content.aspx?id=79 © Supply Chain Consulting
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The McKinsey Abatement Cost Curve
An Australian Cost Curve for Greenhouse Gas Reduction, Feb 2008, www.mckinsey.com
A$290 p.a. per household for 30% reduction by 2020 (income >$20K) A$590 p.a. per household for 60% reduction by 2030 (income >$30K) © Supply Chain Consulting
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Companies that are prepared lead the pack – Extend Stakeholder Value and mitigate Exposure
Median
Climate Change for Profits Source: McKinsey
http://www.reputex.com.au
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AGENDA
•
How to get started in Carbon Management
The Carbon Maturity Model
Carbon Footprint Methodology
Carbon Economy Business Drivers
How to provide a “carbon health” check of your supply chain •
© Supply Chain Consulting
Setting the “takeaway” task for review at the following session
www.carbon-view.com
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Carbon Footprint “A company’s carbon footprint is the measure of impact the company has on the environment through its CO2 and other greenhouse gas emissions released into the atmosphere.”
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Carbon Management Maturity Model – Level 1 to 2 Path
Point of Reference Reporting & Analysis
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The Carbon Management Maturity Model –Level 2 to 3 Path
Abatement/Emission Trading Management
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The Carbon Management Maturity Model – Level 3 to 4 Path
Activity Level Emission Allocation & Monitoring
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The Carbon Management Maturity Model- Level 4 to 5 Path
Balancing GHG Reduction with Financial Management
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The Carbon Management Maturity Model Path
Balancing GHG Reduction with Financial Management
Activity Level Emission Allocation & Monitoring
Abatement/Emission Trading Management Point of Reference Reporting & Analysis
© Supply Chain Consulting
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GHG Emissions Reporting
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Doing it Right - Creates great inter-department , inter-state, international Sport!
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GHG Emission Visibility Dashboard – Enterprise Analytics
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GHG & SCM KPI Visibility Dashboard – Product & Operational Reports
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GHG Emission Visibility KPI Alerts – System alerting of possibly future overruns
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GHG Emission Visibility Carbon Trend Analysis
CO2e GHG Trend Analysis is important in understanding exposure to Emission Trading Scheme debits or credits
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GHG Emission Modelling Map
Location Details
X
Facility: Beta Corporation Type: Distribution Operation Cost: $0.9 m Carbon Equivalent: 17.4 m Tax Rate: 23% Throughput: 1.12 m tonnes
Location Details
X
Facility: Alpha Corporation Type: Manufacturing Operation Cost: $1.4 m Carbon Equivalent: 76.6 m Tax Rate: 30% Throughput: 1.98 m tonnes
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GHG Emission Modelling Executive Dashboard Results
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AGENDA
•
How to get started in Carbon Management
The Carbon Maturity Model
Carbon Footprint Methodology
Carbon Economy Business Drivers
How to provide a “carbon health” check of your supply chain •
© Supply Chain Consulting
Setting the “takeaway” task for review at the following session
www.carbon-view.com
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Different Types of Carbon Footprints
Source: Carbon Trust
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Carbon Management Strategy
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Carbon Management Principles
Source: EPA Victoria
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Certification & Auditing
•
Carbon Accounting reporting should follow a protocol based on the:
World Council for Sustainable Business Development's GHG Protocol Corporate Accounting and Reporting Standards, World Resources Institute Standards
AGO 2006/NGA 2008 workbooks and associated NGER Technical Guidelines (Dept of Climate Change)
Utilise a methodology as described in ISO14064 to provide consistency and transparency to systematic development & maintenance of GHG inventories
Accreditation requirements for GHG assertions/claims based on
© Supply Chain Consulting
•
Auditing & Assurance Standards Board’s ASAWE 3000 Assurance Engagements other than Audits or Review of Historical Financial Information
•
ISO14065
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Carbon Management – Getting Started •
Start Measuring
•
•
Establish Base Line
Monitor emissions over a period of time to establish your baseline
Keep it Simple around scope 1 and 2 boundaries
Develop Policies & Strategies
•
Implement company carbon footprint measurement (Fuel, Electricity, Travel, distribution etc)
Develop carbon management policies and procedures and set reduction targets from the base line
Implement & Report
Implement reductions and report abatement successes
•
Assess the reports generated on your carbon emissions and implement changes to affect them.
•
… and keep monitoring your emissions!
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AGENDA
•
How to get started in Carbon Management
The Carbon Maturity Model
Carbon Footprint Methodology
Carbon Economy Business Drivers
How to provide a “carbon health” check of your supply chain •
© Supply Chain Consulting
Setting the “takeaway” task for review at the following session
www.carbon-view.com
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Carbon Economy Business Drivers – External
•
Government Action
•
Customer Demands
•
Legislation or Trading Schemes
Many large organisations are now adding sections to their supply contracts and tenders requiring information, and more importantly action by suppliers
Corporate Social Responsibility
The major change in corporate positioning is to implement Corporate Social Responsibility policies and strategies. Managing carbon emissions should be a significant part of any CSR strategy.
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Carbon Economy Business Drivers– Financial
•
Its Good for Business
•
Many organisations are mistakenly looking at climate change as having a negative impact on their business, and thus are hoping for a delay. Early adopters however are reducing costs and strengthening their market positions.
Cost of Late Adoption
Australia has not skilled up sufficiently in environmental expertise and the early signs of a skilled resource shortage are appearing. Companies who adopt late will pay a premium.
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Carbon Economy Business Drivers – Reporting •
Streamline Greenhouse Gas emission reporting process:
Set up a reporting mechanism according to the NGER Policy and GHG CO2e conversion standards (International/State/Industry)
Ensure consistent reporting across all facilities / locations i.e. central visibility and reporting platform
Reduce labour cost of greenhouse gas data collection
Provide auditable results that enable participation in emission reduction and trading schemes
Provide a point of reference
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AGENDA
•
How to get started in Carbon Management
The Carbon Maturity Model
Carbon Footprint Methodology
Carbon Economy Business Drivers
How to provide a “carbon health” check of your supply chain •
© Supply Chain Consulting
Setting the “takeaway” task for review at the following session
www.carbon-view.com
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Carbon Health Check Survey - Footprint
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Carbon Health Check Survey – Product & CSR
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AGENDA
•
Session review and Q&A
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Agenda For Session 2 •
Westin Hotel Melbourne Case Study
•
Review of attendees results from takeaway task (anonymous)
•
Update on Australian Carbon Economy ‘Green Paper’
•
Strategies in how to reduce supply chain GHG emissions
•
How to assess the ROI impact of carbon management on your supply chain
•
Session review and Q&A
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The Supply Chain Carbon Economy Q&A
Balancing GHG Reduction with Financial Management
Activity Level Emission Allocation & Monitoring
Abatement/Emission Trading Management Point of Reference Reporting & Analysis
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References
• • • • • • • • • • • • • • • • • • • • •
GHG Protocol The Greenhouse Gas Protocol: A Corporate Accounting and reporting Standard, ‘The GHG Protocol, www.ghgprotocol.org, 2004 Department of Climate Change, National Greenhouse Energy Reporting (NGER) Act www.climatechange.gov.au/reporting/, 2007 The Department of Climate Change NGA Factor & Policy Document, http://www.greenhouse.gov.au/workbook/index.html, 2008 Department of Climate Change, NGER Act Fact Sheet, http://www.climatechange.gov.au/reporting/publications/pubs/nger-fs.pdf, 2007 Carbon Disclosure Report, CDP Australia/New Zealand 2007 Report, http://www.cdproject.net/cdp5reports.asp, 2007 Australia Government, Attorney General Department, National Greenhouse Emissions Reporting Act 2007, http://www.comlaw.gov.au/ComLaw/Legislation/Act1.nsf/0/8BFE5E5B013EF8A3CA25736A00128DE9?OpenDocument, 2007 Ross Garnaut, Garnaut Climate Change Review, Interim Report to the Commonwealth, State and Territory Governments of Australia, February 2008, http://www.garnautreview.org.au/domino/Web_Notes/Garnaut/garnautweb.nsf Carbon Trading Market, http://www.environmentalleader.com/2008/02/16/prediction-1-trillion-us-carbon-market-by-2020/, 2008 Factiva, search on climate change articles in Australia, http://factiva.com/, 2007 PWC, Carbon Countdown, http://www.pwc.com/extweb/ncpressrelease.nsf/, 2008 Mobium, Lifestyles of health and sustainability Consumer Trend Report, http://www.mobium.com.au/pdf/Living%20LOHAS%202007%20Overview.pdf, 2007 Australia - Reducing the meat and livestock industry's environmental footprint. http://www.accessmylibrary.com/coms2/summary_028633032989_ITM, 2007 New Zealand - AgResearch to measure sheep meat carbon footprint http://www.farmnews.co.nz/news/2007/nov/848.shtml, 2007 Harpers, The Green Debate, http://www.harpers.co.uk/green_debate/, 2007 Australian Food & Grocery Council, New Study Explores Carbon Footprinting of Food and Groceries, http://www.afgc.org.au/index.cfm?id=607, 2008 A.T.Kearney and Institute for Supply Management (ISM) Sustainability Management Survey, January 2007 The Economist, Change in the Climate: Is business going green? A report from the Economist Intelligence Unit, commissioned by the UK Trade & Investment Department, May 2007 Al Gore, ‘An inconvenient Truth’, http://www.climatecrisis.net/, 2007 Sir Nicholas Stern, The Stern Review on Climate Change 2006, http://www.hmtreasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm, 2006 Tim Flannery, The Weather Makers, The Text Publishing Company, Melbourne, Australia, 2006 Reputex, ‘Climate Change Eroding ASX200 Value, http://www.reputex.com.au/, 2007
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Glossary
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ABARE: Australian Bureau of Agriculture and Resource Economics ABS: Australian Bureau of Statistics AETS: Australian emissions trading scheme AFGC: Australian Food & Grocery Council AGO: Australian greenhouse office ANZSIC: Australian and New Zealand Standard Industrial Classification BOD: Biological oxygen demand CDP: Carbon disclosure project CO2-e: Carbon dioxide equivalent CDP: Carbon Disclosure Project COAG: Council of Australian Governments COD: Chemical oxygen demand CSR: Corporate Social Responsibility DCC: Department of Climate change (Senator Penny Wong) DEFRA: UK department of environment, food and rural affairs EEO: Energy Efficiencies Opportunities program EEZ: Exclusive economic zone EF: Emissions factors FTC: Fuel Tax Credit
© Supply Chain Consulting
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www.carbon-view.com
GCP: Greenhouse challenge program GHG: Greenhouse Gases GEDO: Greenhouse and Energy Data Officer GHG Protocol: Greenhouse gas protocol GEMI: Global environmental management initiative GICS: Global Industry Classification Standard GWP: Global warming potential HFC: Hydrofluorocarbon IPCC: Intergovernmental Panel on Climate Change LCA: Life Cycle Assessment LOHAS: Lifestyles of health and sustainability NETT: National emissions trading taskforce NGA: National Greenhouse Accounts NGER: National greenhouse energy reporting NGERS: National greenhouse energy reporting system NGO: Non Government Organisation UNFCCC: United Nations framework convention on climate change WBCSD: World business council for sustainable development WRI: World resource institute
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Thank you for your attention to understanding
The Supply Chain Carbon Economy Trevor Barrows Principal Consultant
[email protected] May - June 2008
© Supply Chain Consulting
www.carbon-view.com
Trevor Barrows
15-Jul-08
72
