Cleaning up australias readiness for a low carbon future

Cleaning up
Australia’s readiness for a low-carbon future
A report from the Economist Intelligence Unit

Commissioned by


Cleaning up
Australia’s readiness for a low-carbon future

Contents
Preface

2

Executive summary

3

Introduction

7

The Australian Low-Carbon Readiness Barometer: Baseline expectations

10

Corporate sentiment towards a low-carbon future

13

Pricing carbon: How to reduce carbon emissions

13



Threat or opportunity?

14



Risks from going clean

17



Impact on competitiveness

18



Impact on operating costs and profit

18

Corporate preparedness for a low-carbon future

20



Modelling the impact of carbon prices

20



Reducing carbon footprints

21



Proactive planning

23



Targeting targets

24

Capitalising on opportunities in a low-carbon economy

25

Conclusion: Getting ready

28

Appendix: Survey results

31

© The Economist Intelligence Unit Limited 2011

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Cleaning up
Australia’s readiness for a low-carbon future

Preface

C

leaning up: Australia’s readiness for a low-carbon future is an Economist Intelligence Unit report,
commissioned by GE. The Economist Intelligence Unit (EIU) conducted the survey and interviews
independently and wrote the report. The findings and views expressed here are those of the EIU alone.
Elizabeth Fry was the author of the report and Sudhir Vadaketh was the editor. Gaddi Tam was
responsible for design. The cover image is by David Simonds.
We would like to thank the following interviewees for their time and insights (listed alphabetically

by organisation):

• Tim Nelson, head of economic policy and sustainability, AGL
• Peter Burn, policy director, Australian Industry Group
• Craig Roussac, general manager of sustainability, safety and environment, Investa
• James Kell, CEO, Kell & Rigby
• Peter Shields, economics and sustainability team, Macquarie Generation
• Robert Poole, general manager, industry and government affairs, Murray Goulburn
• Carl McCamish, executive general manager of policy and sustainability, Origin
• Rob Kella, formerly chief risk officer, Qantas
• David Plunkett, general counsel, Qenos
• Susie Smith, manager for climate change and sustainability, Santos
• Armineh Mardirossian, group manager, corporate responsibility, Woolworths
May 2011

2

© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

Executive summary

A

lthough corporate and public opinion in Australia is, by and large, in favour of lowering carbon
emissions, there is much debate about how to do it. Although it seems somewhat inevitable that
Australia will eventually transform into a low-carbon economy—thereby reducing its dependency on

carbon for economic growth—the roadmap for this transition is not yet clear. The current government
has announced plans to implement a carbon-pricing scheme from July 2012, but politicians have yet to
achieve consensus on the finer details.
In this uncertain environment, Australian businesses must design and implement corporate
strategy. How prepared are Australian corporations for a low-carbon economy? What are the biggest
threats posed by Australia’s shift to a more sustainable model? What is industry’s preferred option for
pricing carbon, and why? And, crucially, have Australian firms identified opportunities for growth or
alternative markets that are emerging or may emerge from a low-carbon economy? This report, based
on a survey of over 130 senior executives in Australia, attempts to answer these questions.
The key findings of the research include:

•Corporate strategy on carbon reduction is being held back by a lack of policy clarity, and
companies are unsure when a clear policy will be implemented. For the majority of firms, the current
uncertainty around Australia’s future environmental policies is hindering the development and
implementation of corporate carbon-reduction strategies. Almost two-thirds of respondents to the
survey consider the unclear regulatory environment the primary barrier to making further progress on
reducing carbon emissions.
Carbon reduction has moved up and down the corporate agenda over the past few years, partly in
tandem with the perceived political commitment towards combating climate change. The years of
political paralysis have also led to some corporate scepticism—just 16% of respondents believe that
the Australian government has the political will to push through a carbon price.1
This uncertainty has already hampered corporate strategy and decision-making, particularly with
regards to potential new investments in Australia. Some firms, for instance, believe they are making
poor investment decisions—investing in emissions-heavy capital equipment and infrastructure—
because they still do not have the certainty of a carbon price, which will make low-carbon technology
more attractive.
© The Economist Intelligence Unit Limited 2011

1 The survey was conducted in

January and February 2011,
before the prime minister,
Julia Gillard, announced plans
for a carbon tax

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Cleaning up
Australia’s readiness for a low-carbon future

This suggests that Australia must resolve the current impasse over carbon pricing in order for
corporations to design more effective long-term strategies, ultimately improving the economy’s
competitiveness.

•The majority of Australian firms are doing something to address carbon emissions, but only
a minority have detailed strategies for a low-carbon future. Some 70% of firms say that they have
a strategy in place for reducing their carbon footprint. More than two-thirds of firms have specific,
measureable targets for reducing their overall energy usage. However, some of these efforts may be
quite basic. Only 21% of respondents, for instance, say their companies have a clearly defined carbon
reduction programme for their entire supply chain. Less than one-third of firms have modelled the
impact of different carbon prices on their business operations.
Clearly, Australian firms are at many different stages of preparedness for a low-carbon future. Some
have developed thorough, holistic strategies; many have not done much at all, perhaps waiting for
concrete legislative changes before acting.

•Australian firms see opportunities in a low-carbon future, and some have already started
capitalising on them. More than one-half of respondents believe that the need to cut carbon emissions
is a driver of process innovation, and is an opportunity to gain a competitive advantage by creating
new or more marketable products. Meanwhile, more than one-half of the respondents believe that a

corporate carbon tax will improve innovation and investment in clean technology. More than one-half
also say their companies are ready to capitalise on growth opportunities in a low-carbon economy. More
than one-third of respondent companies have created new dedicated roles or teams to identify green
products or services.

•The biggest perceived risk in a low-carbon future is increased costs. When asked to identify the
biggest risks to their business posed by Australia’s shift to a more sustainable economy, almost threequarters of respondents say a major risk is added costs arising from compliance with regulations.
In addition, more than one-third of respondents believe that a carbon price will harm their
international competitiveness unless their foreign counterparts are subject to the same requirements.
These worries may be partly driven by uncertainty around carbon pricing—companies are still unsure of
the exact cost to their business.
They also do not know what, if any, compensation they will be entitled to. Ross Garnaut, the
government’s chief climate-change advisor, believes that a carbon price will affect the international
competitiveness of some companies, and recommends that trade-exposed industries receive
compensation—varying depending on the industry—for three years from mid-2012.
Still, the prevailing uncertainty suggests that the public and private sectors need to invest more in
carbon research to deepen Australia’s collective understanding of the potential impact of a carbon price.

•There is little corporate consensus about the impact of climate change. Surprisingly, there are
many executives who still question the science of climate change—40% of respondents say that the
impact of carbon emissions on global warming hasn’t been sufficiently established to warrant wholesale
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© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

changes in corporate strategy or behaviour. This indicates that broader, deeper climate-change

education is necessary.
Similarly, there is a broad variation in assessment of the business impact of Australia’s shift to a
low-carbon economy, with some respondents viewing it more as a threat to their business, and others
more as an opportunity. They are similarly split on whether the opportunities created by introducing a
carbon price will outweigh the risks in the long run. More than two-thirds of respondents do, however,
feel that cutting Australia’s carbon emissions is principally a matter of changing corporate behaviour.
Put together, these findings portray the uncertainty, doubt and confusion in Australia’s private
sector towards climate change and carbon reduction. This suggests that the national discussion and
debate about sustainability is still in its infancy.

•The majority of respondents favour some sort of carbon-pricing scheme, but they disagree about
which one. One-quarter favour a carbon cap-and-trade scheme, while 20% prefer a simple tax on the
carbon footprint of their operations. A further 12% want a consumer tax on the carbon footprint of
goods and services consumed.
Many of the companies interviewed for this report approve of the government’s idea of introducing
a carbon tax—which gives them price certainty—followed later by a market-based pricing mechanism.
Nevertheless, they are doubtful about the perceived accelerated timeline. They would also like more
detail on the impact on trade-exposed and emissions-intensive industries; the provision of incentives,
allowances and a transition period; the potential for unintended consequences; and a host of other
uncertainties surrounding any scheme.
This suggests that the Australian government must carry out further research and analysis into
carbon pricing, as well as broad-based communication and dialogue, in order to secure buy-in from
Australian corporations and society. By building a broader consensus behind its carbon-pricing
policies, the government will encourage more firms to make low-carbon investments in the country,
and spur clean-product innovation within local firms. This should help to position Australian
companies for success in low-carbon economies around the world.

•Large firms are more prepared for a low-carbon future. The survey results suggest that bigger
companies have invested more into preparing themselves for a low-carbon future. For instance, 41% of
firms with more than 10,000 employees globally have assessed the impact of different carbon prices on

their business operations. This compares with just 23% of firms with 10,000 or fewer employees globally.
Meanwhile, amongst firms with more than 10,000 employees globally, 34% have a carbon-reduction
strategy in place that covers the whole business, including external partners and supply chain. This
compares with just 15% of firms with 10,000 or fewer employees globally.
These findings indicate that larger firms feel a greater imperative to prepare for a low-carbon
future. This could be because they worry more about the possible impact of a carbon price on their
profitability. Large firms also have more resources to dedicate to a carbon-reduction strategy.

© The Economist Intelligence Unit Limited 2011

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About the survey
The research involved surveying 131 Australiabased senior executives who are familiar with their
companies’ sustainability strategy. Many of the
respondents are in senior management—57% are in
the C-suite or sit on the board. In terms of size, 47%
work at companies whose global headcount exceeds
1000 people. Some 45% of respondents work at firms
whose global annual revenues exceed US$1bn.

6

The respondents work in a broad mix of
industries—23% work in the energy and natural
resources sector; 18% work in construction and real

estate; 11% are in the telecommunications industry;
11% work in transportation, travel and tourism; 10%
are in the agriculture and agribusiness sector; and
the remainder work in logistics and distribution;
IT and technology; manufacturing; consumer
goods; retailing; healthcare, pharmaceuticals
and biotechnology; professional services; and
education.

© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

Introduction

A

s the world’s hydrocarbon reserves continue to be depleted, all countries will have to reduce their
carbon intensity—the amount of carbon required per unit of GDP. This shift is being accelerated
by concerns about climate change, which have led to global agreements, commitments and efforts
to reduce carbon emissions. Some countries, including Denmark, India, and the Netherlands, have
already implemented a carbon tax, largely with the intention of reducing carbon emissions.
This issue is particularly important for Australia, the world’s top coal exporter, which generates
more than 80% of its electricity from coal and has per-capita CO2 emissions that are the highest in the
developed world.2 Most other developed countries now have falling or steady emissions but, partly as a
result of its resources boom, Australia’s emissions continue to increase rapidly.
Australia’s robust economic growth drove energy demand from 2007 to 2009. Yet emissions
grew only two-thirds as much as energy demand during that period, and four-fifths as much as GDP,

reflecting a drop in Australia’s carbon intensity. Nevertheless, in the absence of further policy action,
Ross Garnaut, the government’s chief climate-change advisor, estimates that total emissions will
increase by 24% from 2000 levels by 2020.3 This represents an upward revision of four percentage
points from 2010 projections, largely owing to the emissions from opening new coal mines and
liquefying natural and coal seam gas for export. These findings are fuelling a growing awareness in
Australia about the need to continue reducing its carbon intensity.
Australians have also suffered from tragic weather-related disasters recently, from the suffocating
droughts in the decade up to 2009, to the devastating floods in Queensland in 2010-2011. These have
heightened criticism of carbon emissions and the role they play in climate change.
According to the Commonwealth Scientific and Industrial Research Organisation (CSIRO),
Australia’s national science agency, there is a 90% chance that greenhouse gas emissions resulting
from human activities caused most of the global warming since the mid-20th century. CSIRO believes
that future climate change in Australia will depend on the level of carbon emissions in the country. If
emissions are low, CSIRO expects warming of 1-2.5 ºC by around 2070, with a best estimate of 1.8 ºC. If
emissions are high, CSIRO expects warming of 2.2-5 ºC by around 2070, with a best estimate of 3.4 ºC.4
Although public opinion in Australia is, by and large, in favour of lowering carbon emissions, there
is much debate about how to go about it. Australia’s politicians have been unable to achieve consensus
on the issue, largely because opinion is so divided.
© The Economist Intelligence Unit Limited 2011

2 The Global Carbon Project,

2009

3 The Garnaut Climate Change

Review Update 2011

4 “Climate change in

Australia: technical report
2007”, Commonwealth
Scientific and Industrial
Research Organisation

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5 Throughout the paper,

we will refer to the current
government’s proposed
plan—for a carbon tax
in 2012 followed by an
emissions-trading scheme in
2015—as a carbon-pricing
scheme

6 “A 2012 Carbon Price for

Australia?”, Reputex

8

In 2007, the Labor Party, led by Kevin Rudd, swept into power partly because of his commitment to
reducing carbon emissions. In 2008, Mr Rudd’s administration ratified the Kyoto protocol and outlined
a proposed Carbon Pollution Reduction Scheme (CPRS), a cap-and-trade scheme intended to cut

Australia’s greenhouse-gas emissions by 5% over ten years. However, the proposal was defeated three
times in Australia’s Senate (the upper house of parliament). Each time, members of the Australian
Greens party opposed it on the grounds that the scheme would be too ineffective in reducing carbon
emissions, while the opposition Liberal-National coalition claimed that it would unfairly harm tradeexposed industries like the mining sector.
The Copenhagen climate conference in 2009, meanwhile, indicated that international enthusiasm
for combating climate change had waned, and that a binding global pact was less likely to be agreed.
Mr Rudd hence delayed implementation of the CPRS until 2012. This policy retreat, amongst other
things, lost him his party’s support, and hence his job as prime minister. In June 2010 Julia Gillard, his
Labor Party colleague, took over as prime minister, and soon after called an election, which resulted in
a hung parliament. With the support of four MPs—one Green and three independents—Ms Gillard was
able to form a minority-led government.
Soon after Ms Gillard’s ascension, a renewed global commitment towards combating climate change
emerged. While the Copenhagen climate conference in 2009 had failed to deliver any international
agreements, the subsequent Cancun conference in December 2010 produced some concrete policies
(albeit with vague details). These included US$100bn a year for developing countries by 2020 as
climate assistance; a climate fund, partly under the direction of the World Bank, through which much
of the money might flow; and a deal on the conditions under which countries may be paid to decrease
the damage being done to their forests.
In February 2011 (after the survey for this paper was conducted), Ms Gillard announced plans to
introduce a fixed price on carbon from mid 2012, ahead of a full emissions-trading scheme in 2015.
Under the new carbon-pricing scheme, Australia’s biggest polluters will be required to purchase fixedprice permits for each tonne of pollution they produce.5 The permit price will be fixed for each year but
will increase annually at a pre-set rate. In effect, the price of the permit will be the carbon price.
Despite these plans, there is still uncertainty about Australia’s climate-change policies. Ms Gillard,
after all, does not have a widespread electoral mandate. Building a consensus is difficult owing to the
unstable nature of the ruling coalition. Ms Gillard’s Labor Party and the opposition are committed to
reducing Australia’s emissions by 2020 to at least 5% below 2000 levels. The Greens, meanwhile, want
cuts of 25-40% below 2000 levels. They are also against generous compensation to the coal industry
and the heaviest-polluting power generators. As such, the federal government could fail to win
support for its proposed carbon emissions tax.
In addition, powerful stakeholders, including the mining industry, are lobbying for or against

a carbon price. Export-dependent companies are worried about a loss of competitiveness
internationally. Operating costs will probably rise—RepuTex, a Hong Kong-based consultant
specialising in carbon risk analysis, estimates that if the government sets the carbon tax at A$25
per tonne, although nearly one-half of the A$3.3bn cost would be passed on to consumers, the top
200 companies by market capitalisation would be left with a net liability of A$1.75bn.6 Amongst
© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

consumers, meanwhile, there is some opposition to the scheme as people are increasingly worried
about rising gas, electricity, water and food prices.
All this suggests that the Australian government must carry out extensive further research and
analysis into carbon pricing, as well as broad-based communication and dialogue, in order to secure
buy-in from Australian corporations and society.
Australian corporations ultimately need policy clarity. They are concerned that the different
political parties will never be able to agree on emissions targets and carbon-reduction policies. The
years of political inaction have also led to some corporate scepticism—just 16% of survey respondents
believe that the Australian government has the political will to push through a carbon price. This
uncertainty around Australia’s future environmental policies is holding back corporate carbonreduction strategies.
Policy clarity will also allow Australian firms to capitalise on any opportunities that might emerge in
a low-carbon economy. Though carbon reduction is often framed as an effort to control climate change
and reduce fossil fuel dependency, from a corporate point of view, it is as much about developing
innovative products and exploiting new growth markets. In this report we examine corporate
Australia’s readiness to face both the risks and opportunities of a low-carbon future.

© The Economist Intelligence Unit Limited 2011

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Cleaning up
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The Australian Low-Carbon Readiness
Barometer: Baseline expectations

B

6 For clarity, the scoring

system in the barometer
has been reversed from
that used in the original
survey questions (where
1=excellent). The original
survey questions are
reproduced in the appendix.

ased on the survey conducted for this report, we have devised the Australian Low-Carbon
Readiness Barometer, an ongoing index of perceptions of “low-carbon readiness”. Importantly,
in future iterations the barometer will measure improvement or decline over current conditions rather
than the absolute readiness. This chapter summarises the findings of the initial survey, which forms
the baseline index.
The barometer seeks to measure the degree to which companies believe Australia is prepared for the
transition to a low-carbon economy, both in terms of minimising carbon emissions and seizing growth
opportunities that this transition may present in terms of new markets for cleaner products and services.
The overall score is the average of three qualitative scores by senior executives on their perceptions
of “low-carbon readiness” of their company, their industry, and Australia overall, on a scale of 1 to 5,

with 5 denoting excellent readiness.6
In turn, perceptions of “low-carbon readiness” at the company, industry and national level are measured
by averaging respondents’ scores for two questions—“Please rate the overall readiness of each of the
following for minimising their carbon footprint” (see Chart A); and “Please rate the overall readiness of each
of the following to capitalise on growth opportunities in a low-carbon economy” (see Chart B).
Using this methodology Australia’s overall low-carbon readiness is 3.1.
The following scores will form the baseline for the ongoing index:
Overall score

3.1

Company score—low-carbon readiness of “your company”

3.6

Industry score—low-carbon readiness of “your industry”

3.0

Country score—low-carbon readiness of “the Australian economy”

2.6

It is notable that executives view prospects for their own company—the business about which they
are best informed—with the greatest degree of optimism. That may be because they are privy to new
carbon-reduction strategies or clean energy opportunities that reveal the potential for their own firm
to succeed in a low-carbon future. Alternatively, they may be overestimating their own firm’s readiness
in relation to their competitors and the overall economy. Whether executives are being too positive or
too negative will become clear in due course.
10

© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

Barometer by industry
When asked for their perceptions of low-carbon readiness in their own industry, executives in the
agriculture and natural resources, and construction and manufacturing sectors seem slightly less
upbeat than those in the services sector.
This could be because companies in those industries typically emit more emissions than servicesector firms, and hence are a bit more sceptical about their ability to prepare for a low-carbon future.
7 Includes agriculture and

Agriculture and natural resources7

2.9

Construction and manufacturing8

2.9

agribusiness; energy and
natural resources sectors

Services9

3.1

8 Includes construction and

real estate; manufacturing
sectors

9 Includes healthcare,

Barometer by company size
Perceptions of low-carbon readiness also depend on the size of the company. Medium-sized firms are
the least upbeat. This could be because big companies have deep pockets and plenty of resources to
commit to any carbon-reduction initiative. Small firms, meanwhile, may feel they are nimble enough to
quickly adjust to changes in market conditions.
Small (<101 employees)

3.7

Medium (101-10,000 employees)

3.3

Large (over 10,000 employees)

3.7

pharmaceuticals and
biotechnology; IT and
technology; logistics and
distribution; professional
services; retailing;
telecommunications;
transportation, travel and

tourism; consumer goods;
education sectors

It may well turn out that executives in this baseline report are too optimistic about their own
companies’ prospects, in relation to those around them. With uncertainty still surrounding a carbonpricing scheme, many firms may actually be caught unawares when the final legislation is passed.
With the overall barometer score at 3.1 out of 5, there remains plenty of room for movement in both
directions over the coming year. To register your disposition—be it positive or negative—please join us
online at />
Barometer questions
It is encouraging that the majority of firms believe they are ready to minimise their carbon footprint
if need be (Chart A). Still, that does mean that some 46% of companies are, at best, at “average”
readiness. With a little more than a year to go before the proposed introduction of a carbon tax, in July
2012, this raises some questions about the ability of some firms to manage the transition.
Carbon reduction has moved up and down the corporate agenda over the past few years, partly
in tandem with the perceived political commitment towards combating climate change. If and when
Australia finally does decide to price carbon, more than one-half of Australian firms believe they are
© The Economist Intelligence Unit Limited 2011

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Cleaning up
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Chart A
Please rate the overall readiness of each of the following for minimising their carbon footprint. Rate on a scale of 1 to 5,
where 5=Excellent, 3=Average and 1=Very poor.
(% respondents)
Excellent 5

Your company
19

2

4

Average 3

35

Your industry
5

34

17

50

The Australian economy
3
12

Very poor 1
10 2
23

31

5

40

14

Source: Economist Intelligence Unit

Chart B
Please rate the overall readiness of each of the following to capitalise on growth opportunities in a low-carbon economy.
Rate on a scale of 1 to 5, where 5=Excellent, 3=Average and 1=Very poor.
(% respondents)
Excellent 5

Your company
20
Your industry
5
The Australian economy
4

4

Average 3

34

31

24

17

2

12

44
35

Very poor 1

23
31

3
4
13

Source: Economist Intelligence Unit

ready to capitalise on any opportunities that arise (Chart B). For the other firms, they risk missing out
on new growth opportunities, both in Australia, and in other countries that are transitioning to a lowcarbon economy.

12

© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

Corporate sentiment towards a low-carbon
future
Pricing carbon: How to reduce carbon emissions

T

here is little consensus among Australian executives about how to go about cutting carbon
emissions. Some 40% of respondents believe that the impact of carbon emissions on global
warming hasn’t been sufficiently established to warrant wholesale changes in corporate strategy or
behaviour.
More than one-third of respondents, meanwhile, do not think that carbon should be priced,
believing instead that green technology or behaviours should be subsidised (see Chart 1). The
majority, however, favour some sort of carbon pricing. One-quarter favour a carbon cap-and-trade
scheme, while 20% prefer a simple tax on the carbon footprint of their operations. A further 12% want
a consumer tax on the carbon footprint of goods and services consumed.
Name a price
Chart 1: What do you think is the best option for pricing carbon?
(% respondents)
Carbon doesn’t need to be priced; green technology or behaviours should be subsidised instead
36
Carbon cap and trade scheme (eg, CPRS)
25
Corporate tax on carbon footprint of operations
20
Consumer/sales tax on carbon footprint of goods/services consumed
12
I don’t know
7
Source: Economist Intelligence Unit

This preference for a cap-and-trade scheme over a carbon tax probably reflects the perception
that the former will have a greater environmental impact. “The most effective, low-cost and flexible
solution for a global problem is a globally traded carbon unit and a trading scheme that links countries
and industries,” says Carl McCamish, executive general manager of policy and sustainability at Origin,
an energy company. “A price on carbon might affect behaviour but you don’t know by how much. If you
put a cap on the total emissions that are ever going to be emitted, however, you have more certainty
with the environmental outcome.”
© The Economist Intelligence Unit Limited 2011

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10 For several years,
energy-intensive industries
have been forced to report
energy use under the Energy
Efficiency Opportunity
Assessment Act and the
National Greenhouse Energy
Reporting (NGER) Act. About
one-third of Australia’s top
companies are assessed. As
a guide, businesses emitting
more than 25,000 tonnes of
carbon dioxide equivalent, or
consuming more than 25,000

megawatts of electricity or
2.5m litres of fuel in a year,
can expect to be required to
report.

Several interviewees for this paper feel that the success of a trading scheme is dependent on it
being internationalised. Companies are searching for the cheapest source of abatement and that
involves being able to trade permits internationally. For some companies, however, a straight carbon
tax provides much-needed certainty. When business leaders know what it will cost them to emit a unit
of carbon, they can budget and plan accordingly. With a carbon trading scheme, the price fluctuates,
creating some uncertainty.
Qantas, Australia’s largest airline, prefers the simplicity of the tax for now since it makes for easier
administration and implementation. Businesses can easily use the information they already provide
as part of the requirements of the National Greenhouse Energy Reporting Act (NGER) according to Rob
Kella, until recently chief risk officer at Qantas. Their carbon tax liability can be estimated from that.10
Others believe that the current two-step proposal—a tax followed by a cap-and-trade scheme—is
the most sensible approach. Once Australia is used to the general idea of paying for carbon emissions,
it can then move to a more market-based system.
Even Qantas would prefer a cap-and-trade scheme in the long run, but its appeal depends on how
the rules are set. “As a trade-exposed, emission-intensive business we didn’t feel the Rudd-designed
CPRS reflected the inherent limitations of our business and what we were trying to do strategically to
move things forward,” says Mr Kella.
Murray Goulburn, a dairy co-operative and one of Australia’s largest exporters of processed foods,
has come to the same conclusion. As a moderately intensive emitter of greenhouse gases it was not
eligible for free permits under the CPRS. However, as a fully trade-exposed business it would have
incurred high costs and would not have been able to recoup one cent of the tax. It is hopeful that any
future cap-and-trade scheme will address these concerns.
Tim Nelson, head of economic policy and sustainability at AGL, an energy firm, also supports a fixed
price for now, but likes the idea of eventually moving to a cap-and-trade scheme. To him, a carbon price
such as A$20-30 per tonne is manageable and would allow for a gradual transition to a low-carbon

economy. “We’re not talking about revolutionising the economy overnight, but a reform that will take
three or four decades,” he says.
Mr Nelson recommends transitional assistance for energy-intensive, trade-exposed industries
to mitigate the financial impact on those businesses until comparable carbon-pricing schemes are
implemented in competitor countries. He also suggests financial assistance for significantly affected
industries like high-emitting coal-fired generators. “It makes sense to promote investor confidence
and ensure energy security as we move to cleaner technology and renewables,” he says.

Threat or opportunity?
When asked if Australia’s shift to a more environmentally sustainable economy is a threat or an
opportunity to their business, respondents are divided. One-half believe that the opportunities
created by imposing a carbon price will outweigh the risks in the long run. The biggest opportunities,
according to almost one-half of the survey respondents, will be in developing new products and
services and in improving their relationships with their customers (see Chart 2).
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© The Economist Intelligence Unit Limited 2011


Cleaning up
Australia’s readiness for a low-carbon future

Companies such as AGL, Origin and Qantas—three of Australia’s largest emitters11—envision plenty
of opportunities to develop new products and services for a ”clean” economy. In fact, they are already
investing heavily in clean energy. Origin wants to justify building more gas plants that would cut
average emissions when generating electricity. “We have just built Australia’s biggest base-load gasfired plant so we are very proactive in that space,” says Mr McCamish.

11 Compared with others as
reported in Greenhouse and
Energy Information 2009-10,

National Greenhouse
and Energy Reporting,
Department of Climate
Change and Energy Reporting

Opportunity awaits
Chart 2: What do you think are the biggest opportunities to your business in taking steps to reduce its carbon footprint?
Select up to three. (% respondents)
Developing new products and services
47
Improving relationships with customers
47
Risk mitigation (eg, in supply chains)
34
Improved employee engagement/commitment
26
Access to new markets
25
Cost reduction
22
Improving relationships with suppliers
9
Source: Economist Intelligence Unit

In response to demand from environmentally conscious consumers, Origin has moved to build a
market for “green electricity”—where customer choose to pay extra for electricity generated from
renewables rather than from coal.
Qantas relentlessly looks for ways to become more energy efficient. The airline’s massive fuel cost
dwarfs any prospective carbon price, and hence its minimisation is a much bigger driver of innovation
(see Case study: Qantas). More fuel-efficient aircraft will help—Qantas will soon introduce a fleet of

Boeing 787s, which are 20% more fuel efficient than their older planes.
“The real transformation opportunities will take place in the next three to five years with a new
fleet, and in five to ten years with an alternative fuel option which has a better footprint,” says Mr
Kella. He sees many clean energy opportunities in the aviation and automobile sectors, particularly
with the use of alternative fuels, which would also allow countries to reduce their dependence on the
Middle East for crude oil.
Reflecting a popular corporate view, James Kell, chief executive of Kell & Rigby, a construction firm,
believes that any and all sustainability efforts are good for the planet and should be encouraged.
While still hesitant to spend money on measuring his firm’s carbon footprint or modeling risks and
opportunities, he feels any price on carbon will boost innovation and investment in clean technology.
For instance, although solar PV and solar thermal technologies are not yet commercially ready,
and the grid in Australia is not “smart” enough to handle them well, they will one day be feasible.
“Making buildings more sustainable and having a lighter footprint is the right thing to do, so I’m
heading in that direction whether the debate is purely about carbon or not,” says Mr Kell. He sees
plenty of opportunities through new building practices such as new substations, renewable electricity
infrastructure and the like. Much of this will be demand-driven, according to Mr Kell, as “green”
© The Economist Intelligence Unit Limited 2011

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case study

Qantas

Qantas, Australia’s largest airline, has been implementing carbonreduction strategies for about five years. Unlike many Australian
businesses, Qantas could not afford to wait for regulatory certainty

about a carbon tax. Spiralling fuel prices forced the carrier to examine
its fuel efficiency. “Our cost of energy—which is one-third or more
of our total cost profile—is a dominant aspect of our business,” says
Rob Kella, until recently the airline’s chief risk officer. “If you go back
seven years we were pursuing fuel-conservation strategies then and
looking at new equipment primarily because fuel was a high cost.
Emissions became a bigger issue subsequently and in many respects
just complemented the work we had already started on,” he says.
There have also been opportunities for Qantas to make
incremental improvements to its existing fleet. For example it
switched to lighter catering carts in order to lower the total onboard
weight of the aircraft. The major transformations will occur in a few
years time, however, with the introduction of more fuel-efficient
aircraft and alternative jet fuels that have a lower carbon footprint.
The financial imperative for fuel efficiency far exceeds the

punitive impact of any proposed carbon tax. Qantas’s fuel costs for
2010 exceeded A$3bn, says Mr Kella. By comparison, given that
Qantas emits around 4m tonnes of carbon per year, a tax of A$25
dollar per tonne would imply a total tax liability of A$100m. “We
started looking at fuel efficiency and aircraft design to do the right
thing for the environment but equally it’s to be smart from a business
perspective,” he says.
Aviation is one of the most energy-intensive sectors in the world.
Some 95% of airline emissions relate to the burning of aviation fuel.
Imposing a carbon price on Qantas creates a competitive distortion
since the firm competes with airlines from Asia and the Middle East
that have fewer emissions subject to tax or trading systems.
Therefore Qantas is hoping that any new carbon-reduction
regime builds in some transitional arrangements for the aviation

industry and some incentives in recognition of initiatives already in
place—especially given the work on cleaner aviation fuel.
“Government is asking for a response on pricing principles but
seems to be putting the cart before the horse,” says Mr Kella. “It is
creating opportunities for industry to participate but seems to have
taken a view of how to proceed before the consultative period has
begun. People are worried about the time they have to prepare.”

buildings, which require different methods of construction, are more easily designed and constructed
if they are requested by clients.
These anecdotes resonate with the survey results, where more than one-half of respondents
believe that cutting carbon emissions is a driver of process innovation, and is an opportunity to gain a
competitive advantage by creating new, or more marketable products (see Chart 3).
Innovation opportunity
Chart 3: Please indicate your level of agreement with the following statements. Rate on a scale of 1 to 5, where 1=Strongly agree
and 5=Strongly disagree.
(% respondents)
Strongly disagree 5
2
4
Strongly agree 1
3
Cutting carbon emissions is a driver of process innovation
26

37

22

8

7

Cutting carbon emissions is an opportunity to gain a competitive advantage by creating new, or more marketable, products/services
15
43
24
11

8

Cutting carbon emissions is an opportunity to find new clients in Australia
13
29

8

Cutting carbon emissions is an opportunity to find new clients internationally
15
22

33

17

29

21

Cutting carbon emissions is an opportunity to gain a competitive advantage in terms of cost reduction

11
22
29
Cutting carbon emissions is a necessity driven by government regulation
17
33

13

20

18

27

Cutting carbon emissions is a necessity driven by customer and other stakeholder demands/need to maintain reputation
7
31
31

17
21

6
11

Source: Economist Intelligence Unit

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Cleaning up
Australia’s readiness for a low-carbon future

Firms are a bit more phlegmatic, however, about whether cutting carbon emissions can help them
find new clients. On balance, they are also somewhat sceptical that cutting carbon emissions will give
them a competitive advantage in terms of cost reduction.

Risks from going clean
Almost three-quarters of respondents say compliance costs arising from new environmental legislation
is the biggest risk posed to their business by Australia’s shift to a low-carbon economy (see Chart 4).
This finding underlines the fear of a spike in operating costs due to higher energy prices and taxes on
carbon emissions. It also underscores the importance of policy clarity and regulatory transparency so
companies can start managing and mitigating these risks. At the moment, policy uncertainty appears
to be causing concern and hindering corporate strategy. Almost one-half of the respondents perceive
loss of competitiveness as a big risk.
Peter Burn, policy head at the Australian Industry Group, a non-profit cross-industry association,
does not believe that the additional ongoing compliance costs will be great. He points out that
one-third of Australia’s biggest emitters already measure and report carbon emissions under NGER.
Although firms incur significant costs to comply with the NGER, he believes that a carbon price that
feeds off that reporting regime should not be expensive to implement.
There will be additional compliance costs, says Mr Burn, if businesses participate in the Emission
Intensive Trade Exposed (EITE) scheme or other programmes aimed at offsetting any loss of
competitiveness. Both small and large companies may be involved. The EITE system has high upfront
costs but much lower ongoing costs.
In terms of implementation, a cap-and-trade scheme would be costlier because instead of paying a
tax, companies will have to acquire permits, expertise and any other know-how related to the permit
platform. Additional compliance costs would also be involved if the company were to buy carbon

offsets, such as forestry investments.
All things considered, however, Mr Burn believes that loss of competitiveness could potentially have
a much bigger impact on businesses than ongoing compliance costs.
Risky business?
Chart 4: What do you think are the biggest risks to your business posed by Australia’s shift to a more sustainable economy?
Select up to three. (% respondents)
Imposition of large costs through compliance with regulations
73
Loss of competitiveness
49
Creation of an uncertain investment environment
42
Risk of brand/reputational damage through non-compliance
27
Loss of strategic focus on enhancing corporate value
16
Enhanced supply-chain risk
15
Source: Economist Intelligence Unit

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Impact on competitiveness
Many Australian corporations worry that any national carbon pricing scheme could make them

less competitive internationally. Some have complained that this will ultimately lead to job losses
in Australia. Almost one-half of respondents feel that any carbon pricing must involve a global
agreement; they say Australia has no obligation to act unilaterally.
These critics say that any carbon tax will have a negative impact on all trade-exposed industries
because those firms will be unable to pass on the cost of the tax overseas, and will be forced to absorb
it. The end result, suggests Robert Poole, general manager, industry and government affairs at
Murray Goulburn, is that more manufacturing will be shifted abroad, as global corporations practice
environmental regulatory arbitrage. The net effect on carbon emissions worldwide will remain
unchanged. In fact, global emissions could even increase, if the company moves to a country that uses
a more emissions-intensive production process, risking so-called carbon leakage. “Fears about carbon
leakage are overblown but remain a powerful obstacle to the introduction of effective mitigation
policies the world over,” says Professor Garnaut.
Mr Poole believes that an international solution is critical since at present trade is highly distorted
by the fact that some countries price-in pollution and some do not. “If emissions reduction is the
appropriate response to address man-made climate change, then by definition if we don’t get the
major economies involved, we are not going to achieve the outcome we are seeking,” he says.
As with many companies, the dairy co-operative operates in a highly global competitive market
where it already faces restricted trade access and export subsidies. “We don’t want to see another
distortion in the already tough global dairy sector,” Mr Poole says.
The Australian government, led by Ms Gillard, says it is engaged in genuine consultation with tradeexposed, emissions-intensive industries. Nevertheless, the government has been forced to publicly
defend the consultation process, amid industry worries that the carbon price and compensation
package have already been decided. Similarly, the interviews conducted for this paper suggest that
many executives feel their voices are not being heard. “More work needs to be done on securing
investment certainty during the transition from a fixed carbon price to a cap-and-trade scheme,” says
one executive.

Impact on operating costs and profit
A national carbon price will inevitably have an impact on many aspects of business. Respondents
generally believe that a price on carbon will lead to higher operating costs, lower profits, and
weaker international competitiveness (see Chart 5). This reflects the fact that a tax is immediate and

unavoidable, whereas any future fillips to profitability or competitiveness are merely potential. Peter
Shields, who works in the economics and sustainability team at Macquarie Generation, a state-owned
power generator, believes that the firm will lose hundreds of millions of dollars with the introduction
of a carbon tax. It can pass on a fair portion of the costs but the tax could potentially wipe out all its
profits.

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Ups and downs
Chart 5: How do you think the introduction of a national corporate carbon tax will affect your company in the following areas?
Pick the most likely impact for each of the following variables.
(% respondents)
Improve

Operating costs
4

Stay the same

Don’t know

Deteriorate

33

62 2

Efficiency
21

62

16 2

Profits
9

34

56 1

Competitiveness within Australia
13

69

Competitiveness internationally
10

17 1

48

38

4

Brand value/reputation
43

47

9 1

61

8 2

Employee engagement
29
Innovation/investment into clean technology
56

32

11 2

Risk management
25

58

12

5

Transparency
23

61

8

8

Source: Economist Intelligence Unit

It is a similar story for Qenos, a plastics manufacturer. “Our production process is intrinsically
emissions intensive, as our operations require very high temperatures and large volumes of steam,”
says David Plunkett, general counsel at Qenos. “We have already taken steps to improve our energy
efficiency and therefore reduce our carbon emissions. Nevertheless, if a carbon price is introduced, and
we don’t get appropriate transitional assistance, our long-term viability will be threatened.”
Furthermore, a carbon price will dramatically change the dynamics in the energy sector and has led
to fears that electricity security will be compromised. As evidence, the opposition Liberal-National
coalition points to Professor Garnaut’s report, which it believes shows that the government’s carbon
policy would lead to brownouts and insufficient electricity production.
Balancing these detrimental effects, however, respondents to the EIU survey do believe that a
carbon price will benefit their business in some ways. More than one-half believe that it will boost
innovation and investment into clean technology, while 43% say that their company’s brand value and
reputation will be enhanced.
Several interviewees are concerned that proceeds from any carbon pricing scheme will not be used
to develop clean technology. The government has recently said that one-half of the revenues from its
proposed carbon-pricing scheme will be transferred to low-income households—probably through
credits and tax cuts—to compensate for higher electricity bills. This has fanned fears that there will be

insufficient funds to compensate polluters and for clean technology investments.
“While you don’t want to disadvantage Australian households, the government must make sure that
any additional revenue is invested in the most effective carbon-reduction measures,” says Mr Kella of
Qantas.
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Cleaning up
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Corporate preparedness for a low-carbon
future
Modelling the impact of carbon prices

A

bout one-third of Australia’s top companies are already assessed under NGER, helping explain
the survey finding that around the same proportion of respondents have modeled the impact
of different carbon prices on their business operations (see Chart 6). In essence, NGER provides the
framework for how a carbon tax or an emissions scheme would work. Once companies know what their
emissions are, they can assess liabilities and look for cost-effective carbon-reduction strategies.
Assessing the future
Chart 6: In your scenario planning, have you assessed or modelled the impact of different carbon prices on your business
operations?
(% respondents)
Yes
29
No, but we are planning to do so

33
No, no plans to do so
31
Don’t know
8
Source: Economist Intelligence Unit

For many interviewees, the cost of carbon is incorporated into all planning and all investment
decisions. However, one-third of respondents say they have no plans to model the impact.
According to AGL’s Mr Nelson, one-third of Australia’s companies measure energy efficiency
rather than carbon emissions per se, since energy consumption is the critical issue for them. The
sophistication of the modelling is really in proportion to how much energy they use. Smaller users
should focus on how efficiently they use electricity and gas, he says. Bigger users are probably already
efficient but they should explore abatement opportunities outside their sector, such as sourcing inputs
with lower energy intensity and hence lower costs in an emissions-trading environment.
Like many heavy emitters, AGL models the impact of different carbon prices on operating costs,
profitability and net present value over the next ten years and discloses it to shareholders. The
company decided several years ago to start investing in clean assets in order to become more
competitive in an environment where carbon costs are factored into fossil-fuel power generation.
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Cleaning up
Australia’s readiness for a low-carbon future

Similarly, for nearly ten years, all of Origin’s investments have been subject to a carbon-price
analysis. “Every time we make a new investment, build a new plant, or develop a new product we look
at the carbon cost,” says Mr McCamish. “It is built into everything we do much the same as the cost of

funding.”
Woolworths, a supermarket chain, factors a carbon shadow price into all areas of its business and
all potential investments (see Case study: Woolworths). It is important to understand how prepared
the business is for a low-carbon future, and to be ready to capitalise on potential opportunities, says
Armineh Mardirossian, the firm’s head of corporate responsibility.

case study

Woolworths

Woolworths, Australia’s biggest supermarket chain by revenue, is
targeting to cut its carbon emissions to 40% below “business as usual”
levels by 2015. In a bid to increase its energy efficiency as well as
reduce its carbon footprint, the firm continues to invest in low-carbon
technology for stores (mainly refrigeration) and transportation.
Relatively speaking, Woolworths is a moderate emitter. It has
a large electricity bill, however, and managing that is essential
in a low-margin, fiercely competitive business. According to
Armineh Mardirossian, Woolworths’s group manager of corporate
responsibility, the company is well prepared for the new carbonpricing scheme, having undertaken analysis of potential risks
and opportunities that may arise from a low-carbon economy.
Woolworths is driven by the need to pass on the carbon price and still
remain competitive, which means understanding which parts of the
supply chain can bear the cost increase.
“We have to remain competitive...so we have put every possible

scenario on the table and looked at what that might mean for us.
It’s an opportunity to say what is right for the business, which
investments make sense and which areas can bear an additional
cost,” says Ms Mardirossian. “We do factor in a shadow carbon price

into future investments.”
Regulatory uncertainty has hampered decision making. Ms
Mardirossian says that an appropriate carbon price should drive
more investment into low-carbon technologies—investments that
currently do not meet Woolworths’s return-on-investment hurdles.
The imminent carbon tax has, however, already led to some
process improvements at Woolworths. In the course of setting
carbon-reduction targets, Woolworths realised that its various
business engineering divisions across the group had many different
strengths. It subsequently centralised all the engineering divisions
in a single unit, which is now responsible for shadow pricing,
investment evaluations, pilot projects, and other initiatives that
require coordination across functions. This has improved decision
making in the group.

Reducing carbon footprints
Australian corporations are at different stages of maturity in their efforts to reduce their carbon
footprint. More than two-thirds of firms surveyed have some carbon-reduction strategy in place (see
Chart 7). Almost one-third, however, are concerned only with their own business. Almost 40% of
companies, meanwhile, have strategies that go beyond their direct operations. More than one-fifth of
firms appear to be very well prepared, with a carbon-reduction strategy that covers external partners
and their supply chain.
These findings indicate that Australian firms are at many different stages of readiness for a lowcarbon future. Some have developed thorough, holistic strategies; many have not done much at all,
perhaps waiting for concrete legislative changes before acting. Many firms may also be in the middle of
a multi-year, multi-staged process that begins with their own business.
© The Economist Intelligence Unit Limited 2011

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Cleaning up
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Smaller footprints
Chart 7: Does your company have a strategy in place for reducing its carbon footprint?
(% respondents)
Yes, it covers the whole business, including external partners and supply chain
21
Yes, it covers the business, including our supply chain, but not our external partners
15
Yes, it covers the business, including our external partners, but not our supply chain
3
Yes, it covers only our own business
31
No, but we are currently developing one
17
No, and we have no plans to develop one
11
Don’t know
2
Source: Economist Intelligence Unit

The survey results suggest that bigger companies have invested more into preparing themselves for
a low-carbon future. For instance, amongst firms with more than 10,000 employees globally, 34% have
a carbon-reduction strategy in place that covers the whole business, including external partners and
supply chain. This compares with just 15% of firms with 10,000 or fewer employees globally.
This finding indicates that larger firms feel a greater imperative to prepare for a low-carbon
future. This could be because they worry more about the possible impact of a carbon price on their
profitability. Large firms also have more resources to dedicate to a carbon-reduction strategy. Smaller
firms, by contrast, may have less time and money to invest in planning for an uncertain low-carbon

future.
Susie Smith, manager for climate change and sustainability at oil and gas company Santos, says
that the company has been proactive in trying to understand opportunities and risks in a low-carbon
future: analysing the possible pricing impacts on their business, identifying costs of abatement and
exploring projects that Santos can implement to reduce its carbon emissions. “Australia’s abundant
reserves of natural gas provide a lower-carbon alternative to coal, and have the capacity to generate
substantial employment and investment opportunities,” she says.
Qantas has also introduced enterprise-wide initiatives to reduce emissions. Carbon reduction falls
under the purview of the chief risk officer since emissions are classed as both a strategic and financial
issue. “We are doing everything we can to understand the consequential aspect of the price on carbon
from a financial perspective, as well as the economics of being able to pass some of that through,” says
Mr Kella.
Mr Burn of the Australia Industry Group says that while Australia’s bigger companies clearly have
strategies in place, many manufacturers are not managing their footprint as well as they could. Some
are still putting off costly investments until they really need to spend the money. Mr Burn believes that
even larger firms could be doing more to assess the impact of a tax throughout the supply chain and to
identify vulnerabilities.
The reason they are moving slowly, says Mr Burn, is that they are assessing the likelihood and
materiality of a carbon price against the cost of doing something about it. “They’re making very
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Cleaning up
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rational bets and looking at different scenarios. If the carbon tax has little impact on them they won’t
make a big capital investment.” Many executives are reluctant to implement these strategies until
legislative changes will allow them to make a better judgement about the return on the investment.

This also highlights the carbon-pricing dilemma facing the Australian government. Price carbon too
high, and it risks undermining the viability of some businesses; price carbon too low, and it may not
have much impact on corporate behaviour.

Proactive planning
Craig Roussac, general manager of sustainability, safety and environment at Investa, a commercial
property owner, believes that many Australian companies are focussed on short term energy-reduction
strategies—simple changes that save them money—rather than a long-term plan to set their business
on a clean trajectory. He views a close relationship between the sustainability manager and the other
executives as a sign that a firm has thought through its business strategy and started positioning
itself for the long term. “There are no tensions between executives because financial strategy and
sustainability strategies are aligned,” he says. Almost one-half of the survey respondents believe there
is a link between financial performance and carbon intensity reduction in their respective companies.
Origin has plenty of small and medium-sized customers who are fairly proactive. Others,
however, are not. “It’s not because they’re ignorant that they don’t make those preparations,”
says Mr McCamish, “It’s because they are dealing with other more pressing issues that have greater
shareholder value attached to them, such as wage rises.”
Only 11% of firms do not have a carbon-reduction strategy in place and have no plans to develop
one. This is often because they are small, and do not consider it affordable, practical or necessary. This
suggests that there may be a minority of firms who will never make significant efforts to reduce their
carbon footprint, even as Australia transitions to a low-carbon economy.
Amongst firms that do have a carbon-reduction strategy in place, the majority say they were driven
to develop it by the desire to do the right thing ethically (see Chart 8). This is seen as a more important
driver than the need to comply with laws and regulations or the need for corporate risk management.
However, this may not be an entirely accurate picture of the motives driving efforts to reduce carbon
emissions. Our interviewees suggest that the desire to reduce energy costs—or, in other words, to
improve energy efficiency—is often important. “Energy is a massive expense and all forecasts point
towards it becoming more expensive,” says Mr Poole of Murray Goulburn. “We think it is incumbent on
large energy users to have a very clear strategy on how they source energy in the future.”
Murray Goulburn has made reasonably good progress in improving the efficiency of its processes. For

example, the dairy co-operative has pioneered the use of LNG in heavy transport, reducing transport
costs and associated emissions.
Many large energy users are keen to implement large energy-efficiency projects. AGL and Qenos,
for instance, have entered into an agreement to build a co-generation facility at Qenos’s Altona plant,
replacing a steam boiler with one that uses a gas turbine to produce electricity and then captures the
“waste heat”, a by-product of power generators, to produce steam. The plastics manufacturer expects
to cut carbon dioxide emissions associated with the production of polyethylene by 100,000 tonnes per
© The Economist Intelligence Unit Limited 2011

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Cleaning up
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Ethical behaviour
Chart 8: What have been the primary drivers for developing this strategy? Select the top three.
(% respondents)
Desire to do the right thing ethically
54
Need to comply with laws and regulations
46
It is a part of ongoing corporate risk management
46
Need to meet demands of customers
26
Desire to discover new markets
20
Need to upgrade the company’s image
19

Need to improve the bottom line
14
Need to support recruitment and retention of employees
9
Response to pressure from NGOs and citizen lobby groups
7
Response to criticism in the media
2
Other, please specify
3
Source: Economist Intelligence Unit

annum. “Not enough though,” says Mr Plunkett of Qenos. “The carbon price will still bite.”
The desire to boost profits has driven Investa’s four-pronged plan. Its corporate strategy was to
reduce risks, reduce costs, focus on building short-term relationships so as to secure deals, and then
progress to longer-term relationships—becoming a business partner of choice for larger institutional
tenants keen to be associated with more sustainable property. By reducing the carbon footprint of its
buildings—through reduced energy use—Investa has managed to lower costs and improve its financial
performance.
“The less money we have to pay, the higher our net operating income from the building, the greater
the value of the building. And tied to that is the awareness from tenants who are attracted to clean
energy properties. So you get revenue-side uplift and expenses fall, so the net position is stronger,”
says Investa’s Mr Roussac.

Targeting targets
The majority of companies have specific, measurable targets for reducing their carbon footprint in
terms of overall energy usage, staff practices, green building technology, core products and services,
and new investments (see Chart 9). In some ways, these represent the low-hanging fruit of carbon
reduction. Less than one-third of firms have targets for customers, partners or suppliers. This suggests
that these are areas that come later in the corporate carbon-reduction lifecycle. This also resonates

with the findings from Chart 7.
After a period of aggressive target-setting, however, some of Australia’s companies have ditched

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© The Economist Intelligence Unit Limited 2011