Climate finds a compliance friend
Climate finds a compliance friend
March/April Edition, 2008: Climate change is well and truly on the agenda. With the inevitable emissions trading scheme on its way, the Government first needs a means to effectively measure the output of Carbon from an organisation– it’s a new line of work presenting some unique data management challenges.
The Federal Government has made a commitment to reduce Australia’s carbon emissions by 60 percent of 2000 levels by the year 2050. It’s an ambitious proposition, and one that can only be achieved through regulatory controls that put the responsibility directly back on those who burn the fuel.
Already, many major Australian organisations are thinking ahead as to how a Carbon trading initiative may change the nature of their operations. Penny Wong, minister for Climate Change and Water told an Australian Industry Group meeting in Melbourne the initiative, “will constitute the most significant economic and structural reform undertake in Australia since the trade liberalisation of the 1980s.”
But first, Australia needs some decisions as to who exactly should be required to provide information on their Carbon output and when. Some definitions would also be handy, anything that can put in place the foundations for an effective reporting structure.
In July 2006 the Council of Australian Governments determined a ‘single streamlined reporting system’ that reduced red tape to be the preferable way forward. Currently the government is receiving submission on its recently released National Greenhouse and Energy Reporting System, Regulations Policy Paper. It’s a process proving the system is one step closer to the reality of corporations reporting on greenhouse gas emissions and their actions to reduce output.
The scheme is a move forward for corporate social responsibility and the environment, but the ramifications and changes set to cloak businesses are extensive. It’s also not so far off - those initially required to reports on their emissions and energy will need to have their first submission completed by the 31st October 2009.
These registered corporations will be required to keep records for seven years, while no regulations have as yet been specified as what type of records will be kept, the Government is expected to determine these later down the track. However already it’s likely reporting entities will be able to chose between keeping paper or electronic records, as long as they are accessible in the future.
A market for permits will also be developed, with a system of trading later set to impact the reporting and auditing structures of organisations. The trading scheme is set to commence in 2010, giving the government a few more years to get organised and businesses the time not only get serious about climate change, but also their strategies for dealing with it.
So how prepared are Australian businesses? According to Martin Tolar CEO of the Australian Compliance Institute, greenhouse reporting issues will affect most companies, yet the majority are not even aware of what it’s going to mean.
Knowing this, Tolar believes is best putting the onus of responsibility on those who know best: “It’s our view that the people responsible should be in the compliance area. They’re already good at reported externally to government agencies on a whole range of issues,” he says.
Paul Glover, senior business consultant in Emissions Management solutions at LogicaCMG says depending on the complexity of a business, typical structures will need to change. “For some it will be another administrative burden their business will need to undertake,” he says. “For others who already have appropriate structures and systems in place, it should be a relatively straight forward process.”
Glover believes even organisations not at the top of the hit list required to report should start thinking about what changes they might need to make in the future. “If I was them, I would be starting to think about what business processes and underlying systems I need to put in place to effectively mitigate my risk associated with reporting under this scheme.”
Carbon in business may start as a compliance issue, but Glover believes it will extend out to technology and also the financial arm of a business, especially under a trading scheme where permits may directly affect the bottom line. “You will then also have your traders involved, if you have a certain amount of permits and they don’t quite cover you exposure then you need to go out into the market and acquire those permits to match up your obligations. It’s a financial issue,” he says.
“The issue is going to affect pretty much every factor of the business,” continues Glover. “Having a system to underpin this is crucial.”
It’s not just carbon trading that looks set to impact governance in an organisations, but also those ‘green’ credentials popular with the marketing department. The Australian Competition and Consumer Commission have released a discussion paper regarding misleading claims by some companies looking to enhance their ‘greenness’ of their products and services. This, says Tolar, will be an issue for compliance people to manage, particularly in the areas where marketing has been so enthusiastic in making claims of ‘carbon neutrality.’
The current calculations behind carbon output are by no means a perfect science. A major current problem is that there are still no official standards in place and therefore no black and white answers as to what ‘carbon neutrality’ actually is.
“When those socially responsible comments are made to gain market advantage, compliance people need to be across all this to ensure these claims can be upheld. There’s a risk mitigation and a brand management element involved,” says Tolar. “The question ends on whether compliance becomes part of CSR or CSR becomes part of compliance.”