The limits of government

Efforts to reduce the damage big business causes to the environment centre around carbon dioxide emissions trading, with the idea that market forces will encourage businesses to clean up their act and so help rein in global warming. But Martin Croft discovers flaws in the plan

Diamonds may be a girl’s best friend, but industry is more concerned with another kind of carbon – carbon emissions.

Carbon dioxide – CO2 – is a major component of greenhouse gases, and there are a range of schemes either already in place or proposed to cut CO2 emissions or lock CO2 up (for instance, by planting trees).

The European Union set up an Emissions Trading Scheme (EU ETS) two years ago, which has this declared a success. Similar schemes exist around the world for major industries such as power generation. Such schemes allocate emissions quotas to companies; they can sell any excess allowance they do not use, but if they go over their allowance, they have to buy more.

Figures released earlier this month by the Department for Environment, Food and Rural Affairs (Defra) show that in 2006, UK companies covered by the EU ETS scheme emitted 251.1 million tonnes of carbon dioxide (MtCO2), compared to a cap of 217.3MtCO2.

Defra published provisional CO2 statistics in March showing a 1.25% increase in overall CO2 emissions in the UK. Defra blames this increase on unusually high prices for gas, which meant the power sector had switched from gas to coal. Coal-fired power stations emit about twice as much as gas-fired power stations per unit of electricity generated.

The UK Government plans a massive extension of the idea of CO2 quotas. In its Meeting the Energy Challenge White Paper, it proposes a mandatory national scheme based on similar principles to the EU ETS – the “Carbon Reduction Commitment” – to require large commercial organisations to reduce their emissions. This will include all businesses that usually spend more than £500,000 a year on electricity and will include between 2,000 and 5,000 organisations.

The idea is that market forces will encourage businesses to clean up their act, cut the amount of carbon they release into the atmosphere and so help rein in global warming. Many businesses have already begun to take steps to cut down on their environmental impact – and some are trumpeting their “green” initiatives in press releases and advertising.

There is also the possibility that carbon allowances will be extended to ordinary people. This looks less likely at present, however, as even environmental campaigners accept the proposed schemes would be unworkable given current UK attitudes to the spread of the so-called “surveillance society”.

Data collection
Even if people did accept the levels of data collection that would be required to monitor everybody’s carbon footprint, the resources necessary to do so would be hugely costly.

Alongside proposals for a carbon allowance and carbon quota exchange, the idea of carbon offsetting is popular, with various schemes that supposedly allow you to balance the carbon released by flying, for instance, with tree planting. Indeed, back in January, media attention forced Tony Blair to announce that he would offset the CO2 created by his family’s Christmas flight to Florida, at a cost of £89.82.

It is estimated that the global carbon trading industry is worth about £15bn, and carbon offsetting looks likely to become a major business in its own right. In December, ABTA, which represents 70% of British travel agents, started offering a carbon-offsetting scheme, as did internet travel company Lastminute.com. The Lastminute.com homepage now sports a Carbonwise banner ad. Click on it, and you are taken to a page promoting carbon offsetting, with details of the schemes. Overall, Lastminute says 10% of customers offset last year, while on December 17, 2006, 15% of all Lastminute bookings were offset.

Dorothy Mackenzie is chairman of branding consultancy Dragon Brands. In the 1980s, she was one of the first marketing industry experts to look at the growing green movement in terms of what it means for brands and marketers. She agrees that carbon offsetting could be seen as just a PR stunt for a company, but she argues that while carbon offsetting may be good PR for a company, it is also good PR for the need to take action against global warming.

Mackenzie adds: “There’s no harm in brands talking about the actions they take to reduce their carbon footprint. The more people see messages like that, the more they think about it.”

Julia Hailes is co-author of the original Green Consumer Guide, published in 1988. She argues that “the concept of carbon offsetting is slightly specious, because none of the schemes actually offset the carbon you produce right now – the best of them just promise to offset them later.” In other words, if you plant trees now, it will be some years before they have “locked up” the equivalent to your carbon emissions.

Industry should certainly be trying to cut their carbon emissions, the experts say. After all, while it may be more expensive in the short term to switch to renewable energy sources, it should be cheaper in the long term – particularly if increased scarcity starts to drive up the cost of fossil fuels.

Sue Welland co-founded carbon offset and climate consulting business The CarbonNeutral Company in 1997 after a career in marketing. She says/ “The impact of climate change is clear, and there are signals that consumers want to vote with their pocket.

Bottom line
“And business has recognised that CO2 emissions will cost them money, so managing those emissions down is good for bottom line as well as reputation.”

But while it certainly appears that businesses will take to the idea of carbon allowances and carbon trading in the same way as they have already begun to use carbon offsetting, many green experts question whether consumers will accept it in the near or even medium term.

Hailes cannot see how carbon emission quotas and carbon exchange schemes can possibly be extended to include ordinary citizens in the next few years, given attitudes to issues of surveillance, data collection and data retention.

Certainly, global warming is very much in -consumers’ minds right now, but, as Mackenzie says: “People will recycle, they will buy local, they will switch to energy-saving light bulbs. But they won’t cut back on their short-haul holiday flights!”

By Martin Croft

Who’s in charge of corporate ‘green’ strategy?

The “green” issue is driving the social and environmental agenda for big corporations and it is almost impossible to find a business today that does not express a commitment to corporate social responsibility (CSR). The huge sums of money being poured into CSR have ensured that it is now more than just a “feelgood” exercise set in motion by the internal communications department.

But if CSR is so important to companies, who is actually leading the strategy? The answer is far from clear.

Last week’s announcement by General Electric about how it is reaping the benefits of embracing “environmentalism” and is on track to double its revenue from clean technology to £20bn over five years, shows how CSR is important both strategically and financially to a business. In many companies, CSR falls under the remit of the marketing department as a way of creating customer loyalty and generating profits.

“Not in every situation,” says director at Corporate Citizenship Company Andrew Wilson, who explains that CSR tends to be company specific. For instance, a business that operates in a heavily regulated industry such as tobacco could have CSR sit within the government affairs department, while a packaged goods company that wants to communicate its level of responsible business behaviour will find it more efficient to include the function as part of its marketing.

However, Wilson adds that businesses have a dilemma as social credentials have an increasing influence on consumer behaviour. “There is a huge audience interested in a company’s CSR activities today, including investors, consumers and even potential employee. There can be no standard approach to this concept.”

Packaged goods giant Procter & Gamble does not even use the term, instead preferring “sustainability”. P&G’s director of global sustainable development Dr Peter White says: “Sustainability for us is not just about marketing or corporate communications. It is led by Susan Arnold, the president of global business units, and therefore a core business strategy driven by the corporate DNA and is about improving the environmental quality of our operations and our products.”

Head of communications at brewer Coors, Paul Hegarty, does not believe that corporate communications has the expertise to have sole responsibility for CSR. “The strategy includes legal, communications, human resources and social issues,” he says.

At Coors the strategy is led by a business services director who sits on the management board. “Businesses have started having conversations about how beneficial CSR can be for their brand strategy and investing in a robust programme could do more than just help the environment and please the consumers,” adds Hegarty. He says it saves the company money and improved efficiency leads to improved profitability.

However, White says that although P&G has always embraced sustainable development as a potential business opportunity, its research has largely shown that consumers’ buying behaviour is not always influenced by green issues. “P&G has always invested in initiatives like compact detergents or two-in-one shampoos and conditioners,” he adds.

Many believe that CSR as a concept continues to be unformulated, with varying definitions. The consensus, however, remains that consumers will still reward the companies and brands that give something back to the community.

By Sonoo Singh

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