Policy uncertainty hindering corporate Australia’s low-carbon strategy

Press release

Press enquiries for Economist Intelligence Unit:

Joanne McKenna: +44 (0)20 7576 8188 or [email protected]

For immediate release: Monday, May 16th 2011

Policy uncertainty hindering corporate Australia’s low-carbon strategy

Current uncertainty around Australia’s future environmental policies is hindering the development and implementation of corporate carbon-reduction strategies, according to a new survey of Australian companies. Some 64% of respondents to the survey consider the unclear regulatory environment the primary barrier to making further progress on reducing carbon emissions. This is one of the key findings of Cleaning up: Australia’s readiness for a low-carbon future, a new report from the Economist Intelligence Unit, commissioned by GE. The report is based on a survey of 131 Australia-based senior executives who are familiar with their companies’ sustainability strategy.

The policy uncertainty has already hampered corporate strategy and decision-making, particularly with regards to potential new investments in Australia. Some firms, for instance, fear 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.

“It is important for Australia to resolve the current impasse over carbon pricing,” says Sudhir Vadaketh, editor of the report. “This will allow corporations to design more effective long-term strategies.”

Key findings of the report include:

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. 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. The survey shows 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. Some 53% 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, 56% of the respondents believe that a corporate carbon tax will improve innovation and investment in clean technology. Some 38% 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, 73% of respondents say a major risk is added costs arising from compliance with regulations. In addition, 38% of respondents believe that a carbon price will harm their international competitiveness unless their foreign counterparts are subject to the same requirements.

There is little corporate consensus about the impact of climate change. Surprisingly, many Australian executives 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 changes in corporate strategy or behaviour. Respondents are also split on whether the opportunities created by introducing a carbon price will outweigh the risks in the long run.

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 the 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, and are eager for more details about the scheme.

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

is available free of charge at

http://digitalresearch.eiu.com/cleaningup/report

Press enquiries

Joanne McKenna, press liaison, +44 (0)20 7576 8188; [email protected]

Sudhir Vadaketh, editor, +65 9652 6119; [email protected]

About the surveys

The research involved surveying 131 Australia-based 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.

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.

About the Economist Intelligence Unit

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