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A GROWING CONCERN

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Foreword

Arup is delighted to be sponsoring this report.

Reducing carbon emissions makes good business sense, just as eliminating any form of waste does. As the price of carbon and the cost of emissions rise in the future, organisations will concentrate more time and effort reducing their dependence on fossil fuel. Our economic and environmental needs will converge.

But climate change is not just about carbon emissions. While these may be the most visible and in some ways comprehensible symptom of the threat we’re living under, lack of useable land, high quality water and even food are already creating conflict across the world. Indeed, there’s a danger that, in solving the carbon crisis, we create other crises elsewhere. Agricultural land is given over to bio-fuels: we rob Peter to pay Paul.

Solving these even more far-reaching and complex problems isn’t something that any one organisation can do but will require the co-operation of many. There is therefore a limit to what the market can achieve by itself: while organisations compete they cannot collaborate. At the same time, what we don’t need is a United Nations of business.

We think there’ll be two critical success factors here. First, we need organisations able to identify practical solutions for reducing energy demand and shifting to zero or low-carbon technologies and economies with a long-term view; organisations – like Arup – whose governance and ownership structures are capable of taking a medium to long-term view, balancing today’s economic imperatives with the ability to make investments over decades if required. Secondly, business needs to show more leadership. Economics and environmental needs may be closer together than ever before, but we still need individuals and organisations who are prepared to say that we all have to adapt to living in a more fragile world. That’s what Arup is trying to do: the right thing.

David Singleton, Chairman, Global Infrastructure Business, Arup

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Contents

Executive summary 7

Introduction: A changing agenda for business? 8

What’s pushing carbon reduction up the corporate agenda? 12

Putting confidence in capitalism 15

A more fragile future 22

Contributors 26

About the author 27

About the MCA 27

About the sponsor 27

Note on methodology and sample

The information in this report was based on a survey of around 200 public sector and business leaders in September 2007, as well as interviews with management consultants and clients. Many of the people surveyed are experts in environmental sustainability and carbon management. A full contributors list is available on p.26.

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Executive summary

Carbon management has gradually been moving up the corporate agenda, driven by a combination of actual and threatened regulation, the anticipated growth in consumer pressure and an underlying desire to cut costs.

But actual progress is undermining the ambitious and But climate change is not simply a question of reducing carbon. well-intentioned goals organisations are setting themselves. There Already there are signs that we face a far more fragile future in are many reasons for this – many of which would apply to any which the plentiful supply of natural resources can no longer be substantial programme of change. However, fundamentally, the cost taken for granted, as well as other concerns such as the of pollution is not yet high enough to focus the attention of senior acidification of our oceans, the consequences of which could be managers; reducing carbon emissions is still just one of many things even greater than issues of climate change over time. In this jockeying for funds and commitment. This is not as depressing at it context, the familiar tools of capitalism may be of less help and sounds: by raising the price of pollution (in reality, the cost of carbon), more fundamental change will be required. At the heart of this lies it may be possible to galvanise organisations to pursue economic and the need for greater collaboration between organisations, but that environmental goals with equal determination. will mean over-turning some of our most cherished and respected ways of doing business.

Introduction: A changing agenda for business?

Cadbury Schweppes offsetting as a last resort, preferring to concentrate on activities where it can directly make the most impact. Cadbury Schweppes’ environmental programme has been in place for around 15 years. In July 2007, the company launched its “Purple “We don’t have all the answers but by working with others, Goes Green” vision on climate change, setting itself targets of including obtaining advice from experts, we are confident that we cutting its net carbon emissions by 50 percent in absolute terms by will achieve our targets.” 2020, reducing excess packaging and managing water use in its Fujitsu manufacturing processes. “Absolute targets are more challenging, we’ve promised to reduce our absolute carbon emissions which “In the UK alone, our electricity bill is £10 million a year,” points means that even if we grow as much as we hope to in the future, out Juliet Silvester, Head of Environmental Programmes in the we will still produce less CO2 than we do today - we’re the first UK,“so looking to reduce this made economic as well as food manufacturer in the UK to set this level of absolute targets to environmental sense.” do this,” says Lisa Huggins-Chan, Group CSR Manager, Cadbury Fujitsu’s first step was to look at the simple steps it could take to Schweppes. ‘Relative’ emissions refer to emissions per tonne of increase energy efficiency – monitoring usage more carefully, finished product. In theory this figure should fall as a company uses turning the air-conditioning down when everyone had gone home energy more efficiently and as it makes and sells more product. – something that has already saved the company £750,000 this Purple Goes Green is a global programme involving the entire year. “But this is just the starting point,” says Silvester. “We’re now business, and part of Lisa Huggins-Chan’s role is to provide thought working with the Carbon Trust on its carbon management leadership, benchmarking information and to ensure that the programme. We’ve carried out an initial scoping study and are now targets for lowering carbon emissions are fed into the company’s working on a more comprehensive survey to identify long-term business performance contracts. “We also have to change initiatives. We want to be in a position where we understand our behaviour,” she says,“which we’re trying to do with a combination footprint, what’s included and what’s excluded. Our data-centre of using targets themselves, encouraging employee advocates to accounts for quite a large proportion of our fuel bill and if we grow, help ‘green’ our sites, doing things that get people excited, and then our energy consumption will grow too. We also have a large raising awareness. There have to be a lot of different tracks of number of people who travel a lot and this is something else we work, and, because we’re such a large organisation, with business need to reduce; we have to help our employees understand the units in many parts of the world, people like me at the centre can impact they have as individuals. Finally, we are looking at trying to only ever kick-start and support the process. It’s really our buy our energy from cleaner sources: in the first instance, from businesses that will drive this forward through their actions.” British Energy because of their nuclear component, but we’re also looking to install a wind turbine at our new data centre which we Indeed, the scale and duration of the programme are some of its hope will reduce our fuel bill by 10 percent. The one thing we don’t key challenges. “There were months of planning before the July want to do is offset. Offsetting makes it too easy for organisations launch,” says Lisa,“and this continues today as we work out the to claim they’re carbon-neutral, and to throw money at the detail behind the tracks of work and specific projects around the problem without getting the actual problem fixed. It has world. A programme such as this has to be well-managed and allowed people to jump on the carbon reduction bandwagon executed, and be supported by the people at the top of the but not do as much as they could to resolve the issue. No organisation if it’s to succeed. As we do this, we will continue to organisation can be genuinely carbon-neutral but we can try to maintain that sense of a burning platform.” reduce our fuel consumption.” The company says that it will achieve a 30 percent reduction by “Legislation will lead companies to take more of these types of using energy more efficiently, switching from carbon intense fuels initiative, but Fujitsu has been concerned about its environmental to ‘cleaner’ fuels like natural gas, using renewable energy and a impact for a long time, largely because Japanese customers are range of technologies, and by better building management more clued about this issue than they tend to be in Europe, but systems. They are confident that they’ll be able to work out where also because rising fuel bills affect our bottom line. We’re trying to the remaining 20 percent will come from and part of this reduction run a sustainable business in every sense.” will come in part from offsetting. Cadbury Schweppes will use

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Government Office for the South West The water industry

Phil Harding is a senior policy adviser on climate change and Change is afoot in the water industry. Regulation – in the form of a resource efficiency for the Government Office for the South West new sustainability duty – has pushed environmental issues even (GOSW), the regional arm of Whitehall that works with key regional further up the corporate agenda. “To be fair, the greatest agencies to deliver key government policies and programmes. “Our investment in this sector has always been associated with asset aim is to make the South West a better place to live and work,” he stewardship and companies have always responded to changing says,“and clearly an important part of that is to ensure that regulation,” argues Mackenzie Newnham at Turner & Townsend, businesses and communities here are energy efficient and thus who has been working with the sector for 10 years,“but now there’s reduce their carbon footprint.” a step-change in their thinking.”

That’s something Phil and his colleagues have been working on for Carbon footprints aren’t only being calculated, but regular reviews years. Although much of their work programme has been of progress in reducing emissions are being incorporated into the transferred to the Carbon Trust, GOSW still takes an active interest companies’ business plans. “Typically this starts with costing the in helping to influence consumer behaviour and raise overall operational footprint,” says Mackenzie,“but companies are going awareness of the impact of climate change. “We’ve had some on from that to develop a full understanding of their carbon spectacular success,” he points out,“for example, helping a major footprint, deciding how to set the boundaries and what’s in and utility cut its energy bill by £16 million. We’ve also gathered our what’s out of the supply chain. The next step will be a gap analysis, experience together into a guide – “Resource Efficiency and establishing a common approach which the regulator finds Corporate Responsibility – Managing Change”– which was acceptable. Some companies are going further and intend to launched in 2004 (on www.oursouthwest.com). More than 75,000 look at how they deal with waste – the whole idea of the closed printed and electronic copies have been distributed and it’s life-cycle loop which is evolving in Europe. How do we separate out recommended reading by the Environmental Protection Agency in different kinds of waste, create energy from it? How can we turn the US!” some types of waste into biodegradable compost afterwards?”

Like the organisations it works with, GOSW has a clear order of The industry is, she believes, keen to develop a longer-term strategic priorities when it comes to energy efficiency. “We begin with vision in order to understand its role in meeting carbon dioxide cutting waste,” says Phil,“then using alternative, renewable energy targets. “The industry is regulated to be efficient. Their license sources. We would only do – and recommend – carbon offsetting obliges them to try and cut the amount of water we consume, and as a last resort after reducing waste and replacing brown energy that’s always been a paradox given that consumption drives with green. We call this the low carbon hierarchy “REDUCE (cut out revenue. The regulatory framework is focused on keeping costs to waste) – REPLACE (replace brown energy with green where customers down. That’s made the UK water industry world-class in possible) – NEUTRALISE (offset the remaining unavoidable CO2 terms of cost and water quality, and the level of investment has emissions)”. But the main focus for us is education and trying to been very high. However, now the government and regulator need change the way individuals behave. Alongside climate change to provide the right incentives to develop low-carbon approaches.” itself, falling oil production and rising oil prices is another major Mackenzie is confident, too, in the ability of the industry to respond factor affecting world economies as we enter “peak oil” – when the to such a change in direction. “The industry has long worked co- maximum rate of the global production of oil has been reached. operatively on research projects and companies will step forward Energy has been too cheap for too long, and the UK, like the rest of where they think they have best practice. There’s always been a the planet, is living beyond its environmental means. The media culture of sharing information, and that’s going to be a huge has done a good job of raising awareness, but the challenge now is advantage as the industry deals with climate change.” to ensure that that translates into action. Already, we’re finding that, because they’re very conscious about their environmental impact, our staff are happy to endorse the drive we have to improve our own energy efficiency. Indeed, many of them wouldn’t want to work for an organisation that wasn’t responding to this issue.”

Environmental Monitoring Services their efforts, although as a sole activity it is again just treating a symptom, he believes:“It’s a bit like the early days of CSR (CR now), EMS helps organisations manage their compliance, including when the only organisations talking about this were those who monitor and reduce their environmental impact. “The new Energy badly needed to improve their reputation. CR has now become part Performance in Buildings Directive (EPBD) has been concerning a of mainstream business (85 of the FTSE 100 providing full reports in lot of businesses recently,” says Greg Davies, EMS’s Head of Service 2006), and prudent environmental stewardship (including various Development. From April 2008, this sees a phased requirement for forms of carbon management) will similarly become an accepted all commercial buildings to be certified from an energy point of part of business. There’s a whole host of environmental issues that view, much in the same way that we currently get energy ratings need to be put right, and people have to start somewhere.” for electrical white goods. There’ll be a set methodology introduced for calculating the intrinsic energy performance of a A survey by the MCA for this report, carried out in conjunction with building, comparing that to a benchmark of what might be Arup, highlights the extent to which environmental concerns, and expected, and an obligation to improve its efficiency whenever the issues linked to sustainability, have become part of the mainstream building is refurbished (subject to size).” business agenda. Asked how important it was responding to climate change five years ago, almost two thirds of respondents Although demand for its services is growing as a result, such said that it wasn’t one of their top ten priorities (Figure 1). Asked legislative changes don’t necessarily make for an easy life:“We the same question about today, more than 70 percent said that it is already have people who have gone through part of the training for (Figure 2). Indeed, 36 percent said it was among their top five most these changes,” says Greg,“but as the decision has not yet been pressing concerns, and 67 percent agreed with the statement “the made on how the independent assessors (another article within attention we, as an organisation, pay to climate change has the Directive) will be accredited, we are all still just waiting.” increased dramatically in the last five years” (Figure 3). Nor is EMS’s role confined to this one area:“We help organisations Figure 1: How important was responding to climate change in your manage their buildings,” Greg continues,“and that means our organisation’s priorities five years ago? remit is broader than energy. Although heating and lighting can typically account for three quarters of a building’s energy use, waste is also a significant contributor environmentally.While most Our top priority 1% people are aware of the 3R’s (reduce, reuse, recycle) they often forget the waste hierarchy also includes “eliminate” and “dispose” at either end. Organisations that look to stop waste entering the One of our top 5% building, through engagement with their departments and five priorities supplies, tend to be far more effective in the long term as they are One of our top treating the cause, not the symptom” 16% ten priorities In Greg’s experience, most offsetting is the domain of very large organisations:“If we’re looking at carbon as a commodity, then the Not one of our top 61% significance of the market can only grow. Despite the relatively low ten priorities cost of carbon for emissions trading currently, proposals such as the Climate Change Bill and awareness of carbon footprint and Don’t know 17% offsetting will continue to maintain a profile. So far, the low cost of carbon has allowed people to focus on largely in-house initiatives 1 4 5 6 7 8 9 1 3 0 2 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % and turn to their energy suppliers for advice, but they’re going to % % have to go beyond this to uphold their future commitments and Percentage of respondents involve other organisations in their supply chain.” In this context, carbon management and offsetting may help people concentrate

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Figure 2: How important is responding to climate change in your “Organisations have become very interested in the whole green organisation’s priorities today, compared to five years ago? agenda,” says LCP’s Jeremy Hammant. “For the first time this year, we had a client who wanted to have a positive environmental impact while also improving the efficiency of their supply chain. In Our top priority 6% some ways, it was a conventional supply chain management project – in this case, to reduce packaging – but the business case for it also highlighted the anticipated environmental benefits. It’s One of our top 30% five priorities the first time we’ve seen both aspects combined in a single business case, and it’s indicative of the way business is starting to move.” “There’s a massive amount of activity compared to ten One of our top 35% ten priorities years ago,” says Michael King at Atos Consulting. “Companies in all sectors are striving to improve their sustainability performance and

Not one of our top respond to critical issues like climate change. But there’s still the 23% ten priorities question of what it all adds up to.”

The aim of this report is to analyse: Don’t know 6% • the reasons why carbon reduction is – at last – becoming a serious corporate priority 1 5 6 7 8 9 3 4 1 2 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % % • the extent to which corporate aspirations have been matched Percentage of respondents with achievement

Figure 3: The attention we, as an organisation, pay to climate change • whether capitalism provides an effective tool: first for reducing has increased dramatically in the last five years carbon; and, second, for reducing our reliance on other scarce resources

Agree 67%

Neither agree or disagree 20%

Disagree 13% 1 5 6 7 8 9 3 4 1 2 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % %

Percentage of respondents

What’s pushing carbon reduction up the corporate agenda?

In a word: money. here. And that makes substantial pay-as-you-burn taxes inevitable, and that’s when climate change will really hit the bottom line.” But money comes in different forms: “The UK will have to put a mandatory cap-and-trade scheme into • the current and future costs imposed by regulation place,” agrees Andrew Caveney at Ernst & Young. “Companies that exceed their cap will effectively be throwing money away.” • the potential loss in revenue which may result from changing consumer behaviour and associated impacts to the economy overall Even the threat of regulation is starting to change corporate behaviour. “Institutional investors are already looking at this issue,” • the desire to maximise profits by eliminating waste says Caveney,“and we’re fast approaching the point where it will be “Environmental catastrophes – the visible loss of the polar ice caps, untenable not to have a strategy for responding to regulation.” Hurricane Katrina, central African droughts – have vastly increased “Companies that anticipate regulation, rather than wait to be people’s awareness of the threat posed by climate change,” says driven by it, almost always have an advantage,” Cindy Cahill at Katherine Lampen at Deloitte,“ this increasing awareness is Deloitte points out. motivating business to reduce and mitigate their environmental The other thing driving companies’ response to climate change is impacts. The fact that there are costs to be saved is just as an how worried their consumers are about carbon emissions. “If I’m important factor from an organisational point of view.” Graham running a business and my customers are worried about this issue, Whitney at IBM agrees:“Brand, stakeholders and regulation are all then I have to do something, irrespective of legislation,”Todd helping to increase the seriousness with which business takes Filsinger at PA Consulting Group points out. “If you compare the carbon reduction. But the greatest of these is cost. When you drivers of change in the US to those in Europe, Europe is unpick almost every initiative, cutting costs is at its core.” unquestionably further down the legislative track, but in the US In addition “Security of revenue is a key future risk and therefore consumer pressure is greater. The public are demanding that big driver for our clients” notes Arup’s Jo Smallwood.“The carbon companies address this issue and we may reach the point where management aspirations and targets of our clients’ customers are both the public and corporations are ahead of legislation.” driving them to consider their own organisational commitments There’s opportunity here, too: whether a company is launching new, and deliver products and services that will be viewed favourably in greener products and services or reducing its overall environmental a competitive market”. impact, it may be able to steal a march on its less environmentally- Government intervention designed to encourage greater carbon aware competitors. Indeed, the MCA survey indicates that 40 efficiency is already having an impact in some areas. “The percent of organisations believe that reducing their carbon government’s new voluntary code for sustainable homes is a good footprint benefits their brand (Figure 4). example,” says Mike de Silva at Davis Langdon. “It’s encouraging Figure 4: Reducing our carbon footprint is an important aspect of developers to ask a lot of useful questions aimed at increasing the our brand long-term environmental performance of their building stock. The reaction has been very positive.”

But no one seriously believes that the government’s role will stop Agree 40% with voluntary codes.“We just don’t appreciate how bad a polluter the UK is,” says Carbon Profit’s Neil McLocklin, making the point that, if regulation is to change corporate behaviour sufficiently, Neither agree or disagree 32% then the financial penalties involved will have to be substantial. “We produce approximately 12 tonnes of carbon per person in this country, compared to the Kyoto target of about six.” This compares Disagree 28% to – say – seven tonnes in France which benefits from a 1 3 4 1 0 2 6 7 8 9 combination of nuclear power, clustered local economies, fewer 5 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % foreign holidays and a high proportion of diesel cars. “Even the % Chinese are only at three tonnes per person. We, along with the US Percentage of respondents (which produces around 20 tonnes per person) are the bad guys

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However, consumer altruism still tends to evaporate when faced growth depends on carbon-intensive products or services. On the with higher prices. “Consumers en masse have yet to translate other hand, when forced to act, these companies are fast-moving. their concerns into different buying behaviour,” says Richard • “Mules” are reluctant environmentalists; their progress is slow, Sharman at KPMG. “They have to demonstrate that they’re willing but steady. to pay more for greener products.” This may, of course, change as higher fuel prices erode the difference between energy-efficient “It helps us understand their priorities,” says Graham Whitney at and energy-inefficient products, but it’s clear that, while we may be IBM. “Categorising organisations as simply high or low-emitters closer to this particular tipping point, we’ve not yet reached it. doesn’t take into account the different pressures they face.”

Responding to regulation, cap-and-trade regimes and the slow- According to Richard Sharman at KPMG, a typical first step for burn fuse of consumer pressure all have future costs associated organisations is to try and reduce their energy consumption: with them, and it’s the attempt to avoid or reduce the impact of “They’ll encourage people to turn off lights and computers when these that is perhaps the most immediate driver of change. “The they leave. And, once they’ve done this, they start looking at their UK has a target of a 60 percent reduction in its carbon emissions buildings to see whether there’s anything they can do there, but by 2050, but climate change and regulation will mean we have to they’re a long way from really reducing their emissions.” Moreover, act sooner,” argues Ernst & Young’s Stuart Williams.“We could, for many organisations are adopting a wait-and-see approach:“They’re example, expect carbon-intensive products like incandescent light- measuring their carbon footprint,” says Sharman,“but not taking bulbs to be phased out, so companies that make and use these are active steps to reduce it beyond simple energy saving and recycling going to have to find – potentially higher-cost – alternatives. The initiatives. If they were, we might see our emissions at a national way we source raw materials and deliver finished products are all level fall, whereas they’re still rising.” likely to be more expensive in the future; some markets simply This is borne out by the MCA’s survey: 61 percent of respondents won’t be viable any more. A lot of the activity going on under the said their organisations had carried out a review of energy usage, ‘green’ banner is therefore really about future-proofing business 67 percent said they’d taken steps to reduce overall waste and 46 against substantial increases in costs.” percent claimed to have increased energy efficiency (Figure 5). “You can take a defensive stance, when it comes to carbon Other steps are less common: only 37 percent said they’d increased emissions,”Williams continues,“or you can be more opportunistic, their use of renewable energy and only 23 percent, that they’d looking for ways to cut waste , increase efficiency and gain market reduced air travel. share. To that extent, the approach we take to reducing emissions isn’t going to be very different to the way we approach cutting It’s therefore perhaps not surprising that only seven percent of other waste. Have we got the right products etc? How can we respondents said their organisation had succeeded in cutting its improve our supply chain?” carbon emissions by more than ten percent (Figure 6). Almost a quarter said that their initiatives were too new to have had an From theory to practice impact so far. Climate change may be moving rapidly up the agenda, but to what The lack of real progress in reducing carbon emissions so far makes extent is corporate concern translating into action? the lofty ambitions of some organisations somewhat unrealistic. Clearly, different parts of the economy are affected in different ways, “I don’t see how anyone can say they want to be carbon-neutral,” so we should expect to see variations in the way organisations are continues Sharman. “They’d have to shut the business down approaching this issue. Research by IBM identifies four categories altogether. Achieving this position by offsetting doesn’t mean they’re each of which has distinct challenges and advantages: actually reducing emissions; indeed, it’s perfectly possible for an organisation to claim that it’s carbon neutral while its emissions are • “Gorillas” are the heavy-emitters. A small change here would rising.” “It’s ludicrous if we think we’re going to save the planet by have a big impact, but, precisely because they’re the worst using fewer plastic drinking cups,” agrees PKF’s Cath Hardaker. offenders in environmental terms, these organisations have a lot of experience to share. “All the glossy brochures produced by corporate social responsibility departments which try to ensure they can’t be vilified can make • “Peacocks” are the organisations who set much store by their staff and customers very cynical, and it leads to a lot of confusion brand positioning. The key to change here is to galvanise their about what it means to be carbon neutral. People and suppliers and consumers. organisations have views, but obtaining definitive, hard data is • “Ostriches” hope the issue will go away, often because their incredibly difficult and very costly.”

Figure 5: Which, if any, of the following steps has your organisation Figure 6: What reduction in carbon emissions has your organisation taken to reduce its carbon emissions? achieved in the last five years?

Carried out an internal None – we’re only just 61% 22% assesment of energy starting to do this usage

Less than 1 percent 46% 3% Increased fuel efficiency reduction

Between 1 and 5 percent 67% 7% Cut general waste reduction

Increased use of Between 5 and 10 percent 37% 9% renewable energy sources reduction

Changed raw materials or Between 10 and 50 19% 7% production processes percent reduction

Reduced air travel More than 50 percent 23% 0% for staff reduction 1 5 6 7 8 9 1 2 3 4 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % Invested in carbon offsets 18% %

Percentage of respondents Changed the behaviour of our customers so 20% By contrast, charities have adopted a much more thorough that their carbon footprint is reduced approach, looking at their organisation, measuring their footprint Changed the behaviour and changing their business and how they work. The charity sector of our suppliers so that 25% their carbon footprint is is ahead of the corporate world in this respect at least.” reduced The disparity between organisations’ public intent and private 1 5 6 7 8 9 3 4 1 2 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % practice is often a symptom of the organisational equivalent of the % left hand not knowing what the right is doing. “You can hear Percentage of respondents retailers, for instance, making forthright statements about their “Companies are either in the denial or in a naïve, save-the-world environmental responsibilities, then walk into their estates team phase (announcing they’ll be carbon neutral),” argues Andrew and see them pursuing the same old resource-intensive strategies Caveney at Ernst & Young,“but this is a big public relations disaster they’ve used for years,” observes Michael Nates at Turner & in the making. They’re making huge commitments with little idea Townsend. “Elsewhere, you find firms talk a lot about sustainability of what the costs or return will be, and with no overall strategy. We but don’t invest in CSR, even though they’re two sides of the same see a lot of organisations investing in solar panels, for instance, but coin. The visionaries are way ahead of the rest of the organisation.” they really don’t have much impact and what’s needed is a more “Many organisations are struggling to differentiate between the comprehensive and sustained approach.” At Corpra, Neil McLocklin carbon footprint of their products and those associated with their cites the example of waterless urinals:“We worked with one operations as a whole. We see energy demand and supply, building government department that had written a four-page summary of stock, production, transport, logistics and supply chain their approach to reducing emissions, and waterless urinals took up management as elements that represent opportunities for four lines of this very slender document. They’re a good thing to improved performance resulting in the potential for significant install but they’re not the answer; they’re not going to save the carbon footprint reduction” says Arup’s Neil Kirkpatrick. planet.” For McLocklin, the fact that large corporations have started offsetting so quickly is a sign that they are keener to offload the problem than solve it:“They just want to get rid of this issue quickly.

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Putting confidence in capitalism

But is immaturity and dysfunctional management the only other side of the world, for instance – you can get some surprising explanation for the lack of progress on carbon management? results. The same is true with alternative fuels: they may have Regulation may not yet be strong enough or punitive enough to lower emissions but the energy required to grow the fuel may very force organisations to reduce emissions, and consumer pressure well negate this advantage. But, again, it depends on how you may be compromised by people’s unwillingness to put their money define your footprint.” “Some retailers only consider the footprint where their mouths are, but surely the profit motive should be of something when it lands in the UK,” points out Michael Nates at concentrating executives’ minds. Does lack of progress therefore Turner & Townsend. “They also don’t take into account the impact stem from an underlying failure in capitalism, one that requires of consumers driving to their retail parks even though their government intervention to resolve, or from temporary, perhaps decisions about location are predicated on people’s willingness to operational, obstacles? do exactly this.”“The debate here is about what has a direct impact on an organisation’s carbon footprint,” says Rob Price at Atos What’s a carbon footprint? Consulting. “If you take something like the 2012 Olympic Games, do The first and most pressing problem organisations face is how to you include the construction of the buildings, the transportation define “their” carbon footprint, without which they face an uphill links, the people attending, those watching on television?” struggle in prioritising investment and allocating their resources. “It’s also about considering what your level of control and influence At PIPC, Rob Evans cites the example of an insurance company he’s is over the carbon emitting activities identified” suggests Jonathan been working with: Ben-Ami from Arup. “This affects the speed at which an “Reviewing their footprint has helped them to focus their organisation can change that activity, and potentially the amount management activities. 75% of their carbon emissions are the of investment required, to make a carbon saving. Understanding direct result of energy consumption and much of the rest is how much carbon you can save per pound of investment is critical associated with the generation and disposal of waste. The to implementing a sustainable, realistic and attainable carbon footprinting study meant that they could immediately weigh up management plan”. the cost-effectiveness of investing in greater energy efficiency There are variables, too, to take into account. Steve Wilson at compared with spending on improved waste minimisation, Capgemini has been doing work on measuring the footprint of recycling and management”. grapes sold by a retailer:“The footprint depends on the time of year, Quite obviously, organisations that don’t have that clear country of origin and transportation (grapes can be shipped, sent understanding of their current position find it much harder to by airfreight or transported by road), so the level of carbon varies know what to do. “Many people are very confused about where to quite wildly. There’s a lot of discussion around ‘food miles’, but start,” says Evans. again we have to be careful about what’s included. Our view is that it has to be seed-to-shelf, an approach that takes the fuel used Why is defining a carbon footprint so difficult? by the tractor that harvests the plant but not the fuel that went The first problem is that people don’t know what to include.“If into the latter’s manufacture; we’re looking at energy inputs, not you’re a car manufacturer, do you include the energy consumed capital assets. This is our choice, and not everyone will agree with during a car’s lifetime or just that involved in its manufacture?” us. Companies are starting to put food miles on their products but asks Stuart Williams at Ernst & Young. “A typical car maker they may define the scope differently meaning that consumers produces between four and five tonnes of carbon dioxide per car, won’t be able to compare like with like.” but a typical car produces 20 or 30 tonnes during its life – so that’s “We also need to distinguish between ‘good’ carbon and ‘bad’,” a massive difference.”“Different industries are in the process of argues Arup’s David Singleton. “Supposing we sent a group of figuring out what the term ‘carbon footprint’ means for them,” advisers out to China to help a power plant there reduce its agrees Todd Filsinger at PA Consulting Group,“and it’s not as easy a emissions. Flying those people out there is surely a better use of process as they expected, especially as they start to take the whole carbon than flying the same number of holiday-makers to an exotic supply chain into account. A hybrid car may look good in terms of beach, but at the moment we evaluate the carbon impact in the its use, but in what way does the process of producing it really same way. But we’d need companies to work together – and differ from that of a Hummer? Once you build the whole supply some elegant thinking – to come up with a way of taking this chain into the process – the impact of shipping a car from the into account.”

And what happens when multiple organisations are involved? At Corpra. “The aim isn’t to measure your carbon footprint with 100 Turner & Townsend, Nates has been helping public sector clients percent accuracy, but to measure and then reduce it.” calculate the carbon footprint of their estate:“The government is as Arup’s Neil Kirkpatrick, an expert in life cycle assessment concludes, ham-strung as everyone else, because coming up with these figures “We have to ensure that industry focuses its efforts on those is incredibly hard: a single building may have four different owners in activities that will lead to the most significant carbon footprint as many years; management responsibility moves from one reductions. Good information will be vital in achieving this.” organisation to another, so it’s difficult to come with consistent data.” Finding the data The key issue here is that you can’t see things in isolation: what good is it, if one organisation reduces its carbon emissions at the However, even the highest-level models require hard data. expense of pushing up someone else’s? “Cheap school meals may “We don’t actually know whether it’s better for the environment to reduce government spending,” points out Stuart Williams at Ernst & use ceramic cups in our offices or disposable ones,” points out Cath Young, but what happens if they also increase childhood obesity?” Hardaker at PKF. “We can take a stance on what we think is Not surprisingly, organisations wanting to calculate their carbon reasonable – encouraging people to use ceramic cups or disposable footprint have a variety of different methods to choose from. cups at least twice for example – but at the end of the day this isn’t “Different bodies offer different guidance,” says Richard Goodson at a decision based on hard evidence; it’s applying common sense, and Hitachi Consulting. “The language doesn’t help: people talk about once manufacturing, logistics and cleaning are all taken fully into waste, recycling, carbon management, the environment, and account, we could be wrong. ”Clearly, this isn’t an issue confined to sustainability, so that it starts to feel like a complicated issue and it carbon management, but one that bedevils business across the becomes harder to see how it all fits together.” The only thing the board: we have too much of the wrong sort of data. Conventional different approaches share is the time they take to complete. “It accounting systems don’t hold data in the right way, argues Rob can easily take a retailer a couple of months to understand the Evans at PIPC:“Travel, for example, might be booked centrally (in carbon footprint of just one product,” says Stuart Williams at Ernst which case the costs but not necessarily the distances will be & Young,“so the prospect of repeating this process for 30,000 line captured) or by individuals (in which case they may not be), and that items is understandably daunting.” Instead, retailers are pushing means organisations will struggle with understanding the amount the onus back onto suppliers or looking at automating the process of travel they do.”“Existing systems aren’t up to the job,” agrees – but it’s early days in both respects. “And if the number you get Steve Wilson at Capgemini. “Packages such as SAP and Oracle can out at the end isn’t meaningful or easy to understand, you have to do an excellent job reporting costs, but they’re not designed to ask why you bothered,” agrees Capgemini’s Steve Wilson. report carbon; indeed, they don’t usually capture this data.” “Moreover,” adds Mike de Silva at Davis Langdon,“organisations will The solutions here may not be easy, but they are at least readily need to link information on carbon usage to other metrics to give a identifiable – government intervention in helping define and full life cycle assessment of products and materials, if they’re to establish a common, meaningful way to calculate a carbon footprint understand how a decision in one aspect of their business might being the most obvious one. “It will require governments, regulators affect decisions elsewhere. Part of the solution lies in better, and business to work together and for some clear principles to be smarter technology that is able to capture the information required. set down,” says Cindy Cahill from Deloitte. “This is an area where we “Smart metering of utilities is already growing at a rate of 13-14 do need the government to set down some clear principles.” percent a year,” says Ian Smyth at Hedra,“and that is giving these In the absence of this, it makes more sense to look at carbon companies a vastly superior level of data.” As a result, carbon emissions from the perspective of an organisation as a whole, rather emissions is moving out of the rather hazy realm of corporate social than trying to break the calculation into too much potentially responsibility and becoming something that can be reported with spurious detail. “The point here is to come up with one measure, the same precision as conventional costs. “CSR has always been a then measure progress against it,” says Steve Wilson at Capgemini, cost centre so the level of investment it receives has been coloured “not to use this as a way of benchmarking organisations against and limited by this, but if we can now track how much revenue is each other.” He advocates the equivalent of like-for-like sales related to reducing an organisation’s carbon footprint, then it reporting:“How much carbon has the organisation emitted as a becomes possible to track the value created by CSR, really for the whole? Is progress being made? Analysing the results at a first time.” But, he believes, the decision to invest in new systems comparatively high level is also easier because information does tend and technology is being held up by internal divisions of to exist at this level – expenditure on energy, for instance.”“And doing responsibility. “For an issue like this, it’s hard to know who’s in something is better than doing nothing,” adds Neil McLocklin at charge. Typically, you’ll have people from procurement, marketing,

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and the CSR department, and it’s incredibility difficult to build areas of silicon that aren’t in use and there’ll be environmental consensus.” monitoring in the chassis itself, automatically sending back data and adjusting its operation. This isn’t pie-in-the-sky: companies Better information would reap other rewards, too, as it would boost such as Fujitsu are investing in this area because clients are asking awareness of the implications of economic decisions – both us to do so.”“You can buy disk storage now from Amazon,” says organisational and personal – on the environment. “We have to CSC’s Doug Neal,“so why go to the expense of having all your data embed environmental awareness into all decision-making,” says in your own data-centre, and we simply don’t need as many Richard Goodson at Hitachi Consulting. “It has to become machines as we used to. But data centre efficiency relies on the IT something that people do automatically.” people being able to work with the facilities management people: “It will make it hard to be a free-rider in the destruction of the the former has the data, but the latter has control over the physical world,” says Doug Neal at CSC’s Leading Edge Forum. “At the infrastructure.” But most organisations have never thought of their moment, if you buy a PC, you don’t pay for the rubbish it makes. IT people as being anything other than a cost, a necessary evil:“But One of the options being discussed in California is that, if you build they’ve a role to play in supporting the brand, monitoring and a house, you have to have an energy budget. If you want to build a taking waste out of business processes,” argues Neal. “There’s a house that is bigger than the budget would support you will have huge opportunity here to be innovative – and that’s going to be carry out Green measures to get it back in compliance with the critical in the long-haul. Do we really want just a crowd of tree- budget” One of the things that will be crucial here is “data- huggers working on climate change? Surely, if we’re to fix the mashing” – bringing together disparate sources of data. “The San problem not just agonise about it, we need engineers looking at Francisco Department of the Environment has matched data on this issue. ”At Davis Langdon, Mike de Silva takes the point further sunshine with Google Maps so you can calculate the potential using house building as an example. “We need people with the benefits of solar panels. It’s the same with a Prius’ dashboard: it skills to fix the problem. In Germany, they have the capacity to brings together information about how you’re driving and the build multiple housing units to Passiv Haus standards. These are amount of fuel you are using quickly enough for you to adjust your superinsulated and airtight thus significantly reducing energy in driving. What we need to do is extrapolate this approach so that use. In the UK we have a code for building sustainable homes, but organisations can not only see their existing emissions, but see we simply don’t have sufficiently well-trained workforce to build them quickly enough to do something about them. That’s exactly housing units on this scale. We have people who can design them what Adobe has done: in collaboration with its facilities – we’ve excellent architects and engineers – but we don’t have management company, Cushman and Wakefield, they’ve put enough people with the right skills to construct them.” 30,000 sensors into their new head-office, all of which relays Resistance to change information on carbon emissions to a large and very visible three- dimensional representation of the building.” “Most people don’t think twice about the use-and-consume culture we live in,” says Richard Goodson at Hitachi Consulting,“and that’s “Old” technology and new skills unsustainable.” Mike de Silva at Davis Langdon agrees:“The Better data is just one of the ways in which technology can problem isn’t just that we throw away plastic bottles rather than improve carbon management, but the key to its successful re-cycling them or using reusable glass ones, but that that same deployment in this context is to change people’s perceptions of IT. way of thinking pervades much of the way we do business. Commercial developers look to maximise their rental income in the First of all, there are steps that IT departments can take to reduce first five years, when the buildings are new and can command their own emissions – indeed, more and more organisations are premium rents. They’ll look to offload these buildings after five looking at “green” IT. “A typical data centre contains a large number years or so. On top of this, it is very fashion driven so their life of small boxes with cheap, inefficient power supplies,” points out expectancy is often no more than 30 years which means that even Glenn Fitzgerald at Fujitsu.“Consolidating all the small boxes into buildings are treated as disposable – and that’s something we need fewer bigger ones with fewer better quality power supplies can cut to challenge.” The analogy here is with health and safety, suggests the amount of power consumed by a third. But it’s also possible to Neil McLocklin at Corpra,“you have to invest in education and change the way power is managed in a data centre, by – for awareness raising over a long period of time before people start to instance – re-using waste heat, by turning up the thermostat a internalise the issue. couple of notches (computers are now certified to work at higher temperatures and humidity than used to be the case). In the Like almost any new initiative, reducing carbon emissions relies on future, computer platforms will be intelligent enough to turn off people changing their behaviour as much as on organisational

strategy. Carbon management is no exception to this: people have Changing this attitude will come down to a combination of to be encouraged to change, but cannot be ordered to do so. “As a education, incentives and leadership.“Breaking into this cycle professional services firm, the two major changes we can make to requires leadership,” says Michael Nates at Turner & Townsend. our environmental impact is travel less and use less paper,” says “If we look at companies who’ve done this – companies such as Cath Hardaker. “We know it just makes good business sense to Interspace, the carpet recycling company, which will take back any print on both sides of the paper, but we can’t force people to do so. carpet, clean it and send it to a charity or recycle it – then change We can only do this by making people more aware of the issue and has started at the top with a small number of individuals who are by subtle ways to encourage them. Similarly, we can’t make eating passionate about building an environmentally sustainable apples mandatory, but if we ensure there are apples available by business.”“The buy-in of the board-room is key,” agrees Katherine the vending machines, we hope that people will gradually start to Lampen at Deloitte. “You need to have leaders that believe this is eat more apples.” But getting people to do something that’s the right thing to do and who are prepared to communicate sensible and which doesn’t cause them too much inconvenience is continually with their staff to change their perceptions as well.” one thing; going beyond that is a challenge. “The problems start “What strikes you about the companies that have really tried to when you get onto something like travel,” says PIPC’s Rob Evans. make a difference is the passion their people – particularly those at “They may know that driving is bad for the environment, but that the top – have for this,” says Atos Consulting’s Rob Price. “There’s a doesn’t mean they’re willing to lose their company car.” real danger that carbon management becomes yet another PR In theory, you’d expect it to be easier to change people’s bandwagon, and the factor that will separate those who are simply environmental impact because asking people to change for the trying to jump on it from those that genuinely believe this is the greater good of the planet is a million miles from asking them to right thing to do, will be personal integrity.” Ensuring top-level change to increase profits. The MCA survey shows that awareness of commitment to carbon-reduction doesn’t just provide role-models the need to cut emissions runs high in most organisations (Figure 7). for the rest of the organisation. “It also means that carbon management is taken into account in debates about the strategic Figure 7: Everyone in our organisation is aware of the need to direction of an organisation,” adds Price’s colleague, Michael King. cut emissions “It is very hard to consider the environmental impact of a decision after it’s been made – retro-fitting environmental considerations into an economic fait accompli simply generally doesn't stack up.” Agree 61% This view is supported by Arup’s Jonathan Ben-Ami who says “Embedding carbon management decisions within organisational Neither agree or disagree 21% processes is key; a bolt-on approach is unlikely to be accepted or delivered effectively by staff and suppliers.”

Disagree 18% “Behaviour is also about processes and systems,” says Hitachi’s Richard Goodson.“Most companies don’t have incentives in place to encourage people to reduce emissions. Indeed, they may find 1 4 5 6 7 8 9 1 3 0 2 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % %

% that their mileage allowance actually encourages people to drive

Percentage of respondents their company cars more. They need to examine whether the way they operate supports people doing the right thing.” “But people are much more frugal at home than they are at work,” But people need to know that small changes in their behaviour will argues Richard Goodson at Hitachi Consulting. “They’ll turn off a actually make a difference. “There needs to be a major awareness- light at home because they know that their electricity bill will be building programme aimed at consumers, showing how something lower as a result – they’re incentivised to do the right thing and as simple as turning off a light bulb can add up to a major effect.” over time that behaviour becomes automatic. At work, by contrast, Part of that, says Todd Filsinger at PA Consulting Group, is helping the same person will be profligate, they won’t turn the lights out people understand that just because their economies don’t benefit because they haven’t done so in the past and because it’s not their them personally doesn’t mean they don’t benefit someone money they save. Having lights on doesn’t cost employees money.” somewhere. He cites the example of Beaver Creek Ski Resort in “You have to make it personal,” agrees Corpra’s McLocklin,“to link Colorado, which claims to use all the power it needs from wind life at home and life at work, and some organisations have turbines. “This makes local inhabitants feel good, but they also managed to do just that.” have to understand that, although they’re funding this, the

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electricity these turbines generate goes into the national grid: and Figure 9: We’re only scratching the surface: there’s a lot more we may not be consumed locally. Getting people to see that link could do to reduce carbon emissions between local action and global impact is essential.”

Carbon trading and offsets Agree 75% The barriers to effective carbon management described above – the problems in defining a carbon footprint and measuring progress, legacy systems, inadequate skills and embedded behaviour – may Neither agree or disagree 21% be serious but they’re by no means insoluble. Indeed, any substantial organisational initiative would probably encounter the same range of obstacles. In fact, the overwhelming problem here, Disagree 4% according to the MCA’s survey (Figure 8), is that reducing carbon 5 4 6 7 8 0 1 2 3 9 1 0 0 0 0 0 emissions simply isn’t seen to be important enough. Juggling 0 0 0 0 0 % % 0 % % % % % % % % already busy jobs, responding to climate change is just one more % thing on a very long list of things to do. Percentage of respondents

Figure 8: What is the single, most serious barrier to your organisation Figure 10: We provide special financing for internal projects which reducing carbon emissions? will help us reduce emissions

Other, more urgent 36% business priorities Agree 28%

The costs of reducing our 13% carbon emissions Neither agree or disagree 27%

Lack of people/ expertise/ 14% understanding of Disagree 45% the issue

Lack of top-level 1 5 6 7 8 9 1 2 3 4 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % 17% % % % % sponsorship and % commitment % Percentage of respondents

Complexity of the 12% problem Two tools currently exist to create that pain. However, while each offers some advantages, their implementation is flawed in Dependence on carbon- many respects. based fuel in products or 9% production process “The carbon market – the EU Emissions Trading Scheme (EU ETS) – 1 4 5 6 7 8 9 1 3 0 2 0 0 0 0 0 0

0 is a marvelous idea but it’s deeply flawed in the way it’s been 0 0 0 % % 0 % % % % % % % % % introduced because far too many allowances have been awarded, Percentage of respondents and moreover they were given away rather than auctioned” says Guy Doyle at Mott MacDonald. “From its inception, it was clear Not surprisingly, three quarters of respondents to the survey felt that the inherent volatility of a trading scheme might work against that their organisations were only “scratching the surface” of what it and, although making clear policy statements could alleviate this they could do (Figure 9) and only a quarter said they were prepared problem, they can’t eliminate it entirely. What’s needed is a floor to put their money where they mouth is by providing funding for below which the price of carbon can’t fall. It’s not the principles of projects specifically designed to reduce emissions (Figure 10). the system which is at fault here, but the way in which those For this to change – in effect, for carbon management to be taken principles have been realised.” as seriously as financial management – then we have to translate Offsets, too, have their problems. They don’t, for example, indefinite, long-term and remote environmental pain into definite, encourage organisations to reduce their emissions:“Offsetting can short-term and immediate profit pain.

be seen as a get-out-of-jail-free card,” says Richard Sharman at offsetting,” suggests Graham Whitney at IBM. “Companies benefit KPMG. “Organisations are tempted to think, we’ve offset our from a positive reputation and that creates its own feedback loop, emissions so that’s it.” encouraging them to invest more.”

“Arup is a good example,” says David Singleton. “We’ve adopted a Ian Smyth at Hedra has spent 12 years working in the utility sector: sustainability policy and we’re working on understanding and “Utilities are semi-regulated businesses, responsible for security of measuring our carbon emissions but we’re wary about making power supply, and health and safety of the industry (including grandiose commitments about carbon neutrality because we think nuclear), as well as making money for their shareholders. we might end up going down the offsetting route and we don’t Sustainability therefore means something different in this sector – not believe this is the way to go. A lot of well-meaning people have tried just environmental impact but also their long-term commercial to do the right thing, invested in offsetting schemes which are meant success.” Climate change has been an issue here for the last 20 years, to make a difference, but have ended up being taken advantage of.” however it was only with the publication of the Stern report late last year that it became at or near the top of the corporate agenda. Investigation has indeed shown that some offsets are for existing “Carbon trading isn’t a red-herring for this sector because some carbon reduction schemes so there’s no actual reduction in carbon intervention is necessary if we’re to meet our Kyoto targets, and the emissions – organisations have bought, often unwittingly, into government prefers to use a market mechanism to do this than schemes which would have happened anyway or which may even intervene directly. In other words, it prefers to create incentives rather have a negative impact. “There was an instance of a company than impose punitive measures.” There have been, he argues, a which chose to offset its emissions by investing in a scheme that number of spin-off benefits to carbon trading for both utility encourage people in developing countries to haul their water up companies and their customers.“There’s an incentive to put smart from wells using foot-pumps rather than a paraffin one,” recalls meters in, and these give energy efficiency in the home in the context Mike de Silva at Davis Langdon.“The journalist sent out to of continuing rising demand. They mean that some of the most investigate found that child-labour was being used to operate the vulnerable people in society are better able to heat their homes.” pumps. This might just be an issue of Western sensitivities of course but these issues need to be investigated to ensure that we “A key advantage from a commercial point of view is that it levels are not causing unacceptable ethical impacts. There is a place for the playing field,” argues Richard Sharman at KPMG. “It will stabilise offsetting, but it should definitely be a place of last resort in the the cost of pollution and provide incentives to improve performance. hierarchy.” “People are scared now, as a result,” adds Rob Evans at They also help to secure a stream of funding which, if done properly, PIPC. “They’ve seen a lot of bad press about offsets. Although there does channel investment into developing countries.” are some good projects, they’re all inevitably getting tarred with But the underlying problem here is that the price of carbon is too the same brush, and we need better guidance, ideally from the low. “The low price of carbon is a very important area,” says Isabel government, about which schemes make a real difference, if this Boira-Segarra at Mott MacDonald. “This is an area where we do need approach is to have any long-term credibility.” government intervention, not only to raise the price of carbon, but “Moreover, current trading schemes all focus on the negative also to introduce personal caps on carbon so that the level of aspects,” says Doyle’s colleague Isabel Boira-Segarra. “Companies someone’s emissions directly affects their pockets. We’re not going are looking at how to trade costs, whereas they could be looking to to see radical change at either a corporate or individual level without make money on this market, exploiting the benefit of their lower this.” Graham Whitney at IBM agrees:“The current market for carbon emissions. Business – the market – needs positive incentives if is entirely voluntary and that, combined with the low cost of carbon they’re to work efficiently. If this isn’t in place, then the whole means there’s not much of an incentive to deal with the emissions thing will become just another form of CSR, small-scale and themselves. For this to be a genuine factor in any organisation’s fragmented.” decision-making process, the price has to be high enough – probably around ?50 a tonne – to have an impact.” Crucially, the higher the There are some advantages to carbon trading and offsetting, price of carbon is, the more likely it is that it will start to effect despite their imperfect form. “Carbon trading provides people with consumer prices, and that in turn may change consumer behaviour. a framework showing them where to focus their attention and “Printing the carbon footprint of goods on their packaging may help investment,” argues Richard Goodson at Hitachi Consulting. raise public awareness, but it’s unlikely in itself to stop people buying Katherine Lampen at Deloitte agrees:“It’s helping organisations something,” argues Paul Oakes at Boxwood. “But if that same internalise costs they’d otherwise have ignored, but the cost of product suddenly becomes more expensive, then people will choose offsets still varies dramatically between organisations that provide to stop buying it. Consumers will always buy on value.” offsetting services.” “There’s also a halo effect from carbon

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Eliminating waste to do everything it could to be green irrespective of costs. However, as fuel costs rise, economic and environmental concerns will If the price of carbon were to rise, then it would concentrate converge even more.” organisations’ attentions on the economic imperative of reducing costs. “We have to focus on efficiency,” argues Isabel Boira-Segarra Steve Wilson at Capgemini agrees:“We’ve been working with a at Mott MacDonald. “One aspect of moving to a low-carbon retailer who has been examining the possibility of using double- economy is that it should also be a lean material one in which the decked trailers which will save money and reduce carbon over-riding philosophy is re-use, recycle and maintain.” “We don’t emissions. We used to call this lean thinking, but the same good, see carbon as an environmental issue,” agrees Richard Sharman, old-fashioned operations management thinking is directly “but an economic one. We think that businesses will be encouraged applicable to carbon management. As the cost base changes, to change if there’s an economic reason for saving the planet.” projects which would have been unviable in commercial terms in the past will become justifiable. We tend to manage business “Looking at efficiency is just good supply chain management,” says against scorecards – and it’s worked. Experience suggests that the Jeremy Hammant at LCP. “Using fewer vehicles travelling along most effective way of approaching carbon management is to apply more efficient routes is part and parcel of this, but it’s also good for business principles to the environment, not environmental the environment. The objectives of a business are to grow principles to business.” shareholder value, so it would be a brave organisation that decided

A more fragile future

Although imperfectly implemented at present, carbon-trading and next hot topic,” predicts Ian Smyth at Hedra,“and you only need to offsets have the potential to sharpen companies’ focus, as their look at a large distribution company to know that this could make profits become genuinely squeezed by the rising price of carbon. a tremendous difference to their ability to reduce their own Higher costs will drive business to be more efficient, and higher emission. But in the developing world, if fields currently used to prices will strengthen consumer demand for change. grow rice or maize are converted into bio fuel production, people will starve.” But what of other environmental issues: will capitalism still serve us so effectively in, for instance, the challenges of using land effectively, “There’s a far wider ecological context here,” argues Arup’s Peter of ensuring an adequate supply of water or raising air quality? Head.“Land is the commodity for life and climate change means that people are having to abandon land which they formerly “The key message here should be resource conservation,” says Mike farmed. Food production is falling globally and prices are rising – de Silva at Davis Langdon,“but the topic has been somewhat witness the recent riots in Mexico. Already tensions caused by hijacked by carbon and climate change. The benefit of this is that scarcity underpin many of the conflicts we see in the world today, it’s brought a lot of focus, and the shift from using the term whether they’re the struggle for oil, access to other natural climate change rather than global warming has been helpful resources or simply for useable land. Yet hardly anyone is thinking because it’s stopping people on the street making jokes about how about the depletion of resources and overall land management.” nice it is to spend more time outside. Carbon is undoubtedly a key issue but should be considered more as the currency by which a Carbon is also where the media focus is, says Cindy Cahill at number of resource related impacts are measured.” Deloitte,“and that’s because it’s easier to understand, but access to clean water is a huge problem and multinational corporations will The focus on carbon has its advantages: reducing emissions is now have to take much more responsibility for their consumption in the something tangible, something people can commit to, but it may future.” Todd Filsinger at PA Consulting Group expands on the also lead to environmental “fatigue”. “Carbon is such a dire story point:“People are being encouraged to buy low-energy bulbs, but that it’s already starting to make people feel they can’t deal with it, many of these have mercury in them. That’s not something people and then they think they can’t do anything about it,” says Todd raise environmental concerns about. But what happens when all Filsinger at PA Consulting Group.“It’s important not to overload the millions of light bulbs go into land-fill sites? Does the mercury people, but to give them a problem they think they can fix.” enter the food chain? No one is looking at this kind of thing “We’re inviting a backlash,” suggests Rob Evans at PIPC. “Coverage because all the attention is concentrated on carbon. is reaching saturation point and there’s a real risk that people will Yet, if we look at the availability of water, some projections show it’s start to lose interest.” He worries, too, that other pressing concerns running out quickly in many locations.” People react and conserve have been pushed down the agenda by carbon. “Take poverty as an well based on this information. One of the reasons for this, example: in global terms, we’re currently ploughing too many Filsinger believes, is that while carbon is a genuinely global resources into too many different projects at the same time. Only problem, water is a localised one. “If an area is short of water, the by getting groups of companies to focus on a more limited range of community is much more likely to take the issue seriously and issues and “blitzing” them do we stand any chance of making a real react as it feels like a problem they have some control over.” difference. If we continue as we are doing, it will be hundreds of years before the imbalance between the richest and poorest The MCA’s survey bears out these comments. Asked what natural nations is corrected.” resources their organisation relies on beyond fuel, 42 percent of respondents cited water (Figure 11). By and large, however, the The concentration on carbon ignores the inherent complexity of response has been to cut general waste – in other words, applying the world we live in. “If we focus exclusively on carbon, we’ll take the same approach we see emerging where carbon management is decisions without thinking about their wider environmental concerned (Figure 12). Even more tellingly, 69 percent agreed that, consequences,” argues Stuart Williams at Ernst & Young. “Bio fuels as a society, we still take the concept of unlimited natural resources are the most obvious example of this: to grow existing bio fuels we for granted (Figure 13) and 42 percent said that their organisation have to take away land from agriculture or cut down swathes of continued to make this assumption as well (Figure 14). the rainforest. Ironically, some bio fuels can end up with a greater carbon footprint than conventional fossil fuel.” “Bio fuel will be the

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Figure 11: Which of the following natural resources, beyond carbon- Figure 13: As a society, we still make the assumption that we won’t based fuel, does your organisation depend on to be available in run out of the resources we need substantial quantities and affordable?

Agree 69%

Water 42%

Neither agree or disagree 15%

Land 19%

Disagree 15%

Wheat 2% 5 4 6 7 8 0 1 2 3 9 1 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % %

Minerals 9% Percentage of respondents

Figure 14: As an organisation, we still make the assumption that we None 47% won’t run out of the resources we need 1 5 6 7 8 9 3 4 1 2 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % % Agree 42% Percentage of respondents

Figure 12: Which, if any, of the following steps has your organisation Neither agree or disagree 25% taken to reduce its natural resources?

Disagree 33% Carried out internal 30% assessment of usage 1 5 6 7 8 9 1 2 3 4 0 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % % Increased efficiency in 28% using the resource Percentage of respondents

Competition versus co-operation Cut general waste 35% But will it be possible for business to apply the principles of capitalism to a more fragile environmental future as they have to Increased use of 16% carbon management? alternative resources “The win-win situation – where environmental gains are also Changed raw materials or economic gains – is a comparatively easy one to respond to,” argues 11% production processes Michael King at Atos Consulting. “But the real test of an

Changed the behaviour organisation’s commitment will come when these two elements of our customers so 9% aren’t aligned, when something that has a positive impact on the that they use less of these resources environment has a negative economic impact, and vice versa. Those Changed the behaviour decisions are much more difficult and that’s where we’ll require of our suppliers so 13% some really creative thinking.” that they use less of these resources “Take quality of air as an example,” suggests Mott MacDonald’s 1 3 4 1 0 2 6 7 8 9 5 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % Guy Doyle. “This is localised, so it’s not tradable in the same way.” % “Moreover, capitalism assumes a continuing increase in profits,” Percentage of respondents says Michael Nates at Turner & Townsend. “You have to ask

whether it works within a world in which resources are finite. The Figure 16: We are confident that we will find alternatives to the problem is not that capitalism is failing us, but we need to natural resources on which we currently rely question some of its underlying assumptions. People in India and China want a western standard of living, but the planet can’t afford that. You have to ask, not how do we divide up the cake but who Agree 34% the cake belongs to.”

Government will therefore have a role to play, but it’s perhaps as an Neither agree or disagree 46% enabler more than a doer, as solving this problem will require far more fundamental changes at all levels in society. “The issues around water purity, food poverty, land use and much else are all Disagree 20% questions with solutions,” argues Arup’s David Singleton. “But the solutions aren’t about pressing buttons but doing things. 5 4 6 7 8 0 1 2 3 9 1 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % %

Government can help to an extent. You can’t build a tank to catch % rainwater in Australia, despite the current drought, because it Percentage of respondents would contravene planning regulations designed to prevent people putting in loud, ugly air-conditioning units. What governments Respondents were also clear the challenge this posed. While have to do – here and elsewhere – is remove the obstacles which organisations may not yet be putting the same effort into reducing prevent people from using their common sense. But the solution carbon the effort they put into reducing costs, mechanisms such as comes down to individuals doing relatively small things. Why, for carbon trading and offsets have the potential to force organisations example, have we abandoned the idea of allotments? Urban to act, just as they’d act to deal with any rapidly increase in cost. In agriculture is a prime example of something that could be changed other words, reducing carbon emissions is something people feel at a very local level and which, if we took all the environmental can be achieved within our current way of doing business. But costs into account, there’d be a real economic incentive to pursue.” people don’t see dealing with a scarcity of natural resources in the same light: more than 90 percent of the people responding to the Similar sentiments are re-iterated in the responses to the MCA’s MCA’s survey said they thought that this would significantly change survey. 94 percent of people said that we need to prepare now for the way we work (Figure 17). They are also clear about the key the impact limited natural resources will have on the way we work challenge this poses: getting organisations, which capitalism (Figure 15) and only 34 percent were confident their organisations encourages to compete, to work together (Figure 18). would find alternatives to the resources they currently rely on (Figure 16). Figure 17: Limited natural resources will significantly change the way people work in the future Figure 15: We need to prepare now for the impact that limited natural resources will have on the world economy in the future

Agree 93%

Agree 94%

Neither agree or disagree 7%

Neither agree or disagree 4%

Disagree 0%

Disagree 2% 1 4 5 6 7 8 9 1 3 0 2 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % % % 1 1 3 6 7 8 9 4 5 0 2 0 0 0 0 0 0 0 0 0 0 % % 0

% Percentage of respondents % % % % % % % %

Percentage of respondents

Figure 18: If organisations are to reduce their dependence on natural discussions in the utilities and local government sector over recent resources, they need to work together months.”The main barriers Smyth perceives are short-term ones: “They haven’t any provision in their budgets for doing this and, historically, local governments haven’t procured together so they Agree 90% have to learn how to do this effectively and efficiently.”

Overcoming the natural instinct to compete in the private sector requires maturity on the part of the organisations involved and Neither agree or disagree 8% leadership on the part of those who run them. “If you look at an initiative like ESR Europe,” says Boxwood’s Paul Oakes,“then the

Disagree 2% organisations involved have to be able to see things from different dimensions – technology, emissions of trucks, how to make warehouses green. The next step has been to acknowledge that 5 4 6 7 8 0 1 2 3 9 1 0 0 0 0 0 0 0 0 0 0 % % 0 % % % % % % % %

% they all have a certain amount of spare capacity and that they could share some of these resources. But it’s a complex problem in Percentage of respondents a competitive market and there’s an understandable wariness of “Organisations will have to work together more,” argues Deloitte’s sharing information with rivals. In most industries, environmental Cindy Cahill,“but those that get this right will have a huge issues have not quite reached the tipping point where this competitive advantage: a more loyal customer base, lower costs becomes possible. Unquestionably, though, this is something and low taxes. They’ll also attract the lion’s share of investment.” business will have to move towards: people will have to collaborate, share their understanding of their environmental and social Indeed, there’s already evidence of this happening. “We’ve been impact, and optimise the way they do business to take account of working with ESR Europe, a forum for grocers, on a sustainable this. We need the likes of Tesco to talk to the likes of Wal-Mart – transport initiative,” says Paul Oakes at Boxwood,“Asda,Tesco, and that would be difficult in any sector.” Procter & Gamble and DHL are all involved, driven by the recognition that, if they don’t do something about the “And that takes senior level commitment,” adds Graham Whitney at environmental and social pollution caused by the volume of trucks IBM. “The difference between organisations which are seriously in this country, the government will intervene and consumers will starting to discuss this issue and those that aren’t is only partly turn against them.” related to the sector they operate in. It has much to do with the willingness of the people at the top to take a stand.” “And to take a Public sector and quasi-public sector organisations will have an lead, encouraging others to participate by example,” says Arup’s advantage here over the private sector where competition creates a Peter Head. “The only way forward will be for organisations – huge barrier to change. “There’s less or no pressure on market share public and private – to work together. No one will be able to solve outside the private sector, so more opportunity for collaboration,” these problems on their own.” says Hedra’s Ian Smyth.“So we’re already seeing some initiatives aimed at sharing best practice – indeed, it’s been a big theme in

Contributors

The MCA would like to thank the following for their contribution to Lisa Huggins-Chan, Group CSR Manager, Cadbury Schweppes this report: ([email protected])

Isabel Boira-Segarra, Head of Renewable and Low Carbon Michael King, Atos, Business Consultant, Transport Technologies, Mott MacDonald ([email protected]) ([email protected]) Katherine Lampen, Manager, Corporate Responsibility Services, Cindy Cahill, Partner, Deloitte ([email protected]) Deloitte ([email protected]) Andrew Caveney, Partner, Ernst & Young ([email protected]) Neil McLocklin, Director, Corpra ([email protected]) Greg Davies, Head of Service Development, EMS ([email protected]) Michael Nates, Associate Director, Head of Sustainability, Turner & Townsend Guy Doyle, Chief Economist, Energy & Carbon, Mott MacDonald ([email protected]) ([email protected]) Doug Neal, Leading Edge Forum, CSC Rob Evans, Practice Leader: Environment and Corporate ([email protected]) Responsibility, PIPC ([email protected]) Mackenzie Newnham, Director, Turner & Townsend ([email protected]) Todd Filsinger, Member of Management Group, PA Consulting Group Paul Oakes, Programme Manager, Boxwood ([email protected]) ([email protected])

Glenn Fitzgerald, Solution Champion for Data Centres, Fujitsu Rob Price, London 2012 Account Director, Atos Consulting ([email protected]) ([email protected])

Richard Goodson, Vice President, Hitachi Consulting Richard Sharman, Lead Partner, KPMG Carbon Advisory Group ([email protected]) ([email protected])

Jeremy Hammant, Partner, LCP Consulting Dr Mike de Silva, Associate, Davis Langdon ([email protected]) ([email protected])

Cath Hardaker, Head of Management Consutancy, PKF David Singleton, Chairman, Global Infrastructure Business, Arup ([email protected]) ([email protected])

Phil Harding, Senior Policy Adviser, Sustainability, Climate & Ian Smyth, Principal - Utilities, Energy & Transport Hedra Environment Directorate, Government Office for the South West ([email protected]) ([email protected]) Graham Whitney, Chairman, Climate Change Programme, IBM Peter Head, Director, Arup, ([email protected]) ([email protected]) Stuart Williams, Manager,Ernst & Young ([email protected])

Steve Wilson, Vice President Consulting Services, Capgemini ([email protected])

ABOUT THE AUTHOR ABOUT THE MANAGEMENT CONSULTANCIES ASSOCIATION

Fiona Czerniawska is one of the world’s leading commentators on The Management Consultancies Association was formed in 1956 to the consulting industry. represent the consultancy industry to its clients, the media and government. Management consultancy is an increasingly important She is the founder and managing director of Arkimeda, a firm that industry for the UK economy with management consultancy specialises in researching and consulting on strategic issues in the revenues for 2006 estimated at £8bn. MCA members represent consulting industry. She is also the director of the UK Management around 70% of the UK consulting sector, employ around 20,000 Consultancies Association’s Think Tank. management consultants and work with the FTSE100 and all Czerniawska has had more than 15 years’ experience as a government departments. Nine of the top ten UK-based consulting management consultant, working primarily in the areas of firms (by consulting fee income) are members. marketing and strategy, and now speaks, lectures and writes The MCA supports its member firms with a range of services extensively on the consulting industry and related issues. Her including events, publications, interest groups and public relations. most recent books are The Intelligent Client, and Management The Association also works with its members to attract the top Consulting in Practice: Award Winning International Case Studies. talent into the industry. The MCA provides advice on the selection She is also the co-author of Business Consulting: A Guide to How it and use of management consultants and is the main source of Works and How to Make it Work, published by the Economist in data on the UK market. Spring 2005.

Arkimeda (www.arkimeda.com) produces an annual report, Whitespace, that tracks developments in thought leadership in the consulting industry.

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