As the Climate Change Bill rumbles inevitably towards enactment, businesses are facing a future of green taxes and emissions targets. As Lisa Miles discovers, the message is loud and clear: act now or pay later. But what can you do after you’ve changed the light bulbs?
Planet Earth is in the throes of its sixth great extinction. The past five were caused by physical
shocks – the sixth, says the United Nations, is down to us – human activities have become a dominant influence on our climate and eco-systems.
That may all sound rather melodramatic and far removed from the daily grind of boardroom battles, management meetings and spreadsheet sessions, but the UK government is closing in on the business community in a valiant, if controversial, effort to lead the world into a safer, cleaner, greener future.
The Climate Change Bill is set to become an act of Parliament by July 2008.
It will set targets for reducing emissions by 60 per cent by 2050. The Department for the Environment, Food and Rural Affairs (Defra) published its final impact assessment of the Bill in March, which outlined why it considers government intervention necessary.
“The global causes and consequences of climate change, coupled with the long-term and persistent nature of the impacts, highlights the need for government intervention,” it said.
The policy’s objectives are to demonstrate the UK’s green leadership, establish an economically credible emissions-reduction plan and provide greater “predictability for UK industry to plan effectively for, and invest in, a low-carbon economy”.
Businesses have become even more nervous about how the long green arm of the law will come to impinge on their activities. And the Climate Change Bill underlines the government’s determination to start reaching parts of the community whose emissions have until now escaped regulation.
“Management of businesses’ carbon footprint and reducing carbon emissions will need to become an integral part of the way businesses are run,” says Elizabeth Shepherd, partner and specialist in environmental law at the Manchester office of Eversheds.
“Increasing regulation in this area is a certainty, and businesses that operate in sectors that haven’t previously been subject to climate change policy measures will find that they, too, will be caught.”
The Carbon Reduction Commitment is likely to be the first emissions trading scheme implemented under the bill. To be introduced from January 2010, it will target large non-energy intensive organisations with an annual electricity consumption of more than 6,000mwh. All emissions from all sources, including electricity, gas and other fuels, will be covered. This scheme is likely to affect supermarkets, hotel chains, banks, large offices, hospitals, universities, central government and local authorities.
“Along with increasing regulation, comes a call for transparency in relation to carbon emissions,” says Shepherd. “A recent amendment to the Bill will require publicly listed companies to make annual declarations of their carbon emissions. This could well be the first step toward every business being required to measure and declare its carbon footprint.”
Garry Charnock is managing director of RSK Carbon Management and project manager of North West village Ashton Hayes’ Defra-sponsored bid to become the UK’s first carbon-neutral village. He says the government is planning to take climate change legislation right through to the smallest business.
“Energy prices are going up tremendously, so you may as well save energy now,” he says. “If climate change legislation directly affecting small businesses does come in, businesses will face a huge cost to clean up their act. If you start now, even with behavioural change, it will help in the future.”
One of the many remaining questions surrounding climate change legislation is whether fiscal measures should used by way of a stick or a carrot to turn businesses green. While there are some tax breaks available – involving, for example, low-emission company cars or encouraging staff to cycle to work – they are not being widely adopted and are further impeded by lack of investment in relevant technology such as hydrogen cars.
In November 2007 the government set up the Green Fiscal Commission to find a way of greening the UK tax system. And one of the most sensitive issues it has to tackle, says Paul Warren, managing director at accountancy firm Pierce, is growing tax on fuel. “One of the problems the government has is that fuel taxes are a very sensitive issue, affecting everybody from low-paid workers to businesses involved in transport. The taxes we suffer on fuel make us less competitive in terms of production and transport. If it carries on that way we would not be able to compete,” he says.
“The commission is looking at what it can change in the tax base of the country so that 20 per cent of taxes are from green measures by 2020, but that’s swapping the taxes we’ve got today for taxes in other areas.”
The thorniest issue is the government’s apparent refusal to set aside cash from green taxes to fund environmental projects. The UK has always been philosophically opposed to such tax hypothecation and, despite calls from the European Commission that revenue derived from auctioning emission permits under the Emissions Trading Scheme be earmarked for spending on climate change initiatives, the Exchequer is unmoved.
In May 2008 an unlikely alliance of the Confederation of British Industry (CBI) and the WWF wrote an open letter to the Prime Minister on this subject. It read: “We believe that climate change can be mitigated and the UK can meet its long-term emissions targets. But doing so will require imagination, innovation and, in particular, investment from across the public and private sectors.
“All of us support the case for auctioning of carbon allowances to sectors where this does not threaten their international competitiveness. But this is still a substantial additional transfer of funds from business and consumers to government. This represents a tremendous opportunity for the government to demonstrate its real commitment by announcing an equivalent scale investment in securing the transition to a low-carbon economy and in adaptation.”
The CBI has not always had the greenest of images, but this alignment with the WWF reveals a change in approach by both organisations. Damian Waters, CBI director in the North West, says businesses understand the need to introduce taxes to changes people’s behaviour.
But he says: “You can use tax as a carrot and a stick – perhaps there’s too much of a stick.
Many members accept tax has to be paid, but it needs to be used for issues that are directly for tackling climate change, otherwise people will feel hoodwinked. Airport passenger duty is a prime example – the £20 is meant to be a climate change tax, but all the money has just disappeared into the Treasury.”
The challenge businesses face is what to do after they have switched to energy-efficient lightbulbs, installed a new heating and lighting system, made sure all the computers print double-sided, installed recycling bins and told everyone to turn off equipment at night.
“Government will be pressurising companies to save more energy,” says Charnock, “so they could go to a green energy supplier, which could mean they are then exempt from the climate change levy.” He adds that if a business is not already saving 25 per cent on its energy bills just by adopting energy-saving techniques, then it has a way to go. “Look at simple things like driving forklift trucks in and out and how you keep a space from losing heat,” he says.
Even people based in rented offices can make a difference when it comes to renewing their leases. “Agents are now offering leases where you can specify you want a certain control of the energy bills. When you are renegotiating a lease or buying a property you can make a difference,” says Charnock.
Putting pressure on supply chains is one way in which businesses are starting to put pressure on each other to turn a brighter shade of green. Cheadle-based creative communications business Fresh is aiming to have all its supplier partners signed up to the ISO 14001 environmental standard before creating a super-green supplier database that will be available to all companies throughout the industry. Managing director Nick Porter says: “The biggest area where we can really make a tangible difference is through our suppliers. It’s crucial we encourage our partners to stand up and be included in the green agenda if we’re to have any chance of making a significant and positive impact on the environment.
“By getting suppliers on board we can approach this issue together as a consortium.
By ensuring the green agenda is an integral part of any business agreement, we’re more likely to get buy-in from everyone. If not, we should have the social conscience to simply turn our backs on those partners and deal with alternative suppliers.”
Since September 2007 the Sustainable Consumption Institute at the University of Manchester has been working with supermarket giant Tesco and other companies on developing an internationally accepted methodology for carbon labelling, a system that would require full knowledge of the environmental standards of every single company in the supply chain.
And the impetus for change can work in the opposite direction too. Some companies are even offering their clients green alternatives, as a sales tool but also as a way of making a difference. Dom Raban, managing director at Manchester design agency Corporation Pop, is set to offer his web design clients the use of solar-powered hosting through a Californian company. He says: “We’re porting our own website over to that in the summer. It doesn’t cost any more, in fact it’s cheaper than most UK hosting. The downside is that the technical support is on their time, but it’s a pretty robust service.”