Climate change is not only a threat to the future existence of humanity, but for CEOs and shareholders, it threatens the future prosperity of their businesses. If you think that is reason enough to act, you’re right.
While companies like Exxon have actively resisted changing their operation for fear, perhaps, that reducing carbon emissions will be catastrophically expensive, there is mounting evidence that being carbon-responsible is a necessity if you plan on turning a profit in 10, 20, or 30 years from now.
On the flipside of the Exxon coin you’ll find BHP, which is spruiking its green credentials today with the release of a revised climate policy, which includes a $360 million commitment to developing clean coal technology. And yes, they want us to know about it.
This morning’s The Australian offered the front page of its business section to BHP CEO Chip Goodyear, who writes: “Businesses have a key role to play in (developing technologies that will minimise carbon emissions without stifling economic development) by facilitating such innovation.”
But without regulatory pressure forcing them to act, why are businesses taking such concrete steps while the Government fiddles at the fringes?
“All of these things have long lead-times so if you don’t move now someone else will snap up all the bargains or you won’t be ready and you’ll get hammered in the marketplace,” says Tristan Edis, policy and research manager at the Business Council for Sustainable Energy.
“Emissions trading is about making environmental value become a financial value, and that’s what it’s about. It’s purely about bottom line. It’s about businesses getting themselves to a point where they can benefit or at least cover their loss.
“For example, AGL recently spent at least a billion dollars buying up Southern Hydro, which alongside its hydro power had a host of wind power projects ready to go. There was a sound fundamental underlying business there without the carbon price, but at the same time there was an upside to the business. When people start putting a much higher value on low Greenhouse emissions energy, this business will be worth a lot more.”
Edis says it’s not so much about business improving its environmental credentials, it’s all about the financials. Saul Eslake, chief economist at ANZ, says that’s why business is leading government on the issue. Unlike politicians, CEOs work within much longer timeframes.
“Governments tend to have a three-year time horizon whereas business looks at investment over decades,” Eslake told Crikey. “A company like BHP, in contemplating investments which might have a fifty-year time span, needs the certainty that only governments can give.
“In that, business has been saying publicly through organisations like the Business Council of Australia that the Government needs to come up with targets. Business can impose targets on itself, but in order to make potentially expensive investment businesses need to have some certainty about the regularity environment.”
And the natural environment, of course, is also a beneficiary.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.