Business must take the lead on carbon management
Most people who followed the Copenhagen climate talks in December will have been disappointed.
While the agreement brokered by the group of countries that included the United States, Brazil, China, India and South Africa and ratified by most of the attending countries is being touted as a success of sorts, it fell far short of the expectations that had built up, and achieved very little in concrete terms.
Now with the World Economic Forum approaching, the issue of climate change and sustainability will once again dominate discussions among the business and political leaders who attend the annual gathering in Davos.
Ever since the 1968 publication in Science of Garrett Hardin’s article “The Tragedy of the Commons,” it has been regarded as virtually an article of faith that only strong national and international regulators can be trusted with the proper management of public resources.
A clear regulatory framework is necessary for businesses to act in competitive environments and maybe at least some pieces of such a framework will be provided in the future. But it was not provided at Copenhagen.
James Madison’s 1788 observation, “If men were angels, no Government would be necessary,” underlines the rationale behind a global framework to limit air pollution. Treaties are valuable in defining what a large-scale, shared objective should look like.
On the regulatory front in the United States, for instance, the Environmental Protection Agency instituted a rule in September that will require the roughly 10,000 facilities that account for 85 percent of heat-trapping emissions domestically to measure and report on those emissions. The first such reports will be due in March 2011 and businesses could face daily fines of up to $32,500 for non-compliance.
In Europe, France and Germany have been calling for a punitive carbon tax on imports into the EU from countries that fail to back international efforts to fight global warming.
However, we as business leaders cannot wait for global regulations to be agreed upon and put into practice. We must act today as carbon management and sustainable business will only become more critical over time.
As the cost of energy has become high and volatile, a careful appraisal of one’s consumption becomes a matter of good, common business sense. It is no coincidence that Boeing and Airbus are now in the midst of a fierce competition to build the most fuel-efficient new airliners possible.
Many large companies are already taking matters into their own hands. The hope of course is that politicians will take note and respond with a global regulatory framework, but business leaders know they cannot wait for this framework before acting.
Retail giant Tesco, for instance, is exerting its market power to mandate that its suppliers reduce the carbon footprint of their products by 30 percent by 2020. For years, Nike has been steadily reducing its total CO2 emissions and its use of volatile organic compounds. At SAP, we have pledged to reduce absolute CO2 emissions to year 2000 levels by 2020 (approximately 250,000 tonnes of CO2).
Fortunately for all involved, better technology and better software are now in the process of making it easier for companies to quickly and accurately report on their carbon emissions with less paperwork, fewer headaches, and at a lower cost – thus making it possible to greatly increase the quality of the available data. This data is the key to the success of any post-Kyoto global climate change framework, enabling companies to align their methodologies with diverse and evolving regulatory requirements.
Some 2,500 companies are already providing data on their carbon emissions to the Carbon Disclosure Project (CDP). Their voluntary participation in this global initiative represents a sea change in the business world’s appreciation of the importance of transparency in environmental matters.
These sorts of advances in data collection and aggregation will result in the availability of accurate information that can easily be appraised and compared by investors, businesses, consumer associations and regulators across the world. These simplified processes, managed by software, will make it easier for companies to benchmark their carbon footprints against their peers and to identify key areas for improvement.
At SAP, I am determined that we will be an exemplar among businesses in how we manage our own carbon footprint.
As business people, we have a chance now to lead the way and create an effective monitoring system.
The challenges we are facing after the failed Copenhagen Accord remain formidable. Now, after global political leaders have failed to find a suitable arrangement, it is in the hands of business to lead the way.