Isramart : Prepare your business for the new cost of carbon

Isramart news:
In the near future, carbon won’t be free. Governments will tax it and retailers will mention carbon content on their product labels. Business customers will demand transparency about the way carbon is used in supply chains. Already, consumers have started to make decisions based on the presence of carbon in the products they buy. These trends will drive new costs and shift the playing field for every business—sometimes in unpredictable ways.

If you haven’t started planning for a post-carbon world, now is the time. To prepare for this new future, executives must:

1. Reevaluate existing products. The carbon intensity of some products, and of their production and distribution, will lead to cost hikes that will make these products uncompetitive. Others will be marginalized when cost hikes either erode product margins or reduce consumer demand. Most firms will find it necessary to withdraw from particular markets, or develop replacement products.

2. Rethink investment priorities. Companies will boost investment in order to create new products or production processes that revitalize their portfolios. And with the declining value of assets that support carbon-intensive production, many firms will be forced to repair their balance sheets.

3. Make innovation central to your strategy. New technologies that mitigate the impact of carbon emissions will be a growing source of competitive advantage. At a minimum, the carbon tax will force firms to replace existing products and distribution methods with newer, less carbon-intensive versions.

4. Engage constituents in an ongoing conversation about sustainability. Navigating the world of sustainable business operations means participating in continuous, authentic conversations with a broad range of constituencies (including business partners, nongovernment organizations and customers) about what they care about and what you’re doing about it. These conversations will help you sense shifts in public opinion that could pose a problem (or an opportunity) for your business.

5. Realize that success will depend less on operational excellence. Raw materials and commodity goods will become more expensive (and more regulated) based on their carbon footprint. These cost increases will hamper margin improvements made through traditional operational mechanisms. Companies will therefore need to rely on new profit-maximizing tactics.

6. Plan for different scenarios. Consider evaluating choices through scenario planning, rather than traditional forecasts. Seek tighter relationships with value-chain partners, as well as opportunities for risk sharing and cooperation in areas that will drive growth.

The implications of running a profitable business in a post-carbon world are bigger than most executives recognize. Business leaders need to plan now for how they will adjust to these new economic realities before they’re forced to make tough decisions no leader wants to make.