Isra-Mart srl : Failure to measure carbon could cost businesses dear

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Firms that fail to measure their carbon emissions are in danger of losing their competitive advantage and looking like "they don't know what they're doing ", the chief operating officer of the Carbon Disclosure Project (CDP) warned last night.

Speaking at the BusinessGreen.com Sustainable Business Lecture on Carbon and the Future of Business Management, Paul Simpson gave a stark message to those firms not currently measuring their carbon footprint – carbon accounting will become the norm over the next decade and those companies that act first to manage their carbon footprint will reap the benefits.

"From a business and investment perspective, climate change is really the first ever predictable industrial revolution," he said. "We know that we have to change [but] we don't know when, how fast, which technologies. The people who can predict that are going to be the winners in a changing economy. And the people who fail to predict it and fail to understand it are going to be the losers."

Simpson acknowledged that some companies see the process of accounting for carbon emissions as an additional burden, but warned that investors and the public were increasingly demanding that firms track their carbon footprint.

Companies could find themselves missing out on contracts if they do not have emissions targets and plans for cutting carbon, he predicted, but those that did would prove more popular with investors.

"In 2002 we were working with 35 institutional investors with $4.5tr of assets," he said, referring to the CDP's work requesting carbon data from firms on behalf of investors. "We've seen that number grow tenfold now to over 500 investors with $60tr of assets. More than half the world's investing money is asking the companies they invest in to report on this kind of info."

Simpson added that operational efficiencies tended to follow efforts to minimise carbon, citing the example of consultancy firm Logica, which realised $10m worth of savings just by going through the measurement process.

"Carbon reporting is becoming the norm," he said. "Last year in the FTSE500, 95 per cent of companies were measuring and reporting on carbon emissions. So if you're not doing this, there's a real competitive risk. Are you looking like you don’t know what you;re doing?"

Adrian Gault, chief economist at the Committee on Climate Change, warned the liklihood was that those firms that failed to measure their carbon footprint would eventually face mandatory requirements forcing them to report on their carbon footprint.

He argued that the ability to measure carbon would become increasingly important as governments move to put a price on carbon emissions, noting that climate change legislation was likely to get tighter over the next decade.

"I would expect if anything we would move to tighter carbon budgets and targets not laxer targets and budgets," he said.

His comments were echoed by Christopher Norton, a partner at law firm Hogan Lovells, who said that the direction legislation was moving in suggested mandatory reporting would not be long coming.

The Carbon Reduction Commitment (CRC), for which firms have to have registered by today, was the start of this process, he said, adding that he expected the scheme's league table to force companies to act to curb their carbon footprint in order to protect their environmental reputations.

"There is a positive obligation on directors not just to think about financial performance but to think about the holistic performance of their company - the impact on social and environmental issues," he said. "I think that rather than financial implications will be driver for performance under the CRC. "

But Leo Johnson, a partner at financial services firm PWC, argued that all those efforts would come to nothing if companies fail to act on the carbon emissions data they collect.

He said the private sector must be galvanised to invest in low carbon technologies by improving the returns they can realise from such projects.

He cautioned that at the present rate of growth the world would exceed its 2050 carbon budget by 2034, and as a result it now needs to cut greenhouse gas emissions by 3.4 per cent per year at an estimated annual cost of $1.15tr if we are to avoid temperature increases of over two degrees.

"We've got a carbon beer belly. We've binged. We have carbon love-handles," he said. "The question is: can we get back on the carbon treadmill and achieve this level of descent?"