Being energy efficient has always made financial sense for industry. The introduction of the Clean Energy Future package and a price on carbon makes it even more sensible. But many businesses will struggle because they lack efficiency skills.
Pricing carbon a spur to efficiency
The Clean Energy Future package provides some necessary certainty to industry participants and the public at large. There are some areas of uncertainty in the package which will need to be thought about carefully by industry participants, particularly around the impact on small to medium businesses and related impacts on consumers.
We believe carbon needs to be priced as a means of changing behaviour. This point is reinforced by recent research conducted at UTS on the largest polluting Australian publicly listed firms.
This research shows that the average firm has become more efficient in recent years, using less carbon per dollar of sales. However, total emissions have increased significantly over the same time period for these firms.
Different business, different approaches
If they want to stay competitive in international markets, firms will have to implement energy efficiency programs and take other actions beyond what they are doing at present to reduce their emissions footprint.
For instance, the carbon tax will provide incentives for the property industry to become more energy efficient to reduce direct costs, and to offer more energy efficiency products to discerning consumers. Building construction, both residential and commercial, will move to the use of less greenhouse intensive materials.
How specific businesses and industries react will be very dependent upon whether organisations in a particular sector and employees in particular roles have the skills necessary to make such a change.
Clean energy funding a big step
The $10 billion allocated to the Clean Energy Finance Corporation is certainly a step in the right direction if we are to move to a low carbon economy.
The Clean Energy Finance Corporation and the associated Clean Technology Innovation Program ($200 million over five years from 2012 13) funded at $200 m over 2012-2013 includes an emphasis on energy efficiency.
By itself the investment in renewable energy technology over five years beginning in 2013/14 is a game changer: it will seed new, risky technologies with the aim of commercialising them. The direct advantages to businesses more broadly won’t be felt for a few years, given the nature of its investments.
In our view, energy efficiency is key to the success of the overall program. In many ways it represents the low-hanging fruit.
The idea that there are benefits of becoming more efficient is a concept that is meaningful across sectors, organisational roles and different professions. It can be taken up relatively readily across the board, providing the organisation has the skills and management awareness to do so.
Getting the skills to help pay the bills
Energy efficiency incentive measures have been in place at both national and state levels for a number of years. But recent research has indicated that business organisations have major gaps in their understanding of energy efficiency and how to apply it in the context of their own job.
Basically it is an area that has been relegated to the technical areas of the organisation, with little communication between such roles and management on its strategic importance to the firm.
In our view, much more specific emphasis could have been placed in the government’s overall package on energy efficiency skills and training.
Accountants and management accountants face major challenges in terms of developing systems of integrated reporting – reporting that integrates environmental and economic metrics.
UTS Business School is working to develop and deliver a comprehensive energy efficiency education and training program for accountants and business managers in NSW.
The UTS project involves UTS Business School and Ernst & Young working in partnership with the Chartered Institute of Management Accountants (CIMA), Westpac and TAFE NSW, Sydney Institute to develop and deliver these materials.
Critically, programs such as this will help business and other industry participants to make the most of the strategic opportunities provided by the Clean Energy Finance Corporation and the Clean Technology Innovation Program.
This may include up-skilling programs for a range of employees, including operational and support staff.
Many firms will need to consider how best they may obtain access to the available funding. Without this, the funding will just go to those businesses already established in the area.
As members of the UTS Energy Efficiency Project Working Party, Anthony Krithinakis and Patrick Crittenden also contributed to this article.