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On Target Oct - Nov 2007
 The impact of the Kyoto protocol on business
The Earth and all life that occupies it, require the gases– water vapour (the main greenhouse gas), methane, ozone, carbon monoxide, nitrous oxide and carbon dioxide (CO2) – generated via the greenhouse effect. The Earth manages to regulate concentrations of greenhouse gases through a system of sources and sinks. In nature, carbon (in the form of CO2 and methane) is sourced or emitted by burning and rotting of vegetation and other organic matter (called Carbon Sources). Conversely, CO2 is absorbed (or sequestered), by trees, plankton, soils and water bodies, which are termed 'Carbon Sinks'. Increases in CO2 emissions are a result of either nature (e.g. volcanic eruptions) or the actions of mankind (e.g. the burning of fossil fuels such as coal, oil and natural gas), and thus could be 'mopped up' only by the increased capacity of sinks, via growth of forests, or increases in water bodies (and the plankton within) in which CO2 could be stored or dissolved.
In recent times the burning of fossil fuels like oil– in which CO2 has been stored for millions of years – has led to unprecedented levels of greenhouse gas emissions in the atmosphere which, according to most scientific studies, the current CO2 sinks just cannot keep up with. This is more so when combined with the accelerated land clearance and urbanisation taking place worldwide to house an ever increasing population.
This imbalance calls for greater attention and precautionary measures to be put in place. The international response has been the Kyoto Protocol under which over 150 countries have agreed to strive to decrease CO2 emissions, accounting for an estimated 55 percent of global greenhouse gas emissions. Under the Kyoto Protocol, a country can emit more CO2 than its assigned amount only if it can simultaneously sequester the equivalent amount in 'allowable' carbon sinks, which include afforestation and reforestation activities undertaken since 1990. Note that these have to be 'incremental', i.e. a new tree planted. Pre-1990 trees still existing are not considered as sinks for carbon credit purposes. Some developed countries are giving developing countries 'grants' to use in preventing illicit logging. Such grants are outside the Kyoto protocol.
The USA and Australia are among the group of countries that have not, as yet, ratified the Kyoto Protocol. Some developing countries, such as India and China, have ratified the protocol but are not required to reduce CO2 emissions under the present agreement, despite their large populations.
The flow-on effects of the Kyoto protocol is that governments, business entities and consumers would need to consider the precautionary measures that need to be incorporated in their regulatory and decision making process to meet the international requirements. Governments need to consider 'carbon regulation' issues such as rationing or taxing of net- CO2 emitting entities (both organisations and individuals) and providing credit allowances or tax-breaks for net- CO2 absorbing entities.
Business entities need to consider issues such as trading in carbon allowances (or permits), investment in low- CO2 emission technologies, counting the costs of carbon regularity compliance and passing on the increased cost of carbon regulation to consumers through higher prices. Note that what is traded in 'carbon trading' is not actual carbon, but the right to emit CO2. The basic unit therefore, is one tonne of CO2 per year.
Consumers need to consider if, given a choice, they are willing to pay a higher price for CO2 neutral products and services so as to play their part in reducing CO2 emissions. For example, In Australia, Intrepid Travel, a tour operator, has added a compulsory fee in order to purchase carbon offsets, ranging from A$60 for a return ticket between Melbourne and Bangkok to A$ 180 for a return ticket between Melbourne and Paris. The company says that customer reaction has been mixed amongst different demographic groups, with non-business customers between 20-60 largely accepting the levy.
The Kyoto Protocol provides for three mechanisms that enable developed countries with quantified emission limitation and reduction commitments to acquire greenhouse gas reduction credits as follows:
Joint Implementation (JI): Here a developed country (say USA) with relatively high costs of domestic greenhouse reduction would set up a project in another developed country (say Australia) that has a relatively low cost, such that the CO2 emission of the project is counted within a country that has a surplus.
Clean Development Mechanism (CDM): Here a developed country (say USA) can take up a greenhouse gas reduction project activity in a developing country (say China) where the cost of greenhouse gas reduction project activities is usually much lower. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital and clean technology to implement the project. This has funded hundreds of projects that save about 104 million tonnes of carbon. However, there have been some concerns with CDM schemes. A recent study found that factories in China were using relatively cheap cleaning systems and then exploiting a loophole to claim carbon credits amounting to more than US$700 million.
International Emission Trading (IET): Here countries can trade in the international carbon credit market. Countries with surplus credits can sell them to countries with quantified emission limitation and reduction commitments under the Kyoto Protocol.
.... In the next issue of On Target: Carbon Emissions Trading
Griffith Business School
Symposium on Accountability, Governance & Performance
15 February 2008 | Sofitel Brisbane
Leaders from government, business and academia will gather to debate and discuss the subject of sustainability from both public sector and private enterprise perspectives. Long-term sustainability and good governance are integral to organisational success, and remain key challenges.
REGISTRATION - Now Open
See the website for more details: http://www.griffith.edu.au/school/gbs/afe/symposium/2008
About the symposium
The Symposium is hosted by the Griffith University Accounting, Finance and Economics, Griffith Business School and is held on a biennial basis. The Symposium presents opportunities for information dissemination, discussion and debate on issues of accountability and performance in the public sectors nationally and internationally. It also provides an opportunity for networking amongst the public sector, private sector and academia.
The Symposium will feature presentations from academics and practitioners in the public sector. The theme for the Symposium aims to cover topics such as accountability in the public and private sectors, corporate governance, fraud, fiscal responsibility and transparency, performance management, the balanced score card, ethics, audit, shareholder rights and action, directors' responsibilities and conflict of interest and risk management.
This is a unique symposium in Australia that specifically brings together these three important sectors of the community.
Sustainability Workshop
Developing Effective Strategies and Policies for Organisational Sustainability
Presenter: Charlie Hargroves, TNEP
Both public and private sector entities are increasingly challenged to meet organisational sustainability. This workshop will focus on practical ways to develop effective sustainable business strategies and policies . During the workshop, participants will learn the basic tools and processes needed to facilitate constructive debate on policy formulation and direction setting as well as selecting the most effective implementation strategies taking into consideration the needs of key stakeholders.
The 2-hour workshop will be interactive and will highlight the challenges faced by senior management in meeting corporate sustainability.
Charlie is a co-founder and the Executive Director of the Natural Edge Project (TNEP), and Australian based Sustainability Think-Tank hosted in-kind by Griffith University and Australian National University. TNEP operates as a partnership for education, research and policy development on innovation for sustainable development. Charlie is also involved in the Post Graduate Intensive Short course program at Griffith School of Business which is focused on equipping students with the skills that underpin their roles as policy makers.
Bookshelf
Management journals now dedicate significant space to managing innovation. The Fall 2007 issue of MIT Sloan Management Review is no exception.
Some would say that almost all inventions provide no value, a few are of moderate value and only very few are 'breakthroughs', and these are hard to predict. An article in this issue by Lee Fleming (Breakthroughs and the 'Long Tail' of Innovation) argues that businesses need to understand the factors which can affect 'inventive output'. These include the type of collaboration among inventors who work in teams and the amount of team diversity. While greater team diversity will help generate a greater number of inventions, on average these will be less successful. But diversity also will increase the variance of the outcome, such that failures as well as breakthroughs are more likely. Understanding the team and other factors discussed should help those who want to improve the innovation process.
Of course, inventions and other innovations must be approved by decision makers before they are implemented. In doing so, experienced executives sometimes draw on their intuition, especially when 'the numbers' yield questions rather than answers. Another article, by Kurt Matzler and others (Intuitive Decision Making), notes that the idea that executives could base decisions on intuition has lost favour as our ability to mine and analyse data has increased. The article aims to clarify the nature of intuition, arguing that intuition is not a sixth sense, the opposite of reason, or 'whimsical' decision making. Rather, intuition is a complex form of reasoning that is based on experience and learning, and on facts, patterns and concepts 'in the decision maker's head'. The authors draw on examples from the worlds of chess, neuroscience and business to show that intuitive decision making should not be 'buried'. They note studies which reveal ingredients critical to the development of intuition: experience, personal and professional networks, emotional intelligence, a tolerance for mistakes, a healthy sense of curiosity, and a sense of the limits of intuition. While businesses should continue to mine and analyse data, they should not overlook the value of intuition.
Bill Richardson
What’s On?
7th November, 2007
Melbourne, Australia
ICMA AGM
9th - 16th December,2007
Delhi, India
CMA Symposium on Advanced Management Accounting and Advanced Strategic Management Accounting conducted by CMA India
17th – 23rd December,2007
Dubai, UAE
CMA Symposium on Strategic Cost Management and Strategic Business Analysis conducted by CMA Dubai
10th - 17th February,2008
Mumbai
CMA Symposium on Advanced Management Accounting and Advanced Strategic Management Accounting conducted by CMA India
15 February, 2008
Brisbane, Australia
Symposium on Accountability, Governance and Performance
Conducted by Griffith Business School
Feb, 2008
Venue: TBA, UK
CMA Program on Advanced Management Accounting conducted by CMA Europe
Feb, 2008
Venue: TBA, UK
CMA Program on Advanced Strategic Management Accounting conducted by CMA Europe
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