Maximise your carbon margin

Carbon is likely to stay near the top of the business agenda in 2008. What can you do to get ahead?

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Last Updated: 31 Aug 2010

The most important thing is not to see this as merely a compliance or regulatory issue, according to Arthur D. Little. The management consultancy has identified what it calls the ‘carbon margin’ – which covers not only the impact carbon will have on business and competition, but also the profits available to those companies who play their carbon cards right.

As it says, no business can afford to ignore the issue of carbon emissions - whether you're interested or not. Governments across the world have committed themselves to reducing carbon emissions in the next 10 to 20 years, and the inevitable regulation will change the way businesses have to operate. So to save money, it’s worth thinking ahead.

But there’s more to it than that. The key, says ADL, is to see carbon management as an opportunity, not just an expensive hassle - and that doesn't just mean trading credits. These days emphasising your green credentials is also a good way of winning customers and boosting your brand (ask Sir Stuart Rose, who launched the much-praised Plan A last year) – so you might be able to boost your top line, as well as cutting costs. According to an index ADL’s developed, ‘carbon winners’ are already outperforming their rivals by 20% per year, and this will only increase as the deadlines loom larger.

Sounds good – but how do you go about doing this in practice? The problem, as ADL concedes, is that there’s no ‘one size fits all’ answer to that question. It suggests: ‘Each company needs to identify the strategic options open to its business, and prioritize those options on the basis of a number of attractiveness variables’ – which we think is consultant-speak for ‘pick the best one’.

But these ‘carbon winners’ do have a few things in common, it says. Carbon management is not just delegated to some junior division – the top brass take an active interest, because they see it as ‘a whole-business issue’. They plan for the vagaries of government policy on climate change. They have good monitoring arrangements. And they employ people to predict future trends (rather than relying on past ones) and react to them.

So the moral of the story of is: don’t neglect your carbon margin in 2008. It could be an expensive mistake…

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