PracticeAccounting FirmsGreen light: Whose carbon is it anyway?

Green light: Whose carbon is it anyway?

Today's big businesses' efforts to reduce the environmental impact of their activities are being driven by more than just an ethical imperative - it makes good business sense too

Customers are aware of green issues and are increasingly demanding
environmentally friendly products and services.

With soaring energy costs squeezing margins, ethical investors putting
pressure on businesses to cut back on the environmental damage they do and
harder-hitting legislation on the cards, big businesses are ensuring that
reducing carbon emissions forms a central part of their corporate strategy.

Any successful carbon strategy must be measurable and based on accurate data.
Without effective measurement it is impossible to understand the financial
implications of any initiatives.

Shareholders are demanding companies outline their carbon footprint as part
of their annual report. Therefore the same rigour that is applied to reporting
on financial performance will be expected when accounting for carbon.

Unfortunately, measuring carbon emissions isn’t like checking the gas meter.
Companies often look internally to cut back on carbon emissions, for example,
using greener fuels and energy efficient measures. But to really get their
aspirations on reducing carbon emissions to grow exponentially, businesses must
use their influence as customers to encourage suppliers to reduce their carbon
emissions too.

Forthcoming legislation will see many more organisations compelled to reduce
carbon. For example, from April 2008 all large public buildings such as
libraries or council offices will have to display energy performance
certificates which will rate the buildings energy efficiency level and display
energy certificates that show the actual energy usage.

We are already seeing a demand for accurate management information on which
to develop reduction strategies including investment decisions, tax
considerations and offsetting.

The pressure from consumers that has fuelled carbon reduction and climate
change initiatives is already impacting a number of sectors and the government
has made it clear that some form of regulation isn’t far behind. Whether it is
getting to grips with your own carbon number, understanding what financial
savings are achievable and how best to account for carbon, carbon accountability
requires a strategic approach that should influence every corner of an
organisation.

Alan Buckle is chief executive of KPMG Advisory
Europe

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