Economy

SMEs need to be ready to green their business – but don’t panic

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As the hype grows around the need for companies to take action on carbon emissions, the nation’s small and medium sized enterprises are being told that their large customers will force them to act. But how soon? And how should they prepare?

As the hype grows around the need for companies to take action on carbon emissions, the nation’s small and medium sized enterprises are being told that their large customers will force them to act. But how soon? And how should they prepare?

The Australian Institute of Management in Victoria and Tasmania warns that while few SMEs will be on the list of the 1000 companies the Government will be placing carbon pollution controls on, all SMEs will soon feel the flow-on impact of the new scheme, and their managers need to be ready for it.

AIM claims that some of Australia’s major companies have placed strict environmental requirements on their supplier organisations under the banner of “sustainable supply chain management”.

The CEO of AIM for Victoria and Tasmania, Susan Heron says: “Now that the details of the Government’s plans for its emissions reduction scheme are known, we can expect that more and more of our bigger companies will follow suit and require their suppliers – many of which are SMEs – to prove that they too are reducing their carbon footprint.”

The program manager of VECCI’s “Grow me the money”, Gemma White, says she has just returned from a conference in London on greening supply chains. “The large companies that attended like Nestle and Coca-Cola want to green their supply chain. They are looking at their own environmental performance and now they are looking outside their own companies to that of their suppliers, and putting pressure on them. Most multinationals are moving in this direction.”

She says the companies’ first step is to look at their agricultural suppliers and factories and their impact on the environment. The next step will be to look at other suppliers. “We have heard of companies that have national offices reporting to overseas head offices that are being influenced to green.”

She says that SMEs will start to get pressure from local branches of companies headquartered overseas. “Companies headquartered in Europe for example are moving very quickly on this because there are more regulations there.”

The problem for SMEs is having to produce reports to a whole lot of different companies measuring the environmental footprint or carbon emissions to fit their specific requirements. The solution is for tools to be developed that can standardise measurements.

White says that they have not had any SMEs report that they are being pressured by suppliers to measure their carbon footprint. “It is a perceived pressure. They expect it to happen and want to be proactive,” she says.

Jonathan Jutsen, executive director of consultancy Energetics, says he is seeing companies that are being asked by suppliers for Life Cycle Analysis reports. Some financial institutions have already requested this type of information from their suppliers.

He is also seeing retailers increasingly interested in the environmental footprints of their suppliers. “For example retailers in Britain are looking at carbon labelling. Woolworths is looking at the feasibility and benefits of carbon labeling and Tesco is a long way down the track on this.”

Ikea has done some work on its total emission footprint, which also includes the impact of customers coming to their stores. For example it has done a lot of work on ensuring people can catch public transport for its new stores. “Ikea is are also looking at how they get their products to customers so they don’t drive to the stores and pick them up,” Jutsen says.

But he says SMEs also want Life Cycle Analysis reports for other reasons. “Energy costs are escalating and for many SMEs, while it has been a low cost in the past, it is going to be a much bigger cost.”

Also consumers are turning towards carbon friendly products and services, he says. Companies that want to appeal to these consumers must make sure they do not run into an ever-vigilant ACCC and their claims are supported by rigorous methodologies.

The message for SMEs? Tune in, listen to your supply chain and customers about their expectations and monitor your own energy costs. There could be a host of benefits from being an early adapter, including the satisfaction of doing your bit for the environment.

But be wary of spending too much on over-hyped consultants. And don’t make claims you cannot substantiate.

 

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