Big Business Moves Beyond Carbon Uncertainty

Uncertainty around the introduction of a carbon pricing mechanism in Australia has resulted in most companies doing little to reduce their environmental impact.

But not at the big end of town.

Our parliament may be descending into confusion but a clear policy is emerging from the corporate world. Major companies are taking decisive steps to manage and mitigate their potential carbon risk. You may not hear about the activities but they are happening and they will effect every business in the country.

Corporate leaders are governed by one simple expectation; shareholders demand returns on their investment. To achieve an acceptable return, executive teams follow a few simple rules; one of which is that every dollar spent in the business must contribute to the overall profit of the business. This is not an oversimplification; even the cost of regulatory compliance contributes to profit because it is part of the company's licence to operate. Without a licence to operate, there is no business and therefore no profits.

So why aren't more corporations marketing their green credentials? Some aren't ready yet, and some are waiting for the right time. We need to remember that any government regulation becomes the minimum requirement; a carbon pricing mechanism, tax or market based, becomes the maximum cost. The competitive advantage is won by the business that goes beyond compliance and sets the industry standard. That business will also gain a cost advantage due to relatively low carbon emissions.

In fact, we are already experiencing a kind of carbon pricing. The costs incurred by large corporations in managing and reducing their carbon emissions must be passed on to the customer in order to maintain margins and shareholder return. However, most models that rely on continuous, beyond normative, price increases are not sustainable, so the corporate will look to turn cost into investment, with returns in the form of efficiency gains and/or improved revenue.

Increased revenue will result from strong marketing and brand positioning. Customers will be encouraged (heavily influenced in some cases) to change their behaviours and attitudes towards the environment thus increasing demand for "greener" products/brands.

The political confusion around carbon pricing is providing executive teams a handy screen behind which they can work to improve their environmental performance. They may share our confusion as to the structure of the predicted carbon pricing mechanism, but they have left uncertainty behind in determining their market position. They're just not that vocal about it yet.

R&D Tax Concessions

Each year billions of dollars in business grants and other funding programmes are available from Australian governments. These funding opportunities are for business activities such as business expansion, research and development, innovation and export.

I am continually finding that while many companies are endeavouring to improve their operations and products, few are taking advantage of their R&D tax entitlement.

In my experience there are two main reasons for this: Firstly, many companies do not recognise the sometimes inherent nature of ther R&D efforts and expenditure; and secondly, the complexity of eligibility and the application process.

R&D, to some degree, is part of business and is often driven by change within a market/industry or from a conscious strategy to:

• Gain competitive advantage
• Develop more efficient systems and processes
• Improve the company's sustainability performance

Whatever the impetus for improvement, it is a good idea to talk to an expert in R&D Tax Concessions in order to prepare and take advantage of our government's generosity.

The following link will take you to a recent article that looks at the Federal Government's R&D Tax Concession initiative in its current structure and proposed changes for 2011.

R and D Tax Concessions: Current and Future