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Getting Momentum on Sustainability

Steve LeeUnited Group Limited

Getting Momentum with Sustainability

Steve Lee

Group Manager HSSE

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Getting momentum…

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Big city lights….

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Influences…

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Risk: Climate Change

• No Action

• Reasonable Action

• Substantial Effective Action

• Radical Action

Consequence

Likelihood

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Sustainable Development

Improving operating efficiencies

To meet the needs of the present without compromising the ability of future generations to meet their own needs." United Nations World Commission On Environment & Development

Reducing the company carbon (ecological) footprint i.e. reduce use of energy, materials, water, waste

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Business imperative

Why integrate sustainability into the business?

• Investment groups with increasing expectations

• Compliance to current and emerging legislative requirements

• Compliance to current and emerging company reporting requirements

• Large company demand & competitors adopting progressively

• Opportunities for product and service

• Opportunities to improve internal efficiency

• Potential for positive marketing influence

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Business as usual…!

In the context of the businesses we are involved with…

• Electricity use – eg lighting, fixed equipment, air conditioning, hot water

• Fuel use – eg petroleum, diesel

• Green house gas contribution - LPG gas, CO2,

• Consumption – paper, air travel, bulb replacement, petrol, etc

• Resource use – eg water,

• Waste output reduction, recycling

• Impact of ETS on prices of energy

• Financial impact/increase – rising power & fuel costs,

• Identify environmental impacts in current operational facilities.

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Australian response so far…

• Energy Efficiency Opportunity (EEO) Act (2006)Federal Govt – Dept focussed to improve their energy efficiency on top ASX high energy consuming businesses & industries using over 0.5 Petajoules (PJ) of energy (electricity & gas sources) per year. Required to evaluate & publicly report on cost effective energy saving opportunities.

• National Greenhouse and Energy Reporting (NGER) Act (2007)Federal Govt – Dept of Climate Changefocussed on establishing a single, national system for reporting greenhouse gas emissions, abatement actions, and energy consumption and production by Australian Corporations from 1 July 2008.

• Australian Emissions Trading Scheme Legislation in 2009focused on implementing ETS.

• Reporting on Carbon Disclosure and Corporate ResponsibilityIncreasing demand by investment organisations requiring more information to accurately evaluate company non-financial related performance with respect to sustainable development and corporate governance.

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Australian response so far…

• Energy Efficiency Opportunity (EEO) Act (2006)

• National Greenhouse and Energy Reporting (NGER) Act (2007).

2008 0.50 PJ energy(=125,000 T CO2 )

2009 0.35 PJ energy

2010 0.10 PJ energy

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Progress to ETS

Reduce Australia’s GHG emissions by 60% by 2050

Key steps

Commencement of Mandatory Reporting (NGER) July 2008

Public release of a Green Paper on ETS design (Garnaut Report)

July 2008

Consultation on Green Paper (Garnaut Report) July to Sept 2008

Public release of exposure draft Emissions Trading (ETS) legislation

December 2008

Provide firm indication of medium term trajectory By end of 2008

Bill for ETS considered by Parliament March to Mid-2009

Consultation on ETS regulations 2009

ETS Act enters into force, regulator established 3rd Quarter 2009

Emissions Trading Scheme (ETS) to commence (using Cap &Trade)

2010

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Sustainable Development

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Direct & Indirect Effects

Direct effects of a Price of Carbon

Upstream Pressures• Suppliers will pass on cost of carbon

– Materials – particularly those with high energy inputs such as cement, aluminium, steel

– Electricity – liability of electricity producers, power rates increase

– Fuel suppliers – potential increased costs from upstream liability

• Certain materials may develop higher demand because of use in low emission activities

– The development of the ethanol industry in Australia may push up the price of sugar

– Potential increased competition for forest resources because of forest sink activities or biomass fuel source Increase price of timber

– Switching to gas from coal as a higher energy source

– Solar energy capturing materials,

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Indirect effects of a Price of Carbon

Downstream Demands

• Customers want products and services with lower costs. Carbon price impact on energy costs gives incentive to purchase low emissions products and services to avoid a carbon liability on your business.

• Environmental sustainability demands

– Rise of carbon neutral and emissions reduction programs in the corporate world

– Companies that have made carbon neutral pledges include HSBC, Swiss Re, IAG and NewsCorp

– Companies will increasingly want products and services that help reduce their carbon footprint

– Large companies exerted pressure on their supply chain eg WalMart working with manufacturers and freight service providers

Direct & Indirect Effects

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Some steps to take a reasonable response in assessing the risks and opportunities and developing a carbon management strategy:

1. Measure and monitor carbon footprint – your energy usage

2. Ensure carbon data is independently audited

3. Forecast carbon growth and set reduction targets

4. Assign costs to abatement opportunities

5. Report carbon data internally and externally

6. Create a senior carbon management position

7. Track competitor’s responses

8. Price carbon into investment decisions

9. Identify and leverage new carbon opportunities (avoid green-wash)

10.Review progress on carbon targets

Carbon Management Strategy

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Progress to Date

Working Group established - June 2007

Energy assessment data for UGL operations – Nov 2007

UGL Sustainability Program Paper – Feb 2008

Intranet – internal communication on sustainability – March 2008

Sustainability Manager initiated – May 2008

Sustainability Program commenced – May 2008

Collating current UGL activity and initiate both short and long term actions

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Key actions

Key Actions

1Corporate Sustainability Manager,Establish a UGL Sustainability Steering Committee

2Formal reporting be established for energy consumption Data to be collected and collated for end of quarter reporting

3 Detailed strategy and initiatives communicated

4Initiate reporting for identified resource consumption ie photocopier materials, lighting replacement, air travel.

5 UGL Sustainability integrated into business planning activities

6Formal reporting processes on progress against sustainability actions to be established on a quarterly basis

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Summary

Identify your exposure to Federal Govt progress with EEO and business impact from the ETS

Assess the impact of projected energy costs increases on your business (cost to operating/manufacturing and price increase products)

Carbon reduction is a business efficiency issue

Carbon Management Strategy a good process to use

Broaden the efficiency assessment to include other resources you use

Define participation with your business units with efficiency initiatives

Employees need communication and participation opportunities

Evaluate if there are new business opportunities and impacts

Public company communication - prepare to adopt a corporate reporting standard ie Global Reporting Index (GRI) or similar