As you know, this is the first financial quarter since the Australian Government introduced a carbon price. The price will apply to certain greenhouse emissions, with some large businesses required to purchase carbon credits against their emissions. Most companies have a good understanding of their immediate carbon emissions and energy use, but few have more than a general understanding of their upstream (Scope 3) exposure. This presents a risk as they will be exposed to increasing costs from upstream carbon price costs being passed down.
Until recently, few businesses have done anything in response to the carbon price, to integrate its real or potential impact into their long-term strategies[1]. Your company is and will be affected, although not directly as only the largest emitters are, but the price will be felt through your supply chain. This may also be a golden opportunity where your competitors take a hit and you remain competitive.
Edge Environment has found that medium sized producers can have between $100k to $1M worth of carbon in their supply chains each year according to Jonas Bengtsson, Technical Director at Edge. While not all of this carbon is liable under the carbon price mechanism, some businesses may choose to absorb additional costs associated with the carbon price, while most others will pass them on by increasing the price of their goods and services.
In addition to this, the Australian Competition and Consumer Commission (ACCC) made a very strong commitment to dealing with and potentially punishing any businesses that try to falsely claim cost increases as a result of their carbon price[2], making it more challenging to pass on the real costs from carbon price increases along supply chains. However many retailers and customers are prepared to meet carbon price pass through, but will require strong evidence to support claims they are faced with.
Edge Environment can help map out the carbon and energy flow from your supply chain to determine your real exposure based how and where the emissions occur.
Using Life Cycle Environment and Cost Assessment Edge can help you:
- Validate and prepare for carbon pass-through costs from your suppliers. Again, not all carbon in your supply chain should have a price and you will be in a stronger, better informed position
- Establish your life cycle carbon hotspots to identify key suppliers exposed to carbon price costs and the potential value of price pass troughs
- Substantiate the carbon price you can legitimately pass on to your customers. A business that makes a good faith, reasonable approach to calculating the carbon price for their business has nothing to fear from the ACCC
- Provide information and education on the real effects of carbon price in your supply chain on your bottom line.
“A stray comment from an employee that casually refers to price increases as being carbon related when they are not could result in a complaint to the ACCC,” Rod Sims, ACCC Chairman.
Edge Environment is a leading Australian sustainability consultancy. Our clients include the Australian Food and Grocery Council, Lion Nathan National Foods, and Inghams Enterprises. Internationally Edge are working on the Sustainability Index with Walmart and the Sustainability Consortium.
Edge Environment have decades on combined experience and expertise working with leading companies to deliver tools and information for product innovation and sustainable procurement.
We would appreciate the opportunity to discuss how we can help you respond, adapt, manage and benefit from the carbon price.