Australian business hit with $7bn emissions bill

Rush to meet carbon reporting rules angers business

Australian business will be forced to spend up to A$7 billion (NZ$8.4 billion) rebuilding corporate computer systems and overhauling workplaces to meet the government's stringent new greenhouse gas reporting requirements.

New regulations compelling companies to report their energy use and emissions begin in a little over two months, but the reporting guidelines have yet to be finalised and the federal government's online database for reporting greenhouse data still needs to be upgraded for the new requirements.

Many of the big companies that will be the first required to comply with the National Greenhouse and Energy Reporting System (NGERS), which starts on July 1, have demanded significant changes to the proposed reporting standards, labelling some aspects of the system "unworkable" and "impractical".

Boral, Babcock & Brown, Telstra, Leighton Holdings, ExxonMobil, Theiss, National Australia Bank and BHP Billiton are among those calling for changes.

"Despite Boral reporting energy and greenhouse data for more than 10 years, it is extremely unlikely we will be able to set up and implement new systems before July 1, particularly because of the absence of any guidance around auditing requirements to enable us to understand the level of accuracy of data required," Boral's general manger of environmental services, Richard Strauch, says.

The Australian federal government last week announced a measure aimed at easing the reporting burden on companies.

The reporting requirements for those companies in the the voluntary Energy Efficiency Opportunities programme — designed to improve energy use by big energy-using businesses — will be aligned with those under NGERS, meaning businesses will need to report data only once.

The managing director of information technology consultancy S2 Intelligence, Bruce McCabe, estimates that by 2015 Australian businesses would have spent A$7 billion modifying business applications and instrumenting their operations to capture information on power consumption and greenhouse emissions.

"These challenges are set to become widespread in coming years as new reporting requirements extend to medium and even small businesses, meaning most business accounts will have to collect data on energy use and carbon footprint," McCabe says.

Preparing a business to comply with the new reporting standards would include installing dozens of sensors on every floor of office buildings so that information on energy use is captured in real time and fed into financial applications that could then price and trade carbon. There are fears some companies will struggle to comply with the NGERS system.

"Many companies will be part of the process for the first time and there is concern amongst industry that it is not properly prepared " the Australian Chamber of Commerce and Industry's director for industry policy and economics, Greg Evans, says.

Orica's group sustainability and carbon trading manager, Peter Hader, saiys "we are spending a lot of time and money on all this to make sure we are compliant so I can see why it could be a problem for some smaller companies".

Some of the country's biggest companies have made submissions to the federal Department of Climate Change's Greenhouse and Energy Reporting Taskforce, calling for changes to proposals for the system to help them adhere to the new regime. These submissions are in response to a recent regulations policy paper issued by the department.

Boral warns that a proposed requirement to break down its energy and emissions data into industry classifications, both at state and site level, differs from that used by other Australian reporting systems and increases the compliance burden.

The submission notes: "Boral's major concern with the proposed approach is the substantially more complicated layers of reporting that would be created."

Particularly contentious is the concept of operational control, which is used to determine which entity's emissions a company is responsible for. Leighton Holdings, for instance, notes that operational control is difficult to determine on a mining site and the effort to do so "is contrary to the object of providing transparency of emissions and reducing red tape".

From July 1, hundreds of big companies that meet certain thresholds must start keeping records of their emissions and energy use under the NGERS regime. Companies will have until October next year to report on their emissions for the 2008-09 financial year.

Woolworths group sustainability manager Armineh Mardirossian said one major hurdle is simply determining where responsibility for one business's emissions ended and another's began.

"Every company has a supply chain and is, therefore, faced with the question of where to draw their boundary of responsibility," Ms Mardirossian says.

Then there's the technology, which computer systems integrator Logica's senior Australian business consultant for emissions management, Paul Glover, says software developers and their customers may need to create on the fly.

"With the onset of the emissions trading scheme in 2010 you have a price attached to carbon and as such you will need to incorporate the cost of carbon into your business. Every business decision needs to account for the cost of carbon," he says.

"[But] to my knowledge there doesn't appear to be any direct application that allows you to recover the cost of carbon."

Logica is working with Ford Australia, among other organisations, to help the company take the first step towards carbon trading in July when about 450 companies must start collecting data on their emissions under NGERS.

German software giant SAP, whose accounting systems are widely used in the public and private sector, is also promoting emissions tracking technology.

But the head of solutions in SAP Australia's office of the chief financial officer, Stefan Goehring, says many businesses were already behind in meeting the July 1 deadline.

"The new regulations probably will affect around 700 companies [by 2010-11] and I would assume that at least 50% or 60% of them haven't done any emissions reporting before," Mr Goehring says.

A spokeswoman for federal Minister for Climate Change and Environment Penny Wong says the department would consider corporate Australia's concerns.

— Australian Financial Review

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