42 Degrees - Business from a different angle

Scarcely a day goes by without some new environmental horror story being revealed in the media. Yet recent research suggests that UK businesses are still giving global warming the cold shoulder.

A survey of small firms by a leading UK insurance company found that while 85 per cent of them are aware of climate change, 74 per cent don't see it as a serious threat and nearly half (46 per cent) believe that the threat has been blown out of all proportion.

The findings are particularly surprising given that the research was carried out in areas that have been subject to exceptional flooding in recent years – areas where you would expect businesses to be especially sensitive to the issue.

Yet the government says the average costs to SMEs of climate-related business interruption soared by almost 60 per cent in the four years to 2005, and costs related to flooding are set to rise eight-fold to £42bn a year by 2080.

Perhaps the problem is that SMEs see the issue as the preserve of environmental do-gooders or as an ethical rather than a commercial concern. If so, they are wrong, warns Matthew Farrow, head of energy and environment policy at the Confederation of British Industry. "It is an issue related to business costs and long-term strategic planning. There is no doubt that some of the impacts of global warming could be extremely severe. If you take the long-term future of your business seriously you need to be thinking seriously about what your business can and can't do to be part of the solution."

Unlike their larger rivals, smaller companies cannot afford whole departments dedicated to reducing their environmental impact. However, there are relatively easy and inexpensive measures available to businesses that can significantly reduce the effects of their carbon emissions.

Second only to basic energy savings (42 degrees, issue 5) comes the idea of carbon balance or offset. A carbon offset cancels out the release of carbon dioxide (CO₂) by avoiding the release of, or removing from the atmosphere, the same amount of CO₂ somewhere else. At its most basic, this means using trees to soak up excess carbon dioxide. It is estimated that one broadleaf tree will absorb between three quarters and one tonne of CO₂ over its lifetime.

So let's imagine that yours is a small business with an average ‘carbon footprint' (the total amount of CO₂ emissions arising from all its activities) of 30 tonnes a year. In theory, at least, all you have to do is plant 30 new trees every year and, hey presto, the effect of that carbon will be neutralised.

The cost is suprisingly small. Carbon offset and carbon balance companies charge between £8 and £12 per tree. So your company could balance its emissions for around £300 a year.

Hardly surprisingly, carbon balance has become a huge and rapidly expanding industry. The World Bank estimates the global carbon market, of which tree planting is just one part, to be worth $11bn at the end of 2005 – ten times the value of the previous year.

It all sounds almost too good to be true and there are immediate major business advantages in carbon offsetting. For one thing, consumers love it. "One in three consumers say they would switch brand allegiance on environmental grounds if a company they regularly buy goods and services from fails to deal with their emissions," says Mark Simpson, a director of carbon balance company co2balance. "Being sustainable not only keeps current customers loyal, it also raises your attractiveness to new customers and motivates staff."

But there are also problems with offsetting. To begin with, it takes years for a tree to soak up the carbon you produce in just one. Mark Simpson estimates that a tree planted today won't start reducing CO₂ for six years but, he argues, that's not a reason to put off action. "If everyone offsets all of what they produce, we'll start reducing CO₂ levels within six years," he says.

Also there are problems in policing and auditing plantings. Some high-profile offset schemes, particularly those in the developing world, have run into problems amid allegations that some of the trees are not planted, that many are not properly cared for and that huge monocultural (one type of tree) forests cause environmental problems of their own.

"That's why you should insist on planting mixed forests on land in the UK," advises Simpson.

But probably the greatest concern, say environmental campaigners, is that businesses might see carbon offsetting as a sort of environmental 'get out of jail free' card. "We are concerned that purchasing offsets can be seen as an easy way out for governments, businesses and individuals to continue polluting without making changes to the way they do business or their behaviour," says Germana Canzi of Friends of the Earth.

Even those in the carbon offset industry agree. "The danger is that this is seen as a quick fix. It's not. We prefer companies to look at reducing their carbon footprint and then offset their residual carbon use," says Simpson.

But that's in an ideal world. Reducing the impact your business has on the environment is a long and difficult journey and it makes sense to do the easy things first. Just make sure that's not all you do . . .