Manufacturing News

Carbon has a nasty surprise in store for SMEs

Experts from industry, academia and carbon consultancies agree the cost of the carbon trading scheme will hit small and medium size enterprises (SME) from two directions.

Ahead of Melbourne’s Carbon Reduction & Trading Conference and Expo, which will help SMEs come to terms with the new carbon economy, experts say large business will pass costs both up and down the supply chain, affecting customers and suppliers.

The National Centre for Sustainability’s Richard Lester says large emitters caught under the proposed new laws are already beginning to put pressure on smaller suppliers to minimise their carbon footprints.

“While the National Greenhouse Energy Reporting Scheme (NGERS) and Carbon Pollution Reduction Scheme (CPRS) legislation, at this stage, only have a direct impact on fairly large organisations, we are increasingly finding small to medium enterprises that supply goods and services to larger companies and to government are being asked to provide quite detailed information on their carbon footprint,” he said.

“I expect that it will get to a stage soon when many tenders will require this kind of information. In fact, we are seeing this happen already, particularly in the government sector.”

Jesco d’Alquen, CEO of carbon management technology firm, Tradeslot, says that a key part of that information will be the embedded carbon costs in goods and services.

“This new market will provide a single leveller — the cost of carbon per tonne. All companies, big and small, will need to think beyond purely the footprint and determine their cost per tonne.

“Your competitors will be asked the same questions and whether or not you remain competitive is largely driven by a) how cost effectively can you run abatement products and b) how proficiently you can participate in the carbon market.”

Carbon Reduction & Trading Expo exhibitor, Fadi Geha of Supply Chain Consulting says the global financial crisis will make carbon credentials even more important for small to medium enterprises (SME).

“These are tough times and people are looking for ways to differentiate their businesses,” he said.

“Many large companies are taking a very cynical approach and aiming just for compliance. It’s also true that in excess of 80 per cent of the carbon footprint of a large company is created by suppliers, so they will be expecting them to follow their lead and invest in technology to reduce their emissions.”

“Small companies can use that investment as a good marketing story but for the middle rung, who are caught by the legislation but don’t have the same influence on the supply chain as big business, it’s just going to be another large compliance cost.”

At the same time, the general manager of the Victorian Employers’ Chamber of Commerce and Industry’s Centre for Innovation and Sustainability Excellence, Kate Nicolazzo, says SMEs will face higher input costs.

“SMEs will largely be impacted by rising costs which will be raised as a direct result of the cost of carbon (traded on the carbon market) being added to most (if not all) goods and services.”

“SMEs that have high energy cost components already and/or which import or export their goods and services can expect to face more impacts than those with less significant energy costs. SMEs that operate in regions which have a high proportion of energy intensive industrial operations (aluminium, cement, energy generation, metal product manufacturing, petroleum, plastics and chemicals) and so on, will likely see more severe impacts than other regions.”

VECCI’s Grow Me The Money program will show SMEs visiting the Carbon Reduction & Trading Expo how to survive in the new carbon economy and Ms Nicolazzo says most cannot find adequate information.

“SMEs are to some extent uncertain of the impact or potential impact from emissions trading on their business. They are currently taking some action but are not sure where to go for further assistance and advice. The result of both is that there is a key gap between the information available and the understanding and application within SMEs.”

The organiser of the Carbon Reduction & Trading Expo and Conference, Marie Kinsella, says many small business owners are unaware they need to prepare now for the introduction of carbon trading on July 1 next year.

Ms Kinsella says that although businesses with less than 20 employees account for 90 per cent of Australian employers, just 27 per cent of the 11,521 visits to last year’s inaugural event, which ran in conjunction with Safety In Action and Melbourne Materials Handling, were small employers. Large corporates, which comprise just 1 per cent of Australian employers made up 45 per cent of visitors.

“Our exhibitors and conference speakers say that small business won’t know what’s hit them next year,” Ms Kinsella says.

“It’s not surprising. The goal posts have shifted so often before the game’s even begun. The aim of the Carbon Reduction & Trading Expo and Conference is to gather all the experts, information and tools so that, in one afternoon, any SME can work out what they need to do and how to go about it.”

The Carbon Reduction & Trading Expo and Conference will be held at the Melbourne Exhibition Centre from March 31 to April 2. For more information, visit or phone Australian Exhibitions & Conferences on (03) 9654 7773.

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