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Climate change is the greatest environmental threat ofthe 21st century and presents a major challenge for busi-ness. In the last 20 years, awareness of climate change andits implications has grown rapidly from a subject studiedonly by the scientific community to one that is widelyrecognised as having far-reaching effects across society.Climate change is now firmly on the agenda of the busi-ness community.

Despite comparatively low carbon emissions relative toother industries, many players in the global telecommuni-cations and electronics sector are already tackling climatechange head-on, driven by emerging regulatory pressuresand by a desire to enhance their corporate reputations.

Globalisation is providing further impetus, creating aneed for a better understanding of the impact of the sup-ply chain on climate change, particularly in relation tomanufacturing practices in developing countries, wherecarbon management may be low on the political and eco-nomic agenda.

Some leading companies in the sector have already identi-fied carbon management as an important strategic busi-ness issue. Most companies have, however, so far respond-ed in a reactive manner, focusing on preparing for theEmissions Trading Scheme (ETS) and ensuring compliancewith the relevant regulations. Such a stance is under-standable for several reasons:

• Uncertainty about the approaches governments mighttake to control CO2 emissions;

• Lack of clarity as to how carbon management candeliver business value;

• Little shared sense of urgency from society at large;

Switching on to Carbon: Addressingthe Threat of Climate Change Stefano Milanese, Davide Vasallo, David Lyon, Justin Keeble

Telecommunications is not the first industry thatcomes to mind whenyou’re thinking about carbon-intensive business.But, the telecoms industryis at the forefront of amovement among busi-nesses to slash emissionsacross the board. Therationale is simple: loweremissions mean lowerenergy costs and a betterreputation. In this articlethe authors demonstratehow any company can follow the telecoms lead in reducing carbon emissions.

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• Attractive technological opportunities may be difficultto spot amidst the “hype” that characterises the cli-mate change issue.

We expect that carbon management will become increas-ingly critical for future corporate growth plans and invest-ment strategies in the telecommunications and electron-ics sector - not just as a response to a risk but also as amajor business opportunity in terms of cost optimisationand international competitiveness.

This article seeks to introduce a coherent rationale forestablishing an effective carbon management strategy inthe telecommunications and electronics sector, and pro-vides some insights into selecting the most appropriateresponse.

The Rationale for Carbon Management

The telecommunications and electronics industry hasgone from strength to strength over the past 10 years.Mobile telephony and broadband internet, with its criticalrole in today's knowledge-based economy, have placed the

sector at the heart of the daily livesof 98 percent of the population inWestern economies and a growingnumber in emerging markets.

The industry itself is not carbon-intense relative to other industries.A recent report by Henderson GlobalInvestors suggests that the telecom-munications industry is 13 timesless carbon-intense than the FTSE100average. However, there is consider-able variation within the industry(exhibit 1).

There are various explanations forthese apparent variations in carbonintensity within the industry.Certainly, it is true that some com-panies have well developed carbonmanagement strategies and have

realised considerable carbon reductions while others havenot. For example, in the early 1990s, BT recognised thatits operations had a significant carbon footprint. Throughan aggressive carbon strategy the company has reduced itsenergy-related CO2 emissions by 80 percent - nearly 1.5million tonnes a year - since 1991, bringing it well belowthe average for the industry.

However, there are still considerable difficulties with datameasurement and disclosure, making comparison acrossdifferent companies problematic. For example, there is lit-tle consistency in disclosing direct and indirect emissions:some companies do not report “CO2-equivalent” emis-sions, choosing to report other greenhouse gas emissionsseparately or not at all. The quality and value of this datawill improve, particularly as initiatives such as the CarbonDisclosure Project (www.cdproject.net) and the GlobalReporting Initiative (www.globalreporting.org) promotecarbon disclosure and standardised reporting.

In addition to its direct effects, the industry also has a sig-nificant indirect influence through its role in informa-

Carbon Intensity and the Kyoto Protocol

Increasing awareness of the human causes ofclimate change has fostered the adoption ofglobal strategies to contain the greenhouseeffect. The Kyoto Protocol represents the maininternational counter-measure to limitabsolute emissions in industrialised countries,aiming to reduce greenhouse gases for the2008-2012 period by 5.2 percent (8 percent forEurope) below 1990 levels.

Carbon intensity is the ratio of carbon emis-sions to economic activity (e.g. turnover) gen-erated by a company. The measurement is areflection of the efficiency of the businesswith respect to carbon emissions. A reductionin intensity does not necessarily mean a reduc-tion in total emissions (i.e. the measurementembedded in the Kyoto Protocol).

Exhibit 1 Relative Carbon Intensity of a Selection of Telecommunications and Electronics Companies

Source: Arthur D. Little analysis of publicly available data

CO2-e tonnes/£m turnover in 2004

Nok

iaM

otor

ola

Fran

ce T

elec

omTI

M s

.p.a

.

HP O2N

TT D

oCoM

oTe

leco

m It

alia BT

Voda

fone

NEC

Sony DT

Eric

sson

Phili

psTe

lefo

nica

90

80

70

60

50

40

30

20

10

0

Operators

Manufacturers

Carbon intensity average value for the telecommunicationindustry as reported on “Brand value at risk from climatechange” from The Carbon Trust

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tion sharing, remote working and inchanging attitudes and behaviour insociety. For example, NTT estimatesthat its online e-commerce, telecon-ferencing, supply-chain manage-ment and other systems that facili-tate the movement of people andgoods via IT could reduce Japan'stotal energy consumption by 3.9 per-cent by the year 2010. In the UK, BTsuggests that flexible working, stag-

gered commuting time and increased take-up of onlineshopping could make a major contribution to tacklingcongestion, which costs the UK£ 20 billion a year.

The need to take a proactive approach to carbon manage-ment is driven by a number of critical risks (exhibit 2):

• Emerging government policy– Regulatory risks in terms of compliance with

emerging carbon policies across the world (such asthe European Union's ETS);

– Legal risks through the potential for increased liti-gation against companies contributing to climatechange;

• Changing stakeholder expectations– Reputational risks as corporate responses to climate

change alter brand values and perceptions amongcustomers, staff, suppliers and shareholders;

• Changing market environment– Market risks in terms of changing dynamics for a

company's goods and services (for example, througha shift to more energy-efficient products);

– Operational risks as carbon constraints impinge onexisting assets, costs and capital expenditure (forexample, as energy and carbon prices rise) (adaptedfrom HGI, 2005).

Emerging regulations pose perhaps the greatest threat tobusinesses. Those companies that have proactively soughtto reduce their carbon intensity will be much better pre-pared for a future carbon-constrained world than others.

Despite the risks, proactive positions on carbon manage-ment can present a widening spectrum of opportunities,including being ahead of the game in tackling carbonexposure, finding new opportunities in a marketplacethat is increasingly favouring low-carbon solutions, orsimply looking to enhance brand image and reputation.

Telecommunications and electronics companies areincreasingly looking to realise these opportunities. Arecent study undertaken by Arthur D. Little highlights thegrowing role of environmental issues in driving innova-tion for new product and service development in the sec-tor. The study found that, in contrast to five years ago,leading telecommunications and electronics companiesare using “sustainability-driven innovation” to win newcustomers, create new business opportunities and derivetangible benefits, rather than just managing environmen-tal issues to reduce risk or ensure regulatory and stake-holder compliance.

Realising these benefits is not the only challenge.Navigating through the minefield of options for carbonmanagement can be onerous, especially for companies

Emissions in Europe

The European Union has issued Directive2003/87/CE establishing the EuropeanEmissions Trading Scheme (ETS), to make ener-gy-intensive sectors reach the Kyoto targets.

ETS institutes a CO2 and greenhouse gas mar-ket where companies buy or sell emissionsreduction allowances by bilateral contract andon the CO2 Exchange Market.

Exhibit 2 Carbon Management Drivers, Risks and Opportunities

Source: Arthur D. Little analysis

Com

plia

nce

Bus

ines

s ca

se

Drivers Risks Opportunities

Governmentpolicies

Compliance(eg fines)Uncertainty over the“rules of the game”Legal risks throughthe potential forincreased litigation

Early reparationfor regulatorycompliance

Stakeholderexpectations

ReputationProduct/serviceboycottingDowngrading byrating agencies/investors

Enhance reputationStrengthen brandimageUpgrading by ratingagencies/investors

Market Changing dynamicsfor a company’sgoods and services

New products/services

Cost and capitalexpenditure increaseSecurity of energysupply

Increase marketshareNew cleantechnologiesenergy efficiency“Best choice”supplier in B2B

Emerging regulations poseperhaps the greatest threat tobusinesses. Those companiesthat have proactively sought toreduce their carbon intensitywill be much better preparedfor a future carbon-con-strained world than others.

NTT estimates that its onlinee-commerce, teleconferencing,supply-chain managementand other systems that facilitate the movement of people and goods via IT couldreduce Japan's total energyconsumption by 3.9 percent bythe year 2010.

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just starting to think about developing a carbon manage-ment strategy. What response is most appropriate?

The Best Response for your Company

A good starting point is to consider where operations andactivities are carbon-intensive. Companies in the telecom-munications and electronics sector have tended to adoptdifferent approaches depending upon their visibility tothe consumer and the carbon intensity of their opera-tions.

Business to consumer (B2C) companies, especially thosewith high visibility, may decide to adopt a more customer-orientated approach, perhaps through the adoption ofeco-labelling for their products rather than focusing ontheir factory or internal operations. Such initiatives seekto leverage the interest customers may have in climatechange issues to enhance customer preference and branddifferentiation.

From our work with a range of both business-to-business(B2B) and B2C companies in the telecommunications andelectronics sector, we see three practical actions for com-panies that want to exploit carbon management to derivebusiness value. These are not mutually exclusive:

• Reducing carbon emissions across direct operations;

• Reducing embedded carbon intensity of products andservices;

• Contributing to a low-carbon society through influ-ence in the marketplace.

1. Reducing carbon emissions across direct operations

A range of strategies are being adopted by companies toaddress the direct carbon emissions of their operations.These strategies are best characterised as soft approaches(using indirect investment in carbon offsets to compen-sate for CO2 emissions or using renewable energy sources)and harder approaches (adopting emerging low-carbontechnologies).

A. ‘Soft approaches’

There are two strategies companies can take to reducetheir carbon footprint without making any substantialchanges to their operations:

• Carbon offsetting;

• Sourcing renewable energy.

(i) Carbon offsetting

The past five years have seen the emergence of a range ofcompanies providing carbon offsetting or carbon-neutralservices. These are based on the idea that companies cancompensate for their estimated greenhouse gas (GHG)emissions through best-practice carbon offset projects.Such projects include substituting carbon-intensive ener-gy sources with low-carbon ones, carbon sequestrationschemes (e.g. absorption of CO2 through forestry) andinvestment in innovative energy efficiency schemes.

There is increasing consumer interest in carbon-neutralinitiatives, spurred on by recent publicity regarding vari-ous “carbon-neutral” celebrities, such as The RollingStones and Coldplay. Carbon-neutral initiatives are aneffective tool in the marketing strategy for consumer-driv-en businesses.

There are several successful case studies from a range ofindustry sectors from consumer products to services andevents. For example, Ricoh offset the CO2 emissions fromits UK operations by going carbon-neutral in 2004 andDeutsche Telekom's Human Resources and SustainabilityReport has been produced in a carbon-neutral way as partof the “Hessian Climate Partner” initiative. By supportingspecific climate protection initiatives they have been ableto offset 110 tonnes of CO2 equivalents. However there isan argument that these types of approaches are to somedegree cosmetic, since they fail to tackle any issues relat-ing to the carbon impact of the companies' core activities.

We see three practical actionsfor companies that want toexploit carbon management toderive business value:reducing carbon emissionsacross direct operations, reducing embedded carbonintensity of products and services and contributing to alow-carbon society throughinfluence in the marketplace.

Carbon offsetting and sourc-ing renewable energy are themain “soft approaches” toreducing a company’s carbonfootprint.

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(ii) Sourcing renewables

Almost all of the telecommunications and electronicscompanies presented in exhibit 2 now include somerenewable energy in their mix of energy sources.

BT is a significant consumer of electricity in the UK,accounting for 1.8 percent of non-domestic usage. Thecompany aims to obtain 10 percent of its electricity fromrenewables and has made good progress in meeting thistarget. O2 now sources 20 percent of its electricity in theUK from renewable sources; in Ireland the figure is 32percent. Vodafone sourced 11 percent of its energy fromrenewable sources in 2004/05. In 2005, Three Italy sourced100 percent of the energy demand for its sites fromrenewable energy.

Renewable energy technologies include mature technolo-gies such as onshore wind and geothermal, as well asemerging technologies including wave and tidal power.They also include technologies that have been widelyavailable for some time but could be developed in funda-mentally different ways in the future. Partly as a result ofgovernment intervention, demand for “clean” energy isincreasing and, at the same time, renewable energy equip-ment prices are falling and technological performance isimproving.

Traditional power generation sources continue to havethe lowest electricity generation costs, except for the still-lower costs of large-scale hydroelectric power, but somerenewable sectors are starting to close the gap.Renewables can also offer a hedge against the high fuelprice volatility which can significantly affect fossil-fueltechnologies.

The preferences of energy consumers are unlikely to dif-ferentiate between types of renewables. The main factorin determining the growth of wind, wave, photo-voltaicand other forms of renewable electricity will be the costof production and level of subsidy. Many renewable ener-gy technologies also have a high initial cost of construc-tion and commission, which is a barrier to their develop-ment. One technology area which has enjoyed steadily

increasing market share over many years is combinedheat and power (CHP), which combines efficient genera-tion with optimum energy utilisation.

There are many other examples outside the telecommuni-cations and electronics sector of companies sourcing“green energy”. For example, Marks & Spencer andBarclays now buy a large proportion of their energy fromCHP provided by Npower. Marks & Spencer has negotiated“buying points” over the next three years, rather thanadopting a traditional fixed-price arrangement, enablingit to avoid the economic risks associated with buying at aone-off cost in a volatile market.

B. ‘Hard approaches’

While there is significant merit in strategies to sourcerenewable energy or offset carbon emissions, many com-panies are choosing to focus on reducing their directemissions by investing in low-carbon technologies acrosstheir operations.

Some companies are already using “systems thinking” tounderstand where the impacts are across their operationsand what the levers might be to reduce their carbon foot-print. A useful example is from a leading fixed-line tele-coms operator. After it announced in the 1990s an ambi-tious target for greenhouse gas emissions reductions, itset up an extensive computer-based energy managementsystem, which picked up data every hour from thousandsof sites. However, turning this data into useful informa-tion required an integrated understanding not just oftechnologies but also of the drivers behind energy use. Asa result of this understanding the company was able toidentify a wide range of measures it could take in termsof more effective transport management and selectiveprocurement of renewable or low-carbon energy. The com-pany realised that success depended on rapid “main-streaming” of the initiatives and clearly articulating thebusiness case in terms of costs, security of supply and reli-ability. As a result it has saved many tens of millions ofpounds in energy costs.

Partly as a result of govern-ment intervention, demand for“clean” energy is increasingand, at the same time, renew-able energy equipment pricesare falling and technologicalperformance is improving.

While there is significantmerit in strategies to sourcerenewable energy or offset carbon emissions, many companies are choosing tofocus on reducing their directemissions by investing in low-carbon technologies acrosstheir operations.

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NTT recently implemented its Total Power Revolution(TPR) in order to reduce power consumption across itsoperations. The TPR campaign promotes energy manage-ment at the company's 4,000 buildings across Japan. Thecampaign includes efforts to introduce energy-efficientpower and air-conditioning systems; convert servers,routers, and other IT equipment to use DC power in orderto reduce power consumption; and improve energy self-sufficiency through such clean sources of energy as solarand wind power systems. In 2004, NTT succeeded in reduc-ing power consumption by 180,000 MWh.

A useful approach to take when developing a systems-based view of your company is to map out supply, distri-bution and demand with respect to your operations. Thisshould be based on a detailed understanding of why,when and how energy is used. This needs to be mappedonto the principal business processes at an operationallevel. The active management of carbon through invest-ment or deployment of low-carbon technologies is oftenan outcome of such a systems approach to carbon man-agement. Successful companies are identifying those low-carbon investments that are attractive and can be effec-tively implemented.

Low-carbon technologies cover the full range of technolo-gies related to energy supply, distribution and demandmanagement. Further along the supply chain, there aremany opportunities for managing demand. These includemeasures linked to behaviour (e.g. monitoring and target-ing), engineering options (e.g. high-efficiency boilers) andnon-engineering options (e.g. insulation and lighting con-trols).

There are four key approaches that can be taken by com-panies to exploit the opportunities from low-carbon tech-nologies:

(i) Developing solutions internally through R&D

Some companies have internal R&D functions whicheither maintain awareness of potentially disruptive tech-nologies or incubate new technologies or initiatives them-selves. An example of the latter is a leading telecoms com-

pany which has a ring-fenced fund for emerging initia-tives which, if successful, are integrated into the main-stream business at a later date. Motorola and Nokia areworking at developing miniature fuel cells to supplypower for portable devices from cellular phones and lap-top computers to cameras and electronic games.

(ii) Investing in new opportunities to build capacity

An obvious way to become directly involved in low-carbontechnologies is through investment in emerging compa-nies. This includes acquisition as well as the developmentof minority shares, which can be an effective approach tounderstand emerging technologies. For example, ChevronTechnology Ventures - admittedly outside the telecomsand electronics sector - takes equity shares in potentiallydisruptive technologies such as hydrogen storage, fuelcells and other new energy technologies.

(iii) Enhancing linkages with academia

There are several examples of leading academic institutionsthat are able to provide guidance on assessing the potentialcosts and benefits of different forms of low-carbon energyand carbon abatement. Companies such as HSBC and BPhave invested in university activities. Potential benefitsinclude better understanding of implementation issues andbetter access to leading technology R&D.

(iv) Partnering to bring energy generation in-house

Some companies are choosing to bring energy generationin-house through investing in and developing generation,heating or CHP technologies. Making a choice betweenmanaging energy generation internally or externally canbe difficult and the trend varies considerably across com-panies. There are examples of companies forming closeand long-term relationships with power suppliers or ener-gy services companies1, both of which provide support notjust in generation but also in assisting companies to man-age their demand.

1Energy services companies (ESCOs) bring services, equipment and financing intoone package. This can enable an integrated strategy to be developed that wouldotherwise be cost-prohibitive.

Low-carbon technologies coverthe full range of technologiesrelated to energy supply, distribution and demandmanagement. Further alongthe supply chain, there aremany opportunities for managing demand.

An obvious way to becomedirectly involved in low-carbontechnologies is through invest-ment in emerging companies.This includes acquisition aswell as the development ofminority shares, which can be an effective approach tounderstand emerging technologies.

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For example, in the UK companies such as Ecotricitybuild, operate and own wind turbines on the sites ofclients who agree to purchase electricity over a long peri-od (typically 12 years). By this method, companies such asPrudential, Ford and Sainsbury have benefited from asecure and guaranteed source of renewable energy with-out capital outlay, avoiding the financial risks associatedwith energy market volatility.

2. Reducing embedded carbon intensity of products andservices

A second action is to tackle the CO2 intensity of the prod-ucts and services sold. For example, Sun Microsystems hasdeveloped a high-performance, energy-efficient processorwhich could reduce the number of web servers in theworld by half, with a significant associated reduction inpower requirement. Not only will this initiative reduceCO2 emissions, it will also save customers millions ofeuros in costs associated with cooling and space require-ments.

Some companies are choosing to provide public testi-monies of the carbon footprint of their products and serv-ices. One longstanding approach in this area which isonce again coming into its own is the use of life-cycleassessment. Life-cycle assessment is a “cradle to grave”approach allowing the evaluation of environmental (butalso economic and social) burdens associated with a prod-uct, process or activity. Governments have tried to fosterlife-cycle thinking across industries with specific policiesand the promotion of labelling programmes (e.g.Environmental Product Declaration and Ecolabel).Industry leaders are using the life-cycle approach for prod-uct improvement, product marketing and to support theirdecision-making processes with regard to sustainability.

Environmental Product Declaration (EPD) is a labellingsystem based on verified, science-based environmentalinformation. The system is open to all products and serv-ices and the information provided is comparable betweenthem. Although EPD may be used by private consumers, itis more often used in business-to-business sales by corpo-rate customers as part of their green procurement policy.

EPD aims to stimulate the demand for, and thus the sup-ply of, environmentally friendly products and services.The system has been adopted by companies from Europeand the Far East, and around 100 services and productshave obtained the EPD registration.

On the one hand, governments play an essential role inthe promotion of life-cycle thinking across industry. Onthe other, companies seeking the reduction of embeddedcarbon intensity of products and services need to inte-grate life-cycle thinking into their decision-makingprocesses to derive the most appropriate strategic actions(exhibit 3).

A life-cycle approach helps companies understanding theenvironmental footprint of their products and services,meaning at which stage of the life-cycle the environmen-tal impacts (such as greenhouse gas emission) occur. Thisinformation is essential for the implementation of a car-bon-management programme because it allows the identi-fication of the main areas for improvement and the defi-nition of priority areas for intervention.

Nokia has developed a well-established life-cycle approach.A recent project aimed at reducing the environmentalimpact from its mobile phones found that the most signif-

Exhibit 3 Life-Cycle Thinking and Decision-Making

Source: Arthur D. Little analysis

Strategicplanning

Managementcontrol

Operationalcontrol

Support theevaluation ofproducts forlabellingprogrammes

Early reparationfor regulatorycompliance

Government

Identification oftarget areas forenvironmentalimrovementPrioritiseenvironmentalactions to berefected in policy

Monitorenvironmentalimprovement

Eco-design andproductdevelopment

Identification oftarget areas forenvironmentalimprovementPrioritiseenvironmentalactionsIdentificationof markettendencies (i.e.green markets)

Provideinformation toset targets andmeasureenvironmantal-relatedperformance

Verification ofproductpropertiesEnergyefficiency

Industry

Some companies are choosingto provide public testimoniesof the carbon footprint of theirproducts and services. Onelongstanding approach in thisarea which is once again coming into its own is the useof life-cycle assessment.

A life-cycle approach helpscompanies understanding theenvironmental footprint oftheir products and services,meaning at which stage of thelife-cycle the environmentalimpacts (such as greenhousegas emission) occur.

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icant impact was the energy used to manufacture thephone components and to power the phone charger instandby mode. The life-cycle approach showed that CO2

emissions related to an average 3G mobile phone over atwo-year life-cycle are equivalent to those from four to sixlitres of petrol (Nokia, 2005).

Ericsson, using a life-cycle approach, has shown that mostof its indirect CO2 emissions arise from the energyrequired to operate its products. It has calculated thatdirect emissions from its own activities account for onlyabout 5 percent of the total life-cycle CO2 from its prod-ucts. The company can influence these emissions indirect-ly through its product design and sourcing of materials(Ericsson, 2005).

3. Contributing to a low-carbon society through influ-ence in the marketplace

A number of companies are taking a broader approach totheir carbon footprint by looking to use their competen-cies in technology and communications to stimulate alow-carbon marketplace. They are examining opportuni-ties which are responsive to a growing consumer expecta-tion for a low-carbon footprint. Business customers, inparticular, are facing growing pressures to reduce carbonemissions. Telecoms and ICT companies are responding byoffering solutions that assist in carbon reduction. Forexample, Ex'ovision has developed the Eye Catcher, avideo conferencing technology that allows individuals tomaintain eye contact during remote meetings. The tech-nology has the potential to play an important role inreducing the need for travel and its associated emissions.

Exploiting such opportunities enables companies to tapinto new sources of revenue while enhancing the visibili-ty of their brands. For example, NTT has recentlylaunched “ecommunication”, an inspiring programme todevelop innovative approaches and solutions to tackle keyenvironmental challenges, including carbon emissions.

Recognising the growing interest of telecoms and ICTcompanies in this area, Arthur D. Little has launchedPathways to Growth, a forum where telecoms and ICT

companies can share learning and experiences in sustain-able innovation. The forum is exploring how, for example,companies can use climate change as an opportunity toidentify new sources of revenue. This is particularlyimportant at a time when traditional markets are matureand differentiation is key.

There are two approaches to exploiting these opportuni-ties:

• “Outside in” approaches involve looking at the land-scape of social and environmental problems andexploring the opportunities they open up. Ideas arescreened and piloted and viable solutions put forwardfor mainstream delivery;

• “Inside out” approaches involve applying newly devel-oped or existing technologies in ways that contributeto tackling specific social and environmental problemswhile delivering top-line value.

For both of these approaches, Arthur D. Little uses a sys-tematic approach to identify segments where carbonmanagement will create an opportunity and the best busi-ness model to adopt.

Insights for the Executive

For companies to benefit from the opportunities associat-ed with climate change, carbon management requires astrategic approach.

Government policies and regulations are the main driverin the short term and are likely to intensify. However,despite these regulatory pressures, companies also have todeal with the increasing expectations of their stakehold-ers and market change. A proactive approach to pre-empt-ing stakeholder concerns can create substantial competi-tive advantages and increase corporate value.

We have identified three practical actions for companies:

The first action is to reduce carbon emissions acrossdirect operations. This can be achieved through the adop-

A number of companies areexamining opportunitieswhich are responsive to agrowing consumer expectationfor a low-carbon footprint.Business customers, in particular, are facing growingpressures to reduce carbonemissions.

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tion of soft approaches to carbon management, usingindirect investment in carbon offsets to compensate forCO2 emissions or sourcing renewable energy sources.Other companies prefer harder approaches, adoptingemerging low-carbon technologies and using a systemsthinking approach to understand where the impacts existacross their operations.

A second action is to reduce the embedded carbon intensi-ty of products and services sold. Companies are increas-ingly choosing to provide public testimonies of the carbonfootprint of their products and services (e.g. through envi-ronmental labelling) and industry leaders are using a life-cycle approach to product improvement, product market-ing and to support their decision-making processes andtheir strategic actions in the perspective of sustainability.

The third action is to contribute to a low-carbon societythrough influence in the marketplace. Such action isespecially applicable to consumer goods companies thatare exploring new ways of communicating and market-ing, and enables companies to differentiate themselvesfrom competitors and increase the visibility of theirbrand.

While this article has focused on the telecommunicationsand electronics sector, the approaches and conclusionsapply much more broadly. All sectors have varying levelsof carbon exposure and many of the approaches set out inthis paper are applicable to them. However, the telecom-munications and electronics sector has a special role. Ithas the technological capabilities to be a critical enablerin causing other industries to reduce their carbon foot-print. This opens a fantastic opportunity for forwardthinking companies in the sector.

References

HGI (2005) The Carbon 100: Quantifying the CarbonEmissions, Intensities and Exposures of the FTSE 100,Henderson Global Investors.

Stefano Milanese… is a Manager in Arthur D. Little's Milan office andmember of the Global Environment & Risk Practice. Hespecialises in business risk management and has exten-sive expertise in the telecommunications sector.E-mail: milanese.stefano@adlittle.com

Davide Vassallo... is a Senior Manager in Arthur D. Little’s Rome officeand head of the Environment & Risk Practice in Italy. Hespecialises in sustainable development and corporateresponsibility. He also has an extensive expertise in life-cycle assessment and carbon management.E-mail: vasallo.davide@adlittle.com

David Lyon… is a Manager within Arthur D. Little's SustainabilityServices in the UK. He helps companies make businesssense of managing their social and environmental per-formance. He also has extensive experience in low-carbontechnology management.E-mail: lyon.david@adlittle.com

Justin Keeble… is a Manager within Arthur D. Little's SustainabilityServices in the UK. He specialises in the use of social andenvironmental management as drivers for innovationand growth in business.E-mail: keeble.justin@adlittle.com

While this article has focusedon the telecommunicationsand electronics sector, theapproaches and conclusionsapply much more broadly. Allsectors have varying levels ofcarbon exposure and many ofthe approaches set out in thispaper are applicable to them.