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Outsource magazine: thought-leadership and outsourcing strategy | October 22, 2014

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The impact of the new carbon tax on the Australian outsourcing industry

The impact of the new carbon tax on the Australian outsourcing industry
Martin Conboy

Australian treasurer Wayne Swan says new Treasury data shows the impact of a carbon tax on emissions-intensive industries would be negligible compared with the pressure caused by the fluctuating Australian dollar.

Professor Bruce Chapman president of the Economic Society of Australia and director of policy at the Australian National University’s Crawford school of government in a recent report entitled “How many jobs is 23,510 really?”.  In this report he attempts to put into perspective a claim by the Minerals Council of Australia that a carbon trading system would cut by around 24,000 people, the number than would be employed in the mining industry. He points out that “something like 370,000 people every month go from not having a job to having a job, and something like 365,000 people every month do the opposite.”

He goes on to say: “That’s the change every month. The Minerals Council has projected its change over a period of ten years.”

“The additional outflow would be five people for every 10,000 who would have left in the month anyway. I am happy to call that invisible. I was going to draw a graph of it for the report but I couldn’t – you can’t draw a graph because the effect is too tiny…

“What it says is the carbon price debate should have nothing to do with job-loss figures. The labour market issue should be seen to be irrelevant. It is not interesting, it is not something we should spend any further effort analysing…”

A carbon tax is an environmental tax that is levied on the carbon content of fuels. It is a form of carbon pricing. Carbon atoms are present in every fossil fuel (coal, petroleum, and natural gas) and are released as carbon dioxide (CO2) when they are burnt. In contrast, non-combustion energy source – wind, sunlight, hydropower, and nuclear – do not convert hydrocarbons to carbon dioxide. A carbon tax can be implemented by taxing the burning of fossil fuels – coal, petroleum products such as gasoline and aviation fuel, and natural gas – in proportion to their carbon content.

Notwithstanding the political debate mostly carried on by parties with vested commercial interests this is the first time in history that companies will have to account for carbon when they do their annual accounts.

Going green is a lot more involved than simply turning off the lights; changing to energy-efficient light globes; using double-sided photo copy paper; not throwing waste into the sewage system; recycling; or designing buildings that work with nature to heat up or cool down as the case may be – although that at least is a start.

David Suzuki, the much-admired environmental scientist, reminds us that it is because of the size of the human herd that we need to realise our impact on the planet: “We don’t know our own strength. So many of us have become disconnected to the earth. Our future depends on choices, on the choices we have made in the past and those we will make today and in the future. We cannot continue the exceptional growth of this last half of the 20th century without experiencing consequences. Think about this: every time that the global population doubles there are more people currently alive than the sum of all the people who ever lived.“

There can be no question that Australia’s safest, internationally competitive, long-term climate change objective should be to achieve a “carbon-neutral or better” future – anything less is not sustainable nor in the best interests of future generations of Australians.

From both a risk and opportunity perspective, the legislation should support businesses that create flexible, economically attractive pathways to a carbon-neutral or better future. This will help place such businesses in the most powerful position, as climate change progressively becomes a dominant and mainstream economic and political dynamic for society. Those organisations that can fulfill their purpose, thrive and grow within a carbon-controlled commercial eco system will be the most sustainable.

There is a strategic need for innovation that can provide carbon-based goods and services in a carbon-constrained world and a harmonising need for innovation that can deliver ‘carbon-negative’ outcomes on a major scale.

Being ‘green’ is not just an option any more; it has become a necessity, especially as more and more organisations prefer to do business with companies who have initiatives in place to reduce the carbon footprint of an operation. Many business deals in the coming years will depend on the carbon neutrality credentials of an enterprise. Be that as it may, if we have the ability to change the way we treat our environment, surely then we have a responsibility to do something about it. It’s all very well being rich, but all the gold in the world will be useless if you cannot breathe!

Thinking green has become an important part of an organisation’s corporate social responsibility. Slowly but steadily we find companies taking positive steps towards setting up operations that comply with environment sustainability points.

“We define a green company as doing three things such as integrating corporate responsibility – including green – directly to the business strategy; making it easy for customers to buy, operate and dispose of your products in an environmentally responsible way; and being as transparent as possible about your green initiatives and operations, and very public about your environmental goals,” says Mahesh Bhalla, executive director, and GM, consumer division, Dell India.

“To be environment friendly, the company has to have efficient power consumption; recyclable/reusable packaging; recycling offers for older equipment; use of non-toxic materials; and making investments in future green concepts such as alternative materials,” says Bhalla.

Proper use of outsourcing and cloud-based IT lowers carbon emissions by allowing people to work from anywhere without having to commute; these days they ‘telecommute’ using cloud-based applications. By shifting business processes away from environments that require workers to use private transport to get to work, to environments that have fully utilised mass public transport systems must have an overall impact on carbon footprints. If a company is outsourcing some of its business processes, it will require less real estate as it will have a reduced workforce and thus will have lower heating/ cooling bills.

So where does this leave the outsourcing sector?

As I have previously mentioned Australian companies will be sorely tempted by the prospect of sending local jobs offshore. Given that it’s very hard to find willing customer service staff in a full employment economy like Australia, it makes sense for companies to consider other options just to be able to provide customer service to their customers. A strong dollar gives Australian businesses a lot of buying power and amplifies the difference in the cost of labour in Australia compared with, say, the Philippines, Malaysia, India and China.

Putting aside the fluctuations in foreign exchange, the more exciting and interesting aspect of the green debate as far as outsourcing is concerned is that companies will turn to outsourcing suppliers to help them with challenges like customer service, i.e. solar panel companies, temporary contractors to help with installing will be supplied by recruitment companies, specialist carbon-knowledgeable accountants who can keep score of carbon credits as well as dollars and cents will be in high demand as businesses will have to factor in carbon as part of their business plans. There will be a whole range of new types of jobs and opportunities that will be created as we start to embrace the brave new world that will be created by a carbon tax. I can see a growth spurt in RPO as a result.

Capgemini and CA Technologies have announced a partnership to develop global Energy, Carbon and Sustainability BPO services. Targeting organisations in industries such as manufacturing, fuel and utilities that have a significant carbon footprint, the service will help organisations to better manage complex sustainability data collection to address increasingly challenging reporting demands.

Capgemini believe the new service will offer them significant opportunities within their existing client base and with new clients, as Michael Alf, VP Capgemini Australia, says: “The issues surrounding sustainability and for companies to manage their responsibilities are becoming far more crucial. Organisations need to be providing accurate and meaningful reporting to ensure they are meeting their compliance requirements and are active in addressing their corporate responsibilities.

“Given the trends around sustainability and the significant pressure for organisations to do something about it, we see significant growth opportunities in this area”.

Compliance will be a leading – but not a prime – driver behind this area of outsourcing. Forward-thinking enterprises have recognised the significant competitive advantage in adopting sustainable development principles, including greater efficiencies and cost-reduction, improved compliance performance, and brand protection leading to greater support from regulators and stakeholders.

Over the last view years a range of indices and standards have evolved, in Australia and overseas, to evaluate the environmental and sustainability practices of different companies. As such there is the Australian SAM Sustainability Index, the Corporate Responsibility Index (Australia), the Dow Jones Sustainability Indexes and the FTSE4Good Index.

So as far as opportunities for the outsourcing sector that will be created by the carbon tax, I say bring it on.



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