CERs and the European Emissions Trading Scheme (EU ETS)

The EU ETS was devised as one of several strategies to meet the European Kyoto Protocol target of an 8% reduction for the period 2008 – 2012, and now for the more ambitious EU target of 20% by 2020. Policies regarding renewable energies and energy efficiency, agriculture, and transportation, (to name a few), also contribute to European emissions reductions goals.

The EU ETS covers approximately 45% of total European Emissions (EC, 2013), including emissions from the power sector, aviation (for flights within Europe, though the original proposal covered international flights as well), and has successfully managed to integrate environmental costs into financial cost structures, thus ensuring that emissions are allocated a cost which will be taken into consideration during planning. This puts a monetary value on emissions, and incentivises reductions, and investment into R&D of more efficient, and less pollutant technologies.

In order to provide some flexibility, the Linking Directive (2004) was brought into effect, which allows for the use of Kyoto Protocol flexibility mechanisms, and serves to connect the EU ETS with the international carbon market, and increases international cooperation. The incorporation of these mechanisms allows countries to meet some of their reductions commitments through obtaining Certified Emissions Reductions (CERs) – to focus of the post – and Emissions Reductions Units (ERUs) through the Clean Development Mechanism (CDM) and Joint Implementation (JI), respectively.  Both mechanisms involve the emissions reductions projects, the former in non-annex I countries (developing countries and LDCs), and the latter in annex I countries (i.e. those countries with binding KP targets) (UNFCCC, 2014).

Unfortunately, these mechanisms, which were designed to complement domestic reductions options, increase cost efficiency, and promote international efforts to reduce, have had unexpected results on the effectiveness of EU ETS.

Firstly, instead of supporting domestic reductions strategies CERs came to substitute for domestic action to meet international requirements. In terms of global emissions targets, provided the projects meet standards for environmental integrity, global targets will be met. However, an excessive use of CERs by EU countries for projects in non-EU countries undermines the EU reductions goals. In order to stay on track with for these goals, a limit on the use of CERs was put in place, forcing countries in the EU to consider domestic reductions. Unfortunately, difficulty in determining an adequate limit has made it so loose, that it creates little incentive for domestic action.

Secondly, CDM, in combination with over-allocation, has undermined the overall capacity of the mechanisms to create real reductions. Between the surplus of EUAs, and the availability of cheap CERs, industries under the EU ETS had to make very little domestic changes to meet targets. And if we consider cases like the HFC CER ‘fraud’, where Chinese and Indian companies were producing more HCFC-22 to take advantage of CER revenues for the subsequent destruction of HCFC-23 byproduct (EIA, 2011). Moving forward will require higher standards regarding the environmental integrity of CDM projects, in order to guarantee the effectiveness of our strategies to stabilize CO2 concentrations.

Regardless of potential and actual problems associated with CERs in the EU ETS, the most cost effective path to low carbon intensive economies requires that ‘where-flexibility’ mechanisms like CDM. Cost constitutes a major barrier for adopting low carbon, and more efficient technologies, and compliance with measures can be increased if structures that allow us to take advantage of differences between marginal reductions costs, and incentivise action are accepted, supported.

Moreover, mechanisms that allow for the transfer of capital, and technology from developed countries to developing countries are necessary if we are going to have a real impact on global emissions targets. Additionally, the guidelines for CDM projects combine environmental requirements, with broader socioeconomic goals and helping to bridge the ‘development gap’ between countries of different economic capacity.

The future of CDM in the EU ETS is complicated, emissions trading, and CDM and JI are new, and we are still learning. The urgency of effective climate change mitigation requires mechanism like these in order to make a meaningful impact, and share the associated economic burden. Whether or not we like it, collaborative action is necessary, so itis time to iron out the wrinkles, and get to it.

Sources:

Environmental Investigation Agency (2011) Massive climate subsidies for HFCs industry to continue. . Retrieved 31 March 2014 from:

Massive climate subsidies for HFCs industry to continue

EU ETS (2013) CERs and ERUs market as from 2013. Retrieved 31 March 2014 from:
http://www.emissions-euets.com/cers-erus-market-as-from-2013

European Commission (2013) The EU Emissions Trading System. Retrieved 31 March 2014 from:
http://ec.europa.eu/clima/publications/docs/factsheet_ets_en.pdf

Piris, Pedro (2010) The European Union Emissions Trading Scheme: A Succinct Review, by Pedro Piris-Cabezas 2010.

UNFCCC Website, (Last updated March 2014) Clean Development Mechanism. Retrieved 31 March 2014 from:
http://cdm.unfccc.int/index.html

 

Comments Off on CERs and the European Emissions Trading Scheme (EU ETS) / 30 Apr 2014 por asyamarhubi
IMSD /

CSR in SMEs- The power of the little

When you start a small business you are looking for it to become known and successful. The success comes with different hidden issues.

I come from a country in which small and medium enterprises (SMEs) reflect 49% of the GDP of the country, in a country that is growing from the last 20 years. It is a country where innovation and consumption are essential part of the industry.

Such rapid growth cannot become sustainable or socially responsible if it is not for everyone and working together. Being such a large country, the social and economic gaps are widening, becoming almost impossible to develop isolated communities. That’s when small and medium enterprises play an important role.

” Our model is recognized worldwide. Our commitment is to contribute to build healthier and inclusive cities. “

Albina Ruiz, founder and CEO of Ciudad Saludable.

photo: Albina Ruiz, founder and CEO of Ciudad Saludable.

Business ideas come from entrepreneurs who know what is the need and how can it be meet , there is when an SME is born . They are innovative enterprises because they know their market and especially the culture and customs. Having a small number of workers is advantageous for them because decisions can be made in a very fast and efficient way, achieving dramatic results and rapid growth.

Implement corporate social responsibility (CSR) as a core strategy is to integrate voluntarily in terms of resources and values ​​of the company ‘s concern for social and environmental issues and apply across the value chain and its interactions with all stakeholders ( suppliers, customers, employees, the community, shareholders, environment.)

Being a good member of the community impact positively but not enough to make actions from time to time , it is included in the strategy a responsible attitude in order to be competitive in the long term. SMEs are the largest contributor to employment and the economy.

photo: andina.com.pe/ Peru moda 2014

The fact that the message is efficient not only depends on the creativity of sustainability reports. Is, among other variables, about attitude and starts at the office.

Those who run the company should start with the good example and never forget the values ​​with which they started. This way you can reach a high employee engagement, an excellent working environment and a highly effective communication between all.

What counts in a small or medium business is innovation among its range of products, the flexibility to make decisions by being fully horizontal company and above all is the opportunity to grow together for something better.

Entrepreneurs should know that being sustainable is not to spend money, is invest it in something that will lead them to savings in the long term and an infinite loyalty to their stakeholders. It should start with the right foot to stay on the right path. (See bellow some examples of how you can sustainability help your company).

Green Profits for SMEs

Pinche aquí para ver el vídeo

To conclude my idea I want to emphasize that SMEs can make the change that is needed, I think we should put them as an example in many of the actions they take. Not just a powerful company can make a change,  is the person behind the company that can do it. If one is confident that the values ​​and actions taken in the company are correct then there begins the change.

Working with the world is to work for the world, let’s do it!

 

Bibliography

http://www.andina.com.pe/agencia/noticia-promperu-90-empresas-participaran-peru-moda-2014-son-pymes-500115.aspx

http://cendoc.esan.edu.pe/fulltext/e-journals/PAD/7/arbulu.pdf

http://elcomercio.pe/economia/peru/peru-liderara-crecimiento-economico-region-hasta-2018-noticia-1711058

 

Comments Off on CSR in SMEs- The power of the little / 29 Apr 2014 por Gabriela Pella Fernández
IMSD /

The EU ETS double potential

Reducing GHG emissions and raising funds for international climate finance

In this blogpost I would like to investigate if and how the EU ETS (European Union Emissions Trading Scheme) could represent a tool to drive financial funds to climate actions besides being a flagship programme in the EU to reduce the emissions and move forward towards a greener and low carbon society.

The EU ETS is the largest carbon market worldwide (75% of the total) and covers about 50% of the total EU emissions. It is a market-based mechanism that – putting a price on carbon – has created a financial incentive for the big emitters (mainly power plants and factories) to reduce the emissions. Since 2005 it sets a cap on the emissions of the total amount of certain GHG (GreenHouse Gas) that companies can emit each year. A fixed amount of allowances (the EUAs, the currencies of the European carbon market) are issued or auctioned. Each year companies can use those allowances to meet their targets or else buy more credits from other emitters or on the market or funding other projects to get the corresponding offset credits (CERs, Certified Emission Reductions, from CDM Clean Development Mechanism projects – implemented in non-annexe1 countries, mainly developing and emerging economies – or ERUs, Emission Reduction Units from Joint Implementation projects – in annexe1 countries: but there are tighter limits on the amounts of credits possible for these two offsets). Therefore, the EU ETS provides flexibility in the means and it is cost-effective because emissions are cut where it is most convenient.

The key points I want to highlight are that the cap will be reduced over time (thus causing more investments in clean technologies or increased purchasing of allowances) and since phase 3 of this system (2013-2020) fewer allowances are grandfathered (free allocation) as the default method for allocating EUAs allowances will be through auctions: more than 40% in 2013 and then growing year after year.

Actually, during phase 2 (2008-2012) the annual quantity of the allowances that have been auctioned was only about 3% in average: Germany about 9%, UK 7%, The Netherlands  3,7%, Austria 1,3%, Ireland 0,5%, Hungary 2%, Czech Republic (2million). (EU Commission, 2014).

Yet, with the new mentioned regulations of phase 3 the revenues related to the auctions could be consistent – upon the condition that the demand for allowances will pick up (as at the moment there’s a large surplus of about 2 billion allowances). Estimates of the total value of these revenues obviously depend on the carbon price, whose price is currently very low, about €4/tonne. To have a figure, as of 2012 (with a price of €7/tonne) estimates of revenues of the next trading period were of about €10 billion per year (CAN-Europe, 2012).

Now my point is to focus on how member states use these resources: could the revenue streams of these auctions be used to have a further positive impact on climate change?

In 2008 the EU Commission and the environmental committee of the EU Parliament had tried to introduce a binding earmarking of the EU ETS revenues to finance climate action (with about 50% in developing countries and the rest in EU climate projects) but this had been opposed especially by some new EU members, and at the end it was left as a voluntary tool, left open to the decisions of the Member States, i.e., it is voluntary.

This is reflected in the EU ETS Trading Scheme Directive which reports a non-legally binding recommendation according to which member states should spend at least 50% of auction revenues on measures addressed to tackle climate change “..to reduce greenhouse gases; to develop renewable energies, and other technologies contributing to the transition to a low-carbon economy; measures to avoid deforestation and increase afforestation and reforestation; forestry sequestration; capture and geological storage; a shift to low-emission and public forms of transport; research in energy efficiency and clean technologies; improvements in energy efficiency and insulation; to cover administrative expenses of the management of the European scheme” (Emissions Trading Scheme Directive, Article 10, Directive 2009/29/EC)

Unfortunately it is very difficult that voluntary allocation will work properly. There’s a lack of international cooperation. What are member states doing? Have they earmarked the EU ETS revenues either through budgetary or political decisions? Apparently only seven countries have done so. In the EU, Germany is the only country that decided to fully allocate the ETS revenues to climate financing. It set up a the Special Energy and Climate Fund (EKF) which receives since 2012 basically all the revenues from the EU ETS and – through a separate budget structure – operates climate related expenditures at national and international level. France has earmarked its revenues but for national political expenditures and social objectives. Poland might set up a special fund and address 50% of the revenues to national climate actions. Romania has an Environmental Fund and about 70% of the revenues go to it for national actions. Czech Republic earmarks at least 50% for national energy efficiency and international climate finance through and existing State Environmental Fund. Finland is addressing 100% of the resources to international ODA on climate change, through political earmarking. Hungary through political earmarking has addressed 50% of the auction revenues national spending for climate change (Esch, 2013).

Yet, the global arena is eager for climate finance. For instance, at the climate conferences (UNFCCC COP) made in Copenhagen in 2009, in Cancun 2010 and at every single summit since, countries of Annexe-1 (mainly the EU and other developed countries such as the USA, Japan and Australia) committed to provide by 2020 US$ 100 billion a year to developing countries from a variety of sources to fund mitigation and adaptation measures. But no clear way to fund that was set! Again, the revenues of EU ETS auctions could be one way to fund that commitment.

To mention that at the same conferences the EU and other developed countries “pledged jointly to provide nearly $30 billion in ‘fast start’ finance to developing countries in 2010-2012 to support immediate action on the ground”, commitment that has been already respected by the EU that managed to “pledge €7.2 billion over 2010-2012” (about ⅓ of the total pledged) despite difficult economic circumstances. This money is being spent on concrete climate actions in developing countries” (EU Commission, 2014).

Another example of a climate change mitigation policy that might benefit of binding earmarking of EU ETS revenues to climate change actions is the REDD program (reducing emissions from deforestation and forest degradation). Global emissions are roughly 25-30 billion tons of CO2 equivalent and deforestation accounts for about 15-20% of these: the potential relevance of REDD is quite obvious. Yet, how is it funded? REDD at the moment is funded through voluntary pledges / bilateral compensations, with Japan and Norway being the most “generous” countries. Cutting deforestation by 50% in the next five year period 2015-2020 would generate emissions “savings” between 3,300 and 9,900 Million tons of CO2e (IPAM GCP, 2014): these tons represent the supply available to be funded. But the actual total potential demand for REDD emission reductions for the same time period (based on voluntary pledges as of January 2014) is only 253 Mt CO2e. Therefore there’s a large gap between supply and demand. To make REDD working it would be necessary to link it to a direct market-based mechanisms (such as a carbon market) for those jurisdictions ready for it. Therefore, the EU ETS could provide the solution to address to REDD the necessary amount of money. Yet, with the actual surplus, it is necessary to look at the 2030/2050 timeframe: in this perspective the REDD credits could serve both to meet future compliance obligations and represent a reserve of allowances to hedge risks.

Therefore, to conclude, the EU ETS system – besides having a positive impact on emission reductions and investments in green technologies – it might also play a relevant role in channeling money towards international climate finance in the medium-term. To unleash this second potential and provide predictability of resources, policy makers should solve the current issues of the EU ETS (which is determining for instance such a low price of the allowances) and probably set for the member states a tighter regulation with stronger binding commitments and earmarking of the revenues.

References

A. Esch, Using EU ETS auctioning revenues for climate action, GermanWatch, May 2013 – http://germanwatch.org/en/download/7749.pdf

CAN-Europe Position Paper -Best use of auctioning revenues from the EU Emissions Trading Scheme, July 2012 – http://www.climnet.org/resources/doc_view/2056-can-europe-position-paper-best-use-of-auctioning-revenues-from-ets-july-2012

Emissions Trading Scheme Directive, Article 10, Directive 2009/29/EC – http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32009L0029&from=EN

EU Commission, Climate Action, Policies, Phase 2 Auctions, 2014 – http://ec.europa.eu/clima/policies/ets/pre2013/second/index_en.htm

European Commission, Climate Action, Policies, International climate finance, 2014 – http://ec.europa.eu/clima/policies/finance/international/index_en.htm

IPAM GCP Report 2014 – http://www.globalcanopy.org/about/press-enquiries/press-releases/new-report-calls-us12bn-boost-pre-2020-emission-reductions-fore

 

Comments Off on The EU ETS double potential / 29 Apr 2014 por guidopreti
IMSD /

Why CSR in SME´s

Corporate Social Responsibility is the voluntary integration of social and environmental concerns into business activities and relationships with its various stakeholders.

In general , CSR is characterized by the following aspects :

• Responsible Business Practice

• Voluntary initiatives that go beyond legal requirements and contractual obligations

• Activities beneficial to workers , other stakeholders ( including society) or the environment

• With a positive contribution to a target group , while minimizing the negative effects on others (including the environment ).

• Activities on a regular basis rather than an ad hoc basis (ie, related to business strategy )

 

 

Although CSR is usually tested in a context of large companies , it is also a strategic tool to enhance the competitiveness of SMEs. However, their impact is often not able to express themselves on facts and not usually manifest in the short term . CSR can positively influence the competitiveness of SMEs in the following ways

• Improved products and / or production processes , resulting in greater customer satisfaction and loyalty

• Increased motivation and loyalty of employees , increasing their creativity and innovation .

• Improved public image because of prizes and / or a greater knowledge of the business community .

• Best position in the labor market and better interface with other business partners and authorities better access to public aid through better company image .

• Cost savings and increased profitability due to more efficient use of human resources and production increase in turnover / sales as a result of the foregoing .

 

Comments Off on Why CSR in SME´s / 26 Apr 2014 por marioescamilla
IMSD /

SMEs Shaping The Future In CSR

Small and Medium sized Enterprises (SMEs) are important drivers of growth in economies across Sub Saharan Africa, accounting for up to 90% of all businesses in these markets.

They are the vehicles for employment, job creation and key to the regions entrepreneurial environmental needs. Innovative progressive development in Africa would not have happen without them, Socio-economic paradigm shifts would not have happen without them, they have produce middle class in Africa and thus their unique developmental enterprise role.

Associating Corporate social responsibility (CSR) with big companies giving their beautiful huge size, high profit turn over and their well known public image is not a bad thing but CSR is very critical for small and medium-sized enterprises as well (SMEs are organizations of up to 1,000 employees).

CSR is not only about treating all stakeholders responsibly or ethically but also going beyond the minimum legal requirement and obligation stemming from collective agreement in order to address societal needs. This recent definition shows that CSR is not philanthropy.

License to operate, improved risk management, reduce cost from efficient improved ways, new innovative business opportunities, good corporate brand and improve trust with key stakeholders either employees, customers, the government, suppliers and investors are just few of the numerous benefits CSR gives to a company.

I know you will be wondering is this not expensive and time consuming for SME’s to do? Since most of the SME’s founders intention is to make money. Well one nut cannot always spoil the soup and thanks to globalization there are new founders who have desire to meet societal needs in mind and since they are the key drivers commitment to purpose is much easier to engender than big companies. And this makes them more socially responsible than their much larger counterparts.

Personal touch being concern is very important and this can be found only in the SME’s since they know each other and they are few in number flow of information is very effective. They involve employees in key decision making which makes them feel part of the company, give them better flexible working hours and a relax atmosphere to work which makes them like a big family which most large companies does not offer.

SMEs does not only attract the best talent it also grows and bring out the best in even weak staff which make their existence important especially since most of the best innovative product are now coming from SME’s. Since mostly motivation leads to creative and innovation employees are able to offer their best when their leaders empowers them. I will like to end my these with the Michael Hopkins’ definition of CSR

Corporate Social Responsibility is concerned with treating the stakeholders of a company or institution ethically or in a responsible manner. ‘Ethically or responsible’ means treating key stakeholders in a manner deemed acceptable according to international norms.

Social includes economic and environmental responsibility. Stakeholders exist both within a firm and outside.

The wider aim of social responsibility is to create higher and higher standards of living, while preserving the profitability of the corporation or the integrity of the institution, for peoples both within and outside these entities.

Reference:

http://mhcinternational.com/articles/definition-of-csr

Michael Hopkins (MHCi): A Planetary Bargain: Corporate Social Responsibility Comes of Age (Macmillan, UK, 1998).

http://www.huffingtonpost.com/amb-robin-renee-sanders/importance-of-sme-develop_b_888407.html

 

Comments Off on SMEs Shaping The Future In CSR / 25 Apr 2014 por mavisasare
IMSD /

Why is the EU not going to achieve the energy saving target?

The EU 20-20-20 target has been the topic of many discussions. Since 2009 Member States have been working on the 20% increase in energy efficiency (EE), 20% reduction of CO2 emissions and 20% increase in the use of renewable energy resources, being the latter two binding targets at the Member State level, meanwhile the EE only became binding at the EU level in 2012. Nevertheless, the first one is giving everybody a hard time since it was only an indicative target with less political support.

Energy efficiency means using less energy input to produce the same work or activity, which is different from reduction in consumption, where both input and work decrease. In the context of the Energy Efficiency Directive (EED), EE can be achieved by saving energy because it is set in terms of energy use. Cost-effective measures are the key to have savings in the energy bills.

The EU set a first goal of 14% increase in EE in 2006 with the Energy Efficiency Action Plan (EEAP), before the 20-20-20 package in 2009, when it was acknowledged the need of further measures and a new Energy Efficiency Plan (EEP). To support the preparation of the new plan the European Commission did an Impact Assessment (IA) in 2011. The document states that in a business as usual scenario (BAS), the EU will achieve only 9% of energy efficiency. So, why are the efforts not enough? The IA has identified 3 main reasons:

1. Market failures

Energy prices do not consider the cost of negative externalities like pollution, GHG emissions and depletion of natural resources. Split incentives are another cause, which means that e.g. the person paying for energy renovation costs will not be the one benefiting from it. There are some cost-effective measures that have not mainstreamed due to the limited knowledge on the benefits and costs. We also need to consider missing and incomplete markets related to the lack of experts in the field and the infrastructure that do not allow the market to reach a maturity phase. Initial costs are a barrier as well, people want short-term payback and usually the profitability of the investment can be perceived in the long-term. This is reflected in the lack of knowledge of the financial institutions to support energy efficiency projects. Last but not least, we have harmful subsidies for fossil fuels, regulated prices for gas and electricity in some Member States that can provide distorted market signals, and negative incentives like the increase in taxes for buildings with higher values as a result of energy efficiency improvements.

2. Regulatory failures

The technical aspect of energy efficiency doesn’t affect consumers, but also policy makers at the moment of developing regulations, this is translated into lack of political visibility. With little understanding of politicians on this topic, comes the lack of a comprehensive policy framework including regulatory and support instruments, and a poor enforcement, specially at a country level where some of them lack the administrative capacity to work on their policies. Also the constant changes represent a risk for investment.

3. Other barriers

The rebound effect occurs when the savings target is not met. When you develop and sell energy efficiency appliances, the new technology can increase the use of these appliances, not allowing a decrease in the total energy consumption, or even worst, the consumption could be higher.

In the same IA document, the EU identifies the main sectors and the savings potential, and then evaluates for each sector different options to cover the gap. The result is the new policy mix as explained in the following graphic:

According to the distribution of the final energy consumption in the EU, there are some savings potential in all sectors. Taking a look at the pie graph we can see that the third sector (residential and services) and the transport sector are the main consumers, but these two have the potential of achieving 21% of energy savings by 2020 with cost-effective measures. In the case of the industry sector, they have already done most of their savings due to their energy intensive nature; the remaining savings potential is 3%. It is important to consider the energy sector and the possibilities to improve the efficiency in energy transformation and the increased utilization of recoverable energy.

Some of the potential savings can be addressed with existing policies like:

• The Energy Efficiency Action Plan (EEAP) of 2006
• Energy Performance of Buildings Directive (EPBD)
• Energy Services Directive (ESD)
• Combined Heat and Power Directive (CHP)

To cover the difference the IA goes through different policy alternatives:

“As a conclusion, it is proposed that the third policy alternative, a policy framework for Member States with EU support, is followed. This would recognize the importance of Member States in the implementation of energy savings policies, give the EU an important supporting role, and provide for clear objectives and indicators to follow the progress in the realization of the energy savings potential.”

To end with the exercise, the analysis goes further into the various types of policy instruments for each sector, considering voluntary, regulatory, financing, awareness and training schemes. This reveals the need of EU intervention for the sectors to comply with the savings target.

Eventually, in 2012 the Energy Efficiency Directive was jointly adopted by the EU Council and Parliament, which includes mandatory measures for energy efficiency. Some of the changes introduced are:

• Binding 20% target EU-wide
• Governments have to renovate the 3% of public buildings each year
• Big companies have to carry energy audits at least every 4 years
• Energy companies have to achieve energy savings equivalent to 1.5% of the annual energy sales to final customers.

The EED forces Member States to come up with indicative national energy efficiency targets, but will that be enough? Marta Toporek believes that:

“One of the most important measures in the EED package is the 1.5% annual savings target for energy companies, which has the potential to create significant savings and encourage energy efficiency financing. However, its impact could be weakened by too-flexible targets and measures. Other provisions – such as overhauling Europe’s public buildings to make them more energy efficient – also lack teeth. With no binding national energy saving targets and weak energy efficiency measures, the EU will struggle to cut the cost of energy imports, which stood at €488 billion in 2011, or 3.9% of GDP.”

In mid-2014 the EED will be reviewed, giving the European Commission the opportunity to push for an amendment and set binding targets at Member States level. The results of this review will also be a key element to the 2030 Climate and Energy Framework that is proposing not to set national binding targets for renewable energies anymore because it has not been cost-effective. This framework includes a new goal for greenhouse gas reduction as well, but in terms of EE it is still on hold until June before considering the next steps.

Hopefully Member States will not underestimate the importance of energy services and the key role of the utility companies to bridge the gap.

Comments Off on Why is the EU not going to achieve the energy saving target? / 25 Apr 2014 por yvonneroca
IMSD /

CDMs – Friends or Foes of the EU ETS?

The EU Emissions Trading System (ETS) was designed as a climate change mitigation scheme, which would distribute the burden of greenhouse gas (GHG) emission reductions amongst the participating EU member states. The idea behind employing a cap-and-trade system was to improve the cost effectiveness of mitigation. Hence, when the Linking Directive in 2004 introduced the Kyoto Protocol’s Clean Development Mechanism (CDM) into the ETS, it was understood that the economic efficiency of the system would improve. Unfortunately though, CDMs have been widely critiqued and the overall value added to the system challenged; hence, we have to determine if this link was truly a good decision or a very harmful one.

The EU ETS is based on the understanding that the costs of emissions abatement differ across Member States, for which reason allowances can be traded within the market mechanism. Likewise, it is widely accepted that abatement costs are significantly lower in other regions of the world, namely emerging countries. For this reason, CDM projects offer an opportunity for states to invest in a wider range of abatement projects whilst working towards the goal of reducing global concentrations of GHGs by 70% compared to 1990 levels.

Looking at the UNFCCC’s website today, we are presented with a rosy image of CDMs, in terms of the global CO₂ emissions they have avoided and the billions of dollars that have been saved with regards to mandatory abatement costs. What these figures fail to highlight is the overall contribution of these projects to the environmental goals set and what impact they have had on the EU ETS. Unfortunately, though these projects were intended to improve the environmental health and sustainability of the Global South, economic incentives have driven several CDM projects away from these objectives.

One of the clearest examples of this is the case of the HFC-23 destruction projects. The objective behind these initiatives was to destroy a harmful by-product of HCFC-22, a common refrigerant. Given the immense global warming potential of HFC-23 (as compared to that of CO₂), participants realised that by destroying small quantities of this GHG, they could obtain huge credits which they could exchange for CO₂ allowances. As a result, higher volumes of HCFC-22 were produced, thereby releasing higher quantities of HFC-23[1], which was completely contradictory to the objectives of the Kyoto Protocol and EU ETS.

The popularity of such projects not only had environmental repercussions, but also impacted negatively on the carbon market. Coupled with the over-allocation of allowances, credits from CDM projects essentially flooded the market and contributed to the landslide drop in the price of carbon. As a result, stricter emphasis was given to the principle that CDM projects were intended to support national reduction policies, and now only a limited percentage of allowances from these projects can be used to cover emissions. Nonetheless, this percentage varies within the EU, so CDM projects still play a large role in some member states.

Given their continued presence, other regulations have been implemented, including the type of projects that can be carried out. Land use, land use change and forestry are no longer viable options, and hydropower projects over 20MW must comply with the standards of the World Commission on Dams[2]. With the risk of environmental damage and market inefficiency, we may ask ourselves why CDM projects have not been banned from the ETS altogether. The reason stems from international negotiations on climate change; principally, in a ‘promise’ made to the Global South…

This promise, set in the Copenhagen Accord, obliges the industrialised nations of the Global North to mobilise $100 billion each year by 2020[3], to fund climate mitigation and adaptation. Given this immense sum of money it is evident that it must be sourced from a number of initiatives, which is where CDMs come into play. Though reduction burdens can be differentiated to reduce the costs of mitigation for the Global South, CDM projects initially appeared to create the best incentives for foreign direct investment in climate change abatement. The issue now is that with demands from Annex I nations for ‘meaningful participation’, wherein non-Annex I countries would also have to take on reduction burdens[4], CDM projects are likely to become obsolete. Given the principle of ‘additionality’, wherein only projects that would not have occurred otherwise can be credited as CDM, any project carried out in a country with a set commitment would be difficult to justify. For this reason, it is presumable that participants in the EU ETS will move their focus to Europe and, as a result, that international mitigation efforts will suffer.

Though the EU complied with its pledge to raise €7.2 before 2012[5], to fund immediate action, climate financing may become increasingly difficult. With reduced economic demand and over-allocations of allowances, the price of carbon continues dropping and credits from CDM projects are currently being traded at €0.15. Given that the majority of credits allowed from CDM projects for phase II have already been purchased and surrendered, further investments in CDM are highly unlikely. Though this may improve market efficiency and increase national mitigation efforts in the EU, it does not paint an optimistic picture for international climate change decisions.

Comments Off on CDMs – Friends or Foes of the EU ETS? / 24 Apr 2014 por anabeatriceacuna
IMSD /

Barriers for SMEs to approach sustainability: myth or reality?

It is becoming less rare to find Small and Medium Enterprises (SMEs) that integrate social and environmental concerns to their business strategy. They try to achieve their economic goals while creating shared value for society (employees, community, suppliers are included) and preserving the environment.

When talking about businesses that follow the sustainability path, including in their strategy and procedures social and environmental concerns, we are talking about responsible business. The term Corporate Social Responsibility (CSR) in this blog doesn´t refer to having a CSR department in the enterprise, but to include sustainability in the business strategy or at least start implementing practices towards it.

In spite of this growing interest of SMEs to this approach, still, there are many managers leading small companies that aren´t convinced about adopting this model. There are different arguments set by the sustainability “skeptics”, most of them are more a myth than a reality; I will try to explain why in each case.

 

1)    “IT IS TOO EXPENSIVE!” Myth.

Being responsible while making business and thinking about the consequences of the decisions that are being taken doesn´t cost money. But not only in the strategy phase is this argument a myth. When it comes to implementing actions in there are many options that don´t necessarily need to cost money, for example:

–     Think about the packaging being used. Could you get rid of it? This last option would even save money!

–     Separate the waste and ensure it is recycled.

–     Reduce the use of paper in the office, or use paper that comes from certified sustainable sources.

–     Promote work & life balance for employees offering benefits such as flexi-time, home office, make agreements with local restaurants for discounts, training, integration days, volunteer hours, amongst others.

–     Offer local communities production scraps that could be useful for them, to create new things or to recycle.

–     Employ local people and train them.

–     Offer local organizations in-kind support such as: spaces for events, communication channels, being a donation point, training their volunteers, etc.

Be creative! These are only some options, but there are many adding value activities with no monetary cost.

 

2)    “IT IS TIME CONSUMING, WE HAVE OTHER URGENCIES.” Truth, but….

Being responsible is a mindset. There is almost no enterprise where managers don´t take the time to plan a business strategy. Is it really that much extra time to include social and environmental aspects in the planning?

If everyone that is part of the company starts including in their day-to-day decisions social and environmental concerns, a responsible business culture will be built. Decision making is a process that can be more or less formally established, but if “responsibility” is included as a binding value no extra time will be needed to “think about sustainability”.

It is true that not always small enterprises take that much time to plan or analyze decisions and in many cases this planning is very informal. Also, not all SMEs have defined internal decision making procedures. If this is the case, then including CSR to the picture could be time consuming. But it is also truth in these cases that without proper planning or procedures, the economic sustainability is at risk.

3)    “MY COMPANY IS TO SMALL THAT IT WON´T MAKE A DIFFERENCE.” Myth.

According to the IFC, SMEs “account for about 90 percent of businesses and more than 50 percent of employment worldwide”.  So if every SME includes CSR as a way of doing business, the impact it could have is huge. One would think a small action can´t change the world, but it definitely can make a difference and inspire others.

 

There are many organizations that offer support to SMEs to include CSR and start being more sustainable without cost. Learning more about this business approach and talking with your team about it can be a first step!
Some interesting links for SMEs who want to go for CSR:

• http://www.csr-in-smes.eu/
• http://www.reportingcsr.org/smes-p-167.html
• http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/sme/index_en.htm
• http://www.fccsingapore.com/sites/default/files/public/publications/CSR_Guidebook_2012.pdf

 

Comments Off on Barriers for SMEs to approach sustainability: myth or reality? / 24 Apr 2014 por celinalesta
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Corporate Responsibility starts at the heart

When talking about of Corporate Responsibility what always comes first to mind is a big company doing some kind of philanthropic activity trying to offset its negative impacts. But in a country like Spain, where 99.88 % of the companies are SMEs, thinking that only big companies are required to be responsible leaves most of the economic activity (and pollution) out of the picture. However, that’s not the way corporate responsibility works. It is simpler, it’s all about acting responsibly.

The Oxford Dictionary defines responsibility as a moral obligation to behave correctly towards or in respect of something or someone and also as the state or fact of being accountable or to blame for something. It is as simple as that: making any decision, while keeping in mind that the decision-maker has the moral obligation to act correctly and at the same time, he or she is accountable for it. In this simple equation there is no room for the size of the company. It doesn’t matter if the company has 10 employees or 1,000, the principle is the same. What changes is the impact.

Of course, the impact of a small company that acts responsibly and seeks sustainability is nothing in comparison to transnational corporation but if we go back to the first figure (99.88 % of the companies are SMEs in Spain) our perception of the potential impact of SMEs grows exponentially. And with such an easy recipe to act responsibly: act correctly and consider the consequence of each choice; the effect could be the same as waves in the water. From a small drop (the core of the company, the leader), it amplifies and scales up in magnitude changing the way the company acts, disturbing the market, modifying how suppliers work, increasing the awareness of the community and creating and enabling environment for positive change.

But all has to come from the heart of the company, big or small. The decision-maker has to be responsible and act with responsibility.

 

Comments Off on Corporate Responsibility starts at the heart / 23 Apr 2014 por juancarlosgomezmartin
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CSR IN SMEs: Values Becoming Valuable Once Shared

 

In an ever-changing world, re-thinking traditional concepts and frameworks is becoming a must, especially for the world of business where profit has always been the ultimate goal to attain.

The economic aspect, although crucial, has lost its monopole making room for other pillars that a business should take into consideration in order to survive in a highly competitive market.

Therefore, companies are no longer perceived as isolated entities detached from their environment and communities.

Nowadays, with the rapid evolution of social media, the balance of power has been completely transformed, giving stakeholders the right to put companies under the microscope analyzing their promises, behaviors and therefore demanding answers.

Transparency is no longer an asset that enterprises can proudly portray as a competitive advantage.

However, the way companies choose to communicate, and engage with their stakeholders can be a distinctive approach forging a unique corporate identity.

Hence, corporate responsibility is becoming a duty and a fact rather than a choice, putting the company´s reputation at stake, and its maintenance an ever-growing challenge.

 

The emergence of SMEs is a living proof that when it comes to corporate responsibility size does not matter.

Therefore, all the misconceptions that link corporate social responsibility with the company´s size and budget, are becoming ideas from the past.

However, in SMEs, savings in the budget are often achieved through innovation and eco-efficient measures.

Small and medium enterprises have been created as a response to a specific demand in society, justifying their size, structure and business focused on niche markets.

Stressing on the important fact that CSR is not a simple add-on to the company´s performance, SMEs are being created with responsibility at the heart of their mission, vision and purpose. They are being portrayed as role models due to their contribution to sustainable development and the contagious effect it is generating, by transcending the limits of the communities where they operate.

It is a well-known fact that change makers should start by looking at themselves in the mirror first, before changing the world. And that is exactly the strategy that is being adopted by SMEs.

Before engaging the external stakeholders, it is essential to start with the heartbeat of the enterprise itself; its people.

The employees are the doers, responsible to transform the owner´s words, promises and values into concrete behaviors, reflecting the cultural essence of the enterprise.

Therefore, internal engagement and motivation of the employees are key success factors.

When the source and the inside of the organization is healthy, it reflects on the outside, and translates the purpose of the business in the most honest way possible, straight to the heart of its stakeholders.

 

The staff is the mirror of any enterprise, their efficiency and passion feed on the inputs they receive from the top management. A management that believes and apply the values they  preach across the company.

In a world where focus is being set on increasing the market share, all businesses are looking in the same basket, whereas multiple sources of inspiration and innovation can be extracted, just by looking at their own businesses.

Coherence will start rising as soon as the actions of the companies start matching their promises.

Innovation is leading the way, and presenting new alternatives even in times of crisis. Innovative solutions that are focused on the core excellence of the SME seek, to achieve positive change by getting an increasing number of other enterprises on board for a collective and more influential impact.

“Doing good” does not contradict the purpose of business it complements it, and gives it an added value.

From the suppliers to the customers, SMEs are conscious about their position and the nature of the relation they are trying to build with every stakeholder.

 

By setting their own rhythm and trend, SMEs are forging the path of shared values, by getting all their stakeholders on the same boat and making them feel part of the company.

Decision-making is not management oriented anymore, brainstorming and collective input and feedback are humanizing the business.

 

Traditional top-down communication trapped in a hierarchic corporate context is being transformed into a lateral communication, where the messages are spread across the enterprise.

Nowadays, isolation offers rejection and interaction with other entities is a guarantee for survival, acceptance and trust.

Therefore, personal values coexist with the company´s values as well as the values shared by society as a whole.

Allowing all stakeholders´ values to be heard will enhance the love brand zone that every company is aiming to install towards their clientele, by trying to transform them into evangelists.

In other words, the goal is to create loyalty towards the brand, through emotional engagement.

 

Values define identities, and corporate identity is clearly a competitive advantage, since it sets the company apart from its tribe.

According to Roy Disney: “It’s not hard to make decisions when you know what your values are”.

 

Comments Off on CSR IN SMEs: Values Becoming Valuable Once Shared / 23 Apr 2014 por rimaelkhoury
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