FEATURE
SUBOPTIC 2023 BEST NEWCOMER PRESENTATION AWARD
PRICE IS RIGHT
In(ternal)vesting In Carbon Pricing For Sustainable Growth By Nancy Cai (Telstra)
ABSTRACT
Every business decision is associated with environmental externalities. With that in mind, internal carbon pricing (ICP) is growing as corporate decision-making tool to incorporate climate change-related risks and opportunities. Embedding environmental considerations is part and parcel of working towards our shared ambition of sustainable growth. To do so, companies can consider ICP to understand the true environmental impacts of business activities. This article examines the recent trends and various designs of ICP based on the available reports and data from the Carbon Disclosure Project (CDP), exploring case studies in the technology and telecommunications sector.
INTRODUCTION
As more countries corral together to tackle climate change, carbon pricing measures such as taxes or emissions trading systems are important not only for international politics but also businesses. Increasingly, more companies are adopting ICP to guide their corporate decision-making (such as project or investment decisions and procurement). ICP refers to the method of voluntarily assigning a monetary value to carbon emissions generated from a company’s business operations. By internalising the cost of a company’s greenhouse gas emissions (GHG), ICP induces environmentally conscious behaviours which decreases the company’s direct and indirect GHG. The Task Force on Climate-related Financial Disclosures (TCFD) advocates ICP in scenario analysis as a forward-looking metric to facilitate the climate transition for a low-carbon economy for financial institutions.1 With greater pressure placed on businesses by regulators and stakeholders, ICP is expanding amongst the private sector and telecommunication players to not only respond to such regulations but also demonstrate greater social responsibility through progress in environmental, social and governance (ESG) standards.
ICP refers to the method of voluntarily assigning a monetary value to carbon emissions generated from a company’s business operations.
TCFD. (2017). Final Report: Recommendations of the Task Force on Climaterelated Financial Disclosures.
1
Financial Stability Board. Basel, Switzerland: Bank for International Settlement.
WHY USE INTERNAL CARBON PRICING
Based on the Climate Change reports published by the CDP, which manages a global disclosure system for companies to assess environmental impacts, ICP is cited to be adopted for multiple purposes, including:2 • Navigating GHG regulations • Stakeholder expectations • Changing internal behaviour • Driving energy efficiency • Driving low-carbon investment • Identifying and seizing low-carbon opportunities With companies pledging to reduce GHG emissions, ICP is one of the many climate change strategies in their arsenal, although motivations could vary from pleasing stakeholders to changing behavioural practices inside the company. In 2020, over 50% of submissions reported chang2 CPLC. (2021). Putting a price on carbon. London: Carbon Pricing Leadership Coalition. 10.
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