Carbon tax: A juggling act

Six key points to help deal with its impact on your business

How does an IT company best set itself up to deal with the Carbon Tax. Surprisingly, given all the media attention, ARN found it quite hard to get the definitive answers. But in the end we did establish six key points.

The eagle has landed. The implementation of the Carbon Tax on July 1 marked its transition from political debate to legislation. Australia’s top 500 polluters, marking about 0.02 per cent of the nation’s businesses, will be paying $23 per ton of carbon emissions, a figure which the treasury expects to rise to $29 in 2015 as the tax becomes a trading scheme at the hands of the market.

1. Get on with it

Criticisms (and perhaps fears) aside, both Channel Dynamics director, Cam Wayland, and IDC Australia research director, Matt Oostveen, are adamant that change presents adequate opportunity. To take advantage of it, IT businesses must demystify the Carbon Tax to not only identify the ways in which to reduce cost and become more energy efficient, but to find new revenue and turnover elsewhere, particularly through customer relations.

“The tax is in force, and it will have an impact across a whole range of services and prices. If it gets repealed, we will deal with what those changes are then but, for now, businesses need to look at the here and now,” Wayland said.

The here is and now is an inevitable cost impact that will hit IT businesses as the result of a knock-on effect triggered by the top polluters who are within the Carbon Tax’s direct scope.

Oostveen said for the most part, chief information officers (CIOs) and datacentre operators, the people responsible for the areas with the largest power consumption figures in the IT industry, are on board with the here and now.

“There was an awareness that it was coming into effect, and organisations have been preparing for it for up to 12 months,” he said.

2. Whose got the power?

While money will be pushed through numerous sectors, power costs and the datacentre will logically see the bulk of expenses within the IT industry.

In May, Wayland suggested research and understanding into power suppliers, drawing on the use of different coals in Victoria and New South Wales and the impact of each as example. His approach to “shop around for energy, understand the deregulated energy market, and understand clients to help them improve their energy efficiency,” is one which he continues to advocate, and a step which Channel Dynamics took in its recent supplier change.

The competitiveness among power suppliers that will ensue throughout the next few months will act as an opportunity for businesses to look for a better deal. According to Wayland, existing long-term relationships with suppliers should be a key motive to head elsewhere.

3. The holistic approach

There is no one right answer to driving efficiency into a business, but there are better places to start than others, Oostveen said.

A thoroughly assessed holistic approach is key here, he said. Those companies that did not prepare for the tax ahead of time, need to sit back and analyse their environment, beginning at the top and then moving on to look at the consumer goods used by employees.

“In datacentres, the chief user of power, it begins with the system level,” he said. “It comes down to driving efficiency into the granular individual systems that sit on the datacentre floor.

4. Convert customer savings to your business

Ovum public sector technology research director, Kevin Noonan, said, “Channel businesses, equipment manufacturers, and maintenance companies need to think about power as being one of the factors of customer decision making, rather than something that’s hidden away in the background.”

Although this statement may appear to be common sense at first, Noonan clarifies it by highlighting that previously, energy efficiency resembled a preference; it was good to have, but when times were tough, it did not affect the bottom line. Lip-service was played to environmental issues. With the intent of adjusting behaviour, the Carbon Tax will give power prevalence.

By re-engaging customer relationships, a channel business has the chance to not only guide them to cost efficiency, but convert their savings into its own sales.

“If channel businesses can take some of the operating costs, like lighting, for example, out of its customers’ businesses, that availability in the budget can be utilised on better services or hardware from the vendor or provider itself,” Wayland said.

Although Data#3’s managing director, John Grant, does not believe this approach is driven by the Carbon Tax per se, its significance is cemented with the growing prevalence of power-centric strategies.

“The role of the supplier is to assist customers in getting better business outcomes, and if it does so, it can expect customers to do more business with it.”

5. Observe, consolidate, decommission

The ‘out with the old, in with the new’ cliché lingers at the forefront of dealing with the Carbon Tax. Noonan said, previously, CIOs had not been exposed to the full extent of the cost of powering IT equipment. There is a now a need for managers to be more astute as to what these costs are.

“Businesses need to start to look at inventory checks of age of equipment, what equipment is at the end of its useful life, and whether remaining usefulness is environmental,” Noonan said. “In terms of IT equipment that is spread across the enterprise, such as laptops and computers, all of that adds up to a big spend.”

The incentive of environmentalism was a minute factor in purchasing considerations. The business incentive has made it imperative.

6. Don't jump the gun

While spending will become a go-to option, Oostveen cautions businesses from making knee-jerk response reactions to the implementation of the Carbon Tax.

“I encourage CIOs and the channel to have serious conversations about what they want to accomplish before making the move,” he said. “The reality is that projects get pulled and pushed, budgets change, and strategies can get reverted as well. If the CIO has a light in the sky as to what they want to accomplish, they’ll be tracking to true north.”

This comes back to the holistic approach.

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1 Comment

Iain Smale

1

Good article! My company, Pangolin Associates, (a carbon and energy consultancy working in both compliance and the voluntary space) has identified using a robust methodology that the impact for a purely services based business is around 0.1% on their general ledger. Obviously for those IT companies running data centres the impact will be higher but there are also larger opportunities arising for reductions with higher power costs. More information at http://pangolinassociates.com/sustainability-services/carbon-strategy-risk-report/ Iain Smale, Joint MD, Pangolin Associates.

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