The James McNaughton Group is one of the UK and Ireland's leading suppliers of graphic and office papers, boards, plastics and other substrates. Through sector- specific divisions it offers experienced sales support to clients throughout the printing, publishing, display, public sector and corporate markets.

The Group employs 680 people with headquarters in Erith, Kent, and 16 regional sales centres and has an annual turnover of £281million. It is a subsidiary the Antalis Group, the largest paper merchant in Europe, with a business presence in 30 countries and a combined turnover of 3.74billion Euros and sales of 3,400,000 tonnes.

Howard Browning has worked within the paper industry for 30 years, 23 of them with The McNaughton Group.

"In June 2006, The McNaughton board recognised the growing importance that society in general and, more importantly, our clients were placing on environmental responsibility and charged me with the responsibility to analyse and facilitate group-wide cultural and environmental changes that delivered both environmental impact reductions as well as looking for any financial benefits that might be possible from process improvements. As a result I was appointed to the newly-created role of Director for Corporate Responsibility."

Tell us about what are you working on right now

"At this time of year, I am busy compiling year-on-year performance data to assess our carbon performance in 2007 compared to the audited starting level of 2006. I am hopeful of reporting that the group will have made some significant progress in reducing our total carbon emissions.

"Also, we are working in partnership with Ecotricity, the UK's leading supplier of renewable energy, to construct a 72metre-high wind turbine which, when commissioned, will be able to supply all of the electricity needed by our central distribution site in the Midlands from a zero carbon and sustainable source. It is proving to be a challenging and complicated project but the benefits will be eminently worthwhile and provide a new landmark over one of the UK's largest logistics parks.

"The other main project is co-ordinating our company's involvement in HRH Prince of Wales MayDay 2008 summit on climate change, which takes place on Thursday May 1st.

"At the inaugural event in 2007, around 1200 companies from around the UK came together to learn about not only the unprecedented environmental implications of climate change and the risks that businesses may face in the future as a result, but also the opportunities for businesses taking first actions towards operating in a low carbon economy.

"For May Day 2008, I was asked by the organisers, Business in the Community, if the McNaughton Group would join 19 corporate organisations including BT and showcase their progress and achievements in carbon management during the last 12 months at a marketplace event taking place during the London summit.

"We will also have 9 colleagues attending the various regional events which will I hope greatly increase their appreciation of the issues surrounding climate change and reinforce the importance of the company's focus in reducing its own impacts."

What are the biggest challenges you face in your role and how do you deal with them?

"Apathy mainly, caused in my experience by the lack of
a) real knowledge of the scientific realities;
b) misinformation spread by the media and
c) the general feeling of 'what difference can I or we really make'.

"There is certainly no quick fix to these conditions and so instead I concentrate on providing my colleagues and clients with the information and knowledge that might help them come to their own conclusions based on the increasing level of fact that is presented to us.

"Communication, as always will remain the key to engagement and supportive action."

What has been your most successful low carbon initiative and what made it so?

"Instigating a group-wide energy review which resulted in our first company energy policy and an energy-awareness campaign. This has resulted in the group achieving a reduction in its actual electricity usage of just under 15%. In addition to the Co2 reductions, this made sound business sense, particularly in view of the dramatic increases in energy costs.

"The other successful initiative was analysing the company's car fleet impact with the help of the Energy Savings Trust and realising the emissions and cost benefits that could be achieved simply by changing the policy to restrict drivers choice to either diesel, bio-fuel or hybrid vehicles.

"Over a 12-month period, the fleet reduced its annual business mileage by 480,000 miles, saved almost £60,000 in fuel costs and 171 tonnes of Co2 emissions. This is a progressive project and I am confident savings will increase further as fleet profile continues to change."

What low carbon technology trends are emerging?

"The paper industry is not at the forefront of low carbon technology development but is certainly setting a positive example when it comes to use of current low carbon technology. The process of making paper is a very energy-intensive one and pulp and paper mills are one of the big six of energy users.

"However they have taken a global lead in the use of bio fuel energy: so much so that over 50% of the worlds pulp and paper industry's energy already comes from their own waste bi-products: i.e wood waste. To put this into context, the nearest industry to pulp and paper manufacture is the tobacco industry, which currently uses around 7%.

"As we know paper itself is one of the most sustainable and reusable mediums we have and the dramatic increase in the demand and use of recycled papers using recovered fibre from waste paper destined for landfill sites simply helps to close the entire loop."

Are there any particular pitfalls you've encountered?

"Increasing consumer awareness of climate change inevitably leads to lots of people picking up on lots of 'environmental sound bites', which tend to lead to misinformation. Paper comes from trees and trees come from forests. Forests are, along with the oceans, the world's largest positive processors of Co2 (a process called sequestration) so the natural conclusion is that cutting down trees to make paper must have a negative impact on the environment.

"There are certainly still major reasons for concern over the continued practice of illegal logging in forests in Far East countries such as Indonesia. However, the growing forest certification programmes such as PEFC & FSC are undoubtedly helping to arrest this trend, and I would urge all users of paper to specify the use of certified sourced products or indeed recycled papers.

"The fact remains that in 99% of cases, the trees used in papermaking are part of a harvested crop that comes from strictly controlled, well-managed and sustainable forests. The forestry industry which serves the pulp and paper industry replant trees in a ratio of 3 new for every one harvested, which is clearly very sustainable."

How will the current economic climate affect the push to reduce carbon emissions?

"All of the environmental initiatives our company has instigated have also brought genuine cost savings and this has certainly encouraged greater support from senior management.

"We have only to be reminded of the economic cost predictions contained within the Stern Report to be able to suggest that organisations need to invest in more sustainable business solutions as part of risk-avoidance in exactly the same way as they would to guard against any other business risk. Safe-guarding the environment whilst steering a company through turbulent economical conditions must not now be viewed as mutually exclusive business activities."

Is it necessary to have environmental representation at company board level?

"It certainly helps to demonstrate the importance and commitment placed on the issue within an organisation. It also inevitably leads to quicker and more focussed action and encourages greater engagement from within the workforce.

I would suggest if not main board, then certainly MB-1."

How can government further encourage good company practice?

"Quite simply by avoiding their normal practise of hiding behind revenue generation in the guise of green taxes supposedly aimed at penalising the polluters. It doesn't work and creates negative feeling amongst the public, who are also the same colleagues at work we are trying to gain support from.

"In my view, it's 'carrot and stick' every time. There needs to be much greater financial incentives given to companies acting responsibly which will become too attractive to companies not acting to ignore.

"For those refusing to accept their corporate responsibilities, the introduction of much greater financial penalties will not only make their inaction increasingly detrimental but would also help fund the level of incentives for good company practises."

What advice would you give to someone taking on a role similar to yours?

"Get involved and try to make the little changes become big changes that make a real difference. But never ever underestimate the challenge of trying to culturally change people's individual attitudes and actions. One witty fellow CR practitioner once likened it to being as simple as herding cats!"

Low Carbon Board Report

Investing In Low Carbon - Investing In The Future

Financial investment is the life blood of the low carbon economy, providing vital resources for new businesses and incentives for existing companies to reduce their emissions of greenhouse gas emissions.

Through its task of gauging risks and opportunities, the investment community also provides valuable indicators of the challenges facing companies. These cover a broad spectrum, taking in responses from governments and international bodies in the form of taxation or regulation, the physical impact of changes in weather patterns, and the demands of technological innovation.

The Stern Review of 2006 helped give these challenges a financial shape. Based on extrapolations from current trends, we could see an average 5 to 10% loss in global GDP, and poor countries suffering costs in excess of 10% GDP in the next 50 years, says Stern. Net benefits of up to $2.5 trillion could result from beginning to implement mitigation policies now, says the Review.

First steps for financial institutions

Financial institutions are responding in several ways. Banks have made forays into carbon markets and carbon funds. Notable examples include the Bank of America, which formed a joint venture with Climate Exchange plc to provide offsets for Bank of America retail and institutional clients, and to trade on climate exchanges in the US and Europe.

Development banks such as the Japan Bank for International Cooperation, the Kreditanstalt für Wiederaufbau, and the Instituto de Crédito Oficial now offer investment in overseas projects that comply with Kyoto Protocol requirements. The insurance industry has begun to make moves too, with Swiss Re developing risk transfer products for carbon funds and compliance buyers, for example.

“We began to see real change in 2006 as a result of progress with the carbon markets,” says Dirk Kohler, a member of The United Nations Environment Programme Finance Initiatives (UNEP FI), a partnership between the UN and the finance industry.

The most significant of these was the creation of the European Union Emission Trading Scheme (EU ETS), he says. “The creation of the EU ETS really pushed things forward. For financial institutions this was enough for them to intervene,” says Kohler. “For insurers this brought two major issues: understanding the new dimension of risk, and how carbon trading can be integrated into asset management,” he says.

In the period September 2006 to March 2007, carbon funds worldwide increased in value by around 50%, from $4.7bn to $11.8bn, says UNEP FI. There were 58 funds, covering a wide range of activities, from compliance purchasing through to intermediary trading and project development.

Public concern creates pressures and demands

Growing public concern about climate change has fuelled the second key area of activity, new financial products. Some of these have been quite innovative, such as the move by AXA France to launch a car insurance product with a leasing agreement that provides a small car with low emissions during working periods, and a larger car for holidays or weekends.

Munich Re has introduced Kyoto Multi Risk Cover for delivery of carbon credits, and helped found the Munich Climate Insurance Initiative which aims to develop to help manage the impacts of climate change in developing countries.

Standard Chartered is committed to investing $8 to10 billion in renewable and clean energy projects in Asia, Africa and Middle East between 2008 and 2012, while HSBC has introduced the HSBC Global Climate Change Index, and a Global Climate Change Fund for clients to invest in the companies in this index.

Financial institutions invest directly in renewable energy, energy efficiency, and clean technology too. For example, Allianz RCM’s Global EcoTrends fund is a 1bn Euro portfolio of companies dealing in renewable energy and pollution control; the Barclay’s Climate Action Programme will provide long-term finance to wind farms and biofuel projects; and Citigroup has a10 year plan to invest $50bn in clean technology.

Harnessing the power of people

They also have an important role in engaging stakeholders and capacity building.

Innovative examples include the HSBC Climate Partnership, formed in 2007 by The Climate Group, WWF, The Smithsonian Tropical Research Institute, and the Earthwatch Institute. The five year, $100m programme will see volunteers helping environmental scientists with their field research, and take on the role of climate champions when they return to the workplace.

These are significant developments, but the financial sector could do a great deal more, says UN EFI. Progress in the sector as a whole has been limited, it says in a recent report.

On the issue of stakeholder engagement, it can be argued that a charitable organisation has led the way. The Carbon Disclosure Project (CDP) is the world’s largest registry of corporate greenhouse gases, recently requesting information from 2,400 companies on behalf of more than 300 investors. Taken together, these represent assets totalling more than $41 trillion, amounting to some 30% of global total invested assets. “It’s taken eight years, a few million pounds, and the time of people who could have made millions for themselves in the private sector,” says CDP chief executive Paul Dickinson. “Investors aren’t Father Christmas,” he told Low Carbon Board Report. “They are concerned about carbon emissions in proportion to the cost imposed on it by taxation or regulation. If an investor looks at a company report and sees say, 130 million tonnes of carbon dioxide multiplied by zero you don’t need to be a financial genius to see why they won’t be bothered,” he says.

The need for certainty beyond 2012

Taxation and regulation are policy choices that can only be made by governments, and with 2012 and the expiry of the Kyoto Protocol approaching, uncertainty can only slow the finance community. “2012 is a critical deadline,” says Dirk Kohler. “For people who don’t want to be first movers, there is always an excuse to do nothing,” he says.

While the amount of data about carbon emissions has increased, we have yet to see convincing evidence of its influence on mainstream investment decisions, suggests Danyelle Guyatt, Principal at research company Mercer. “We have found that very few mainstream fund managers and analysts - outside the sustainability branded products - systematically integrate environmental data into their analysis,” she says.

There is a growing demand for environmental data, but investors aren’t confident they know what to do with it, she suggests. “It will be clearer once we have a price for carbon. People are waiting for an outcome. They’re watching the G8 nations,” she says.

This may well be true but it would be a mistake to assume the developing world is any less knowledgeable about the issue or committed to tackling the problems, suggests Paul Wilkinson. “I think the so-called developing world gets it quite well. To pick one example, the China Investment Corporation – with $200 billion – has signed up to the Carbon Disclosure Project,” he says.

Key questions:
· What impact would doing nothing have on future revenues and profits?
· What emissions data should we provide for investors?
· How might emissions reduction help us deliver more value to investors?