carboNZero certification - 'greening' our trading future
Landcare Research's scientifically robust carboNZero programme is helping environmentally focused New Zealand organisations achieve a market edge, as this 2008 case study for the Crown Company Monitoring Advisory Unit (CCMAU) explains.
In 2006 the Grove Mill winery in Marlborough became the first certified carbon neutral winery in the world. Its owners, the New Zealand Wine Company (NZWC), achieved Landcare Research's carboNZero1 certification for their vineyards and production of wines at Grove Mill, and for freight of the wine to its overseas markets.
An economic analysis (Gilkison 2007, 2008) conservatively estimated the value of carboNZero certification to the New Zealand Wine Company to be over 15 times its investment in earning carbon neutral certification. carboNZero certification produced wide-ranging benefits for the NZWC including:
- a significant increase in sales of NZWC wines, especially in the UK
- a 30% increase in share price in the year following certification. Though other factors such as success in competitions potentially influenced share price, carboNZero certification was considered by NZWC management to be the most significant factor in this increase
- a greatly enhanced market impact - estimated by a NZWC UK sales manager to represent a 50-fold return on marketing investment
- considerable positive exposure through media attention on this world ‘first'
- differentiation from competitors, and the ability to ‘cut through' in negotiating with trading partners
- cost reductions through energy savings and other efficiencies associated with certification
- influencing the company's supply chain towards carbon neutrality
- a degree of ‘future-proofing' - defence against potentially negative impacts of ‘food miles', and a timely brand image of environmentally responsible production when demand for products with demonstrated low environmental impact is rapidly escalating.
Grove Mill's carbonZero certification demonstrated to New Zealand businesses the significant economic gains to be achieved from carbon neutral certification through increased sales and cost efficiencies in production.
Other wine producers have since followed suit - five wineries in addition to NZWC are currently among the 40 organisations and events that now hold carbonZero certification - and other industries are seriously pursuing carbon neutral production. For example,
Landcare Research and its research partners currently have MAF funding to develop methodologies for measuring, and eventually reducing, greenhouse gas emissions associated with the kiwifruit sector.
The potential benefit to New Zealand from adoption of carbon neutral certification systems such as the carboNZero programme is huge. carboNZero certification resulted in additional sales of ~20% for the New Zealand Wine Company in its first year of certification. Were New Zealand's entire export wine industry to shift to carbon neutral production and achieve even half2 this increase, additional export revenue of almost $70 million3 would be generated.
Similarly increased export returns from a carbon neutral kiwifruit industry would be in the order of $76 million. However, potentially much more significant is the opportunity offered by carbon neutral certification to limit risks to overseas markets for New Zealand's agricultural and horticultural exports that currently provide 4.8% of New Zealand's $136 million GDP.
Global trade faces a carbon-constrained future. In key markets for New Zealand's agricultural and horticultural exports, trading partners are both cutting their own carbon emissions and increasingly importing products with demonstrated low environmental impact.4
Pointing the ‘green finger'
Food miles are an increasing - if not entirely rational - concern. In the northern hemisphere the ‘green finger' is being pointed at New Zealand, because of our distance from markets. carboNZero certification provides a significant edge in competitive international trade by providing independently verified proof that New Zealand is providing the environmentally responsible products the markets seek. The value of secure access to UK markets alone for New Zealand's agricultural and horticultural produce is over $1 billion.5
Grove Mill's success also contributed to worldwide recognition of Landcare Research and the carboNZero programme as a leader in scientifically robust carbon neutral certification. Recognising the benefits to be gained from carboNZero certification, British-based Achilles Information and Landcare Research entered a partnership in 2008, signing a licensing agreement that will see the carboNZero programme's methodology introduced to 32 000 clients in the oil and gas, transport, public, pharmaceuticals, mining, construction, and communications technology sectors in 24 countries.
Landcare Research established the carboNZero programme in 2001 to research and test a range of tools to reduce or offset greenhouse gas emissions with the highest level of credibility and integrity.
In the past 18 months, the carboNZero programme has established proof of concept, and it is now preparing to be spun out as a fully owned subsidiary company of Landcare Research. carboNZero evolved from an initial investment of ~$600,000 (reinvestment of retained earnings) in EBEX21®, followed by a further ~$400k in NSOF and Capability Funding from 2004 to 2007.
Over the last year it has received Technology for Industry Funding to the value of $30,000 for globalisation capacity-building, and Equity Investment Funding of $1.2 million. Initial research involved less than one full-time research equivalent (FTE). Over the past two years the carboNZero team has increased from 1.2 FTE (August 2006) to 16 staff, working as a Strategic Business Unit within Landcare Research, with an independent advisory panel, a technical advisory group, and over 20 authorised external auditors.
Some 40 New Zealand organisations and events have already earned carboNZero certification and the carboNZero team is helping more than 200 companies to measure, manage, and mitigate their greenhouse gas emissions for a ‘greener' trading future.
Gilkison B 2007. Economic value of carboNZero certification. Confidential report to NZWC and Landcare Research.
Gilkison B 2008. Perfect timing for world´s first carbon neutral winery. The Chartered Accountants Journal 87: 56-59.
carboNZero Newsletters, August 2007, March 2008, April 2008 www.carbonzero.co.nz/newsletters/
Ministry of Agriculture and Forestry 2007. Situation and outlook for New Zealand agriculture and forestry. 7. Kiwifruit www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/sonzaf/2007/page-09.htm#P851_66715
Ministry of Foreign Affairs and Trade. United Kingdom. Key facts. www.mfat.govt.nz/Countries/Europe/UK.php
New Zealand Economic Indicators www.investmentnz.govt.nz/section/14341.aspx#gdp
New Zealand Wine monthly export statisticswww.nzwine.com/statistics/
United Kingdom www.mfat.govt.nz/Countries/Europe/UK.php
2Estimation of future returns is complex. A lower return is likely as the ‘novelty value' of certification decreases, and the number of companies seeking carbon-neutral accreditation rises. However, counteracting this is the security of current markets - reduced risk of losing markets - offered by carbon neutral certification in a trading future in which environmental impact is increasingly likely to be a key determinant of trade
4Examples include Tesco's 2007 move to label all products so shoppers can compare carbon costs in the same way they can nutritional content, and both Tesco's and Marks and Spencer's plans to reduce the amount of air-freighted produce they sell