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 Over the past 5 years, GPL Network has always been on the forefront of the Accounting Industry in Australia and we have been working closely with firms to help them identify growth opportunities. One of the most exciting and misunderstood opportunities at the moment is the Emissions Trading Scheme (ETS) that is an integral part of the Federal Government’s Carbon Pollution Reduction Scheme (CPRS). The intended launch date for the CPRS is only 15 short months away! Ultimately this will have a bigger impact on the Accounting Industry than even the GST! We’ve been researching the issues and the impact that this will have on the industry and we are endeavouring to share that information with you. It’s hard to pick up the paper or BRW and not see something about the CPRS. While there have been a lot of mixed signals sent by the Federal Government, the recent legislative draft released in March signals the government’s intent to start the scheme on July 1 2010. Climate change and the impact on business will have a huge and permanent impact on business. It’s an issue that is not going away. GPL Network has been hosting fortnightly 40 minute webinars aimed at helping accountants understand the basics of the CPRS, what it means for the typical SME and answering what exactly is Carbon Accounting. This email lists the upcoming dates and details on how to register – it’s free so don’t miss out! In this issue of INSIGHT, we are privileged to have an interview with Jason Croston, Partner from SRJ, Brisbane ($9.0m firm). Jason has seen the impact that the upcoming CPRS will have on SMEs and the Accounting Industry and is formulating a plan to help SRJ seize this opportunity to grow their consulting fees and to support their clients with the flow on effects the ETS will have on their business. It’s very insightful reading and a sign of how you should be preparing your firm and clients. Enjoy the read!  1. Jason, can you please give everyone some background on SRJ and your role in the business?
SRJ are a business based in South East Queensland with offices in Strathpine, Caboolture and Brisbane City focussed on helping its clients through a whole of life approach instead of just a whole of business approach. Our passion is to help our stakeholders achieve their life balance and financial soundness through our extensive range of products and services. A core service provided by the business is Audit and Assurance which not only offers statutory audits, but also specialised services such as due diligence, system and procedure reviews, waste audits and special investigations. My role is to lead the Audit and Assurance business. SRJ is also a leading but independent member of the Walker Wayland Australasia with offices in most mainland capital cities in Australia and 3 offices in New Zealand. The firm is also an independent member of BKR International, an international network of like-minded accounting firms. We have over 130 member firms with over 380 offices, in 67 countries throughout the world enabling us to offer both national and global solutions. 2. When did you first recognise the value of carbon accounting and how this could become a growth strategy for SRJ? What are your plans going forward? I have had a keen interest in reading about carbon accounting for some time due to my personal interest in energy efficiency. About 6 months ago a few of us in the Walker Wayland network discussed the potential for us to become involved and be an early provider of advice and solutions in this area. We know that the Big 4 are involved for the big end of town, but there isn’t much advice for SMEs. We see this as a massive opportunity. 3. How difficult was it to convince the partners to move down this path? It has not been difficult to convince my partners to move down this path. We are always looking for innovative solutions that are relevant for our clients and being in the carbon space is very relevant for many SME businesses despite the fact that some may not yet be aware of it. We aim to provide cutting edge solutions and we see this as being right there at the edge. The most difficult part of the process at a national level has been demonstrating how providing a value add service like this fits into the traditional accounting business model. I guess it doesn’t, but we’re not traditional! 4. What process have you and the firm gone through, from researching up until now? Up until now I have been reading the latest updates in the world of carbon accounting via ICAA updates and the like. Most of our knowledge has been gained in researching the different potential joint venture partners to assist us so we can get quicker access into providing this service to our clients without having to undertake a large amount of costly education. By negotiating a gradual process of reducing the assistance we need for each project we learn whilst on the job and utilise the most current knowledge available. 5. How have your team members reacted to this new business direction? Generally they are excited about trying something new. With a young team, the carbon issue is something that many of them are also quite interested in and they can get the feeling that they are positively contributing to one of the most important current issues. 6. Are you providing any professional development to your team members? All team members involved will be provided with training in the process. This will be completed with the consultant that we choose using our own business as a case study. 7. What has been the reaction and feedback from your clients to date? Many clients understand the importance of being able to show that their business is taking a positive stance on environmental issues. The current economic conditions offer a greater challenge to us to demonstrate the merits for our clients to spend money in this area. 8. From your perspective, what are the main benefits in adopting a proactive stance around the new carbon economy? The effect of the environment is something that our clients are thinking about and they need some help to work out what they can do with their businesses to reduce their carbon footprint. By being proactive in this area we can demonstrate to our clients that we are on top of these issues and how they may impact on their business. We can help them develop strategies and help them take full advantage. If we don’t talk to our clients about this and have an available solution there is a possibility for our ongoing relationship with our clients being hijacked by someone who is on top of it. 9. How important do you see this becoming over the next 2-5 years for your firm and business in general? Carbon accounting is going to become increasingly important as the world looks to deal with businesses that have a low carbon impact. We need to consider these issues when we are discussing business risks with our clients. Over this period more accountants will realise that it is important and will come into the market for providing specialist advice. As an early adopter we will have the jump on our competitors in advising on one of the biggest issues of our lifetime. 10. What would you say to those firms who believe that the new carbon economy won’t affect them or their clients? Many people think that this is just a big business issue, but they are wrong. There are many examples where it is applicable other than as a marketing advantage for SMEs. A future example may be a SME business that provides supplies to a larger business which is required to comply with impending carbon legislation. Businesses that provide supplies or services to supermarkets or the mining industry for example may be required by the larger business to comply to the same level in order to enter into transactions. Internationally a large number of businesses are already reviewing their suppliers to ensure that their supply chain is “green”.  A lot has been said in the media about greenhouse issues at an international and national level but what does all this mean for business? The reality is that efforts to constrain greenhouse emissions will turn carbon emissions into a commodity, i.e. greenhouse emissions will have a cost. The defining feature of carbon as commodity will be how widespread its influence will be, since greenhouse emissions underpin most aspects of modern economies. All well run companies share an in-depth understanding of cash flow and unit cost. The key to understanding the opportunities and risks posed by carbon constraint for a particular company is all about gathering the right information to understand what a particular business does at a deeper, more fundamental level. The first step in dealing with the opportunities and challenges posed by carbon trading is about understanding the flows of energy and materials that a business requires to operate. This is in effect the starting point in understanding what exposure a particular business, service or product has to carbon cost. The good news is that a lot of the systems employed to manage accounts can be adapted or build upon to capture this information. An easy place to start for most businesses is understanding electricity consumption. The question to ask is how much electricity is required to achieve a particular function? Electricity price will be directly impacted by carbon cost, since the electricity generators will pass on (ie charge the consumer) a large portion of their cost of carbon. They know that the consumer does not have many options in terms of where the power comes from. This allows an analysis of risk and the identification of opportunities. Can the product/service cope with a 30% increase in electricity cost at the current price point? By identifying elements of the business that are most electricity intensive, smart businesses can create opportunities to gain competitive advantage. This knowledge can also be employed to assist in decisions of capital items and should certainly be considered in decisions to upgrade or replace energy intensive equipment. Assessing the impact of carbon cost on other materials services is more complex, since many industries that compete with imported goods will not be in a position to pass on costs associated with carbon. The businesses that will be most exposed are ones competing with imported goods and exposed to increased energy costs. The critical step in evaluating carbon exposure for a business is understanding the flows of energy and materials required for its products and services. Ben McMahon is one of our keynote speakers at our Carbon Accounting Conferences in May. For more information please click here.  Please note that the GPL Network office has recently moved to a new office located in Southport. Our new contact details are:  Please note that we will be holding our annual Leadership Advanced Practice Management Conference in Fiji from 6-8 April. Therefore, there will only be minimal staff available at our office from Monday 6 April – Thursday 9 April leading into Easter. The entire GPL team will be back from Tuesday 14 April. We wish everyone a safe and enjoyable Easter!
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