risk management - Director Magazine

ENVIRONMENTAL RISKS ARE A PRIORITY FOR ALL
It is vital that directors are aware of this scheme, because while it initially applies
only to a limited number of companies – just over 1,000 in the UK – it will expand
to take in more companies in future years.
The scheme works on a ‘cap and trade’ basis, with companies being set
individual mandatory emissions reduction targets. They can either meet these
directly by cutting their emissions or indirectly, either by purchasing ‘surplus
allowances’ from other producers or by investing in carbon mitigation projects.
The companies targeted in the first phase are those in the highest energy-use
sectors. These include:
power and heat generation
ferrous metals
oil refining
pump and paper
mineral products
The second phase is due to run from 2008 to 2012, with further five-year
periods to follow. The government has already indicated it is likely to add more
industries to the scheme, including glass, rock wool and gypsum production.
The Carbon Trust has warned that the trading regime will create both winners
and losers. It says the winners will be “those companies that take advantage of
new sources of income to manage their emissions. The losers will be those
companies that do nothing.” For more information, visit www.defra.gov.uk/
environment/climatechange/trading/eu/
investors are interested too
As chapter 6 explained, assessing environmental risks is now a crucial part of
any merger or acquisition. Your shareholders do not want to be left carrying the
can for past management failures at a company you have just acquired.
Even if a company’s board feels it can shove environmental concerns down the
management agenda, the shareholders may have other ideas.
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