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Start-ups urged to start planning for carbon pricing

Wednesday, 9 November 2011 | By Michelle Hammond
Experts say small businesses should plan early for the carbon tax, which passed through the Senate yesterday, by conditioning customers for price changes and promoting green credentials.

 

Yesterday, Labor’s controversial clean energy bills passed through the Senate 36 votes to 32, with Prime Minister Julie Gillard describing the move as “a win for Australia’s children”.

 

The legislation will become law from July 1, 2012. From that point onwards, polluting industries will pay $23 per tonne of carbon emissions.

 

The Institute of Chartered Accountants in Australia has already issued a warning to small business owners to start preparing for any adjustments required in response to the legislation.

 

Geraldine Magarey, ICA manager of sustainability, says while small businesses do not need to monitor and measure their carbon emissions under the new law, it will still affect them.

 

“They may be pressured either by cost increases or through changes in demand, driven by overall adjustments in investment and economic activity,” Magarey says.

 

‘Small business owners are encouraged to take stock and prepare for the impact... Suggestions include understanding the supply chain pressures, determining the effect on competitive positioning [and] determining adjustments to pricing.”

 

Pricing expert Jon Manning, founder and managing director of Pricing Prophets, says if companies intend to pass costs on to consumers, they need to start conditioning their customers.

 

“That, I think, is the critical thing. That may mean stuff like buying [items] at a particular time to avoid the price rise, or communicating the fact that price rises apply to new models,” he says.

 

“So if you’ve got new models coming in after July 2012, inform your customers they will be more expensive... [But reassure customers they’re] getting greater value with the new product.”

 

“At the end of the day, companies and consumers don’t buy a product because of what it costs. They buy it because of the value.”

 

With regard to when businesses should start communicating their intentions to raise prices, Manning says it really depends on the industry they operate in.

 

“Some industries have 12-month sales cycles. In those extreme cases, you may want to start thinking about that communication strategy now,” he says.

 

“If consumers are making purchasing decisions in weeks rather than months, you can wait six to eight weeks before the [carbon tax] commencement date.”

 

Manning’s top tips to small businesses:

  • Plan early.
  • Ensure you have a communication strategy.
  • Promote your green credentials.

“Green credentials are starting to resonate more with consumers and businesses. You might be in a better position to do this [after July 1, 2012],” Manning says.