Carbon solutions

Founded in 1886 in Boston, Arthur D Little (ADL), the world's first management consulting firm, is focusing on advising Chinese enterprises on maximizing the benefits from the international trade in carbon credit under the Kyoto Protocol.

To do so, the company's China operation, covering Beijing, Shanghai and Hong Kong, is expanding its consultant team from 45 to 100 professionals in 2008. In an interview with China Business Weekly reporter Tuo Yannan, Thomas Schiller, managing director of ADL China, says his single most important goal is to bring ADL's expertise and experience to the fast growing Chinese market.

Arthur D Little was established by Arthur Dehon Little, a chemist, who was credited for the discovery of acetate, and co-worker Roger Griffin, in Cambridge, Massachusetts. The company was involved in the development of the word processor and synthetic penicillin, and the founding of the NASDAQ trading system. Today the company is one of the world's leading management consulting firms, providing a broad range of services to enterprises such like GE, IBM and GM.

Q: What kind of carbon advisory services do you provide? And what benefit can your customers get by this service?

A: First of all I must explain that carbon advisory is just a very small piece of advisory we provide. Actually though we are a strategy consulting company, we provide not only strategy but also innovation. We do carbon advisory as a part of strategy, we need to identify the risks and the opportunities, and especially in the western world, carbon margin is a long-term effect. If you identify the strategy, you consider how the carbon makes a "carbon margin". Use the investment strategy as an example, you can invest in low carbon technology that has a long-term positive affect on your business.

Let's use energy sourcing for an illustration. For example, for a chemical industry company energy is its most important cost of its business, so the entire carbon margin strategy means investing for 20 years. Especially in the CO2 emissions and the downstream of the products used. We provide our customer's entire strategy including designing the value chain, investment plan, and so on. It's not a strategy from which you can make a profit in one night, but a forward-looking plan for the future especially in multinational business.

Q: Could you give some examples to illustrate the cost effectiveness of your solutions when applied in the market?

A: We have three examples from the different industry segments. First one, a Saudi telecom operator. We made a strategy in investment changes that resulted in a 14 percent energy efficiency improvement and 40 percent CO2 emissions reduction.

For a manufacturing group we had $1.5 million in savings. And the "carbon margin" we did for a national oil company had 110 million dollars in revenues from carbon credits.

Because the carbon credits can be traded globally, and based on our strategy using the different investments, we have different services to provide. Take an example from a global oil company. It's allowed 30 carbon credits globally. If the company not consumed all the carbon pollution, it can sell the rest carbon credits to other companies. So they can get revenues from those trades.

Q: In China, who are your customers in carbon advisory services? The Chinese enterprises or MNCs?

A: Currently multinational companies are our major customers. They all have very strong business in China and have a deep influence in Chinese companies. But I think Chinese companies here in the local market especially in the areas of energy consumption, energy efficiency and low-carbon investment, will invest more than the foreign companies. So the Chinese companies are our important potential and prospective customers.

Q: Can you give some analyses about China's efforts to save energy and reduce emissions? And what service do you offer to help your customers adapt it?

A: The Chinese Government has an energy consumption reduction target of 20 percent per unit of GDP by end of 2010 and has its own energy saving targets for new projects, coal- fired power plants and outdated production facilities etc. However, businesses themselves can look to reduce their own carbon emissions and find business opportunities in upgrading their existing business strategies. In particular we can assist companies to reduce their own emissions by using more efficient production technologies and improving materials efficiency. They can also use fewer carbon intensive energy sources in production, make use of low carbon technologies and better manage energy demand and better source appropriate energy solutions.

For example, we worked with an international chemicals company to identify approaches to re-organize their new product division to exploit opportunities created by climate change. We developed a number of segments amounting to 30 billion yuan market size by 2012 by increasing their competencies and potential for partnerships.

Q: Some MNCs have a very good relationship with the Chinese government and local companies. Do you consider cooperating with the government or private Chinese companies?

A: We do have cooperation with other countries' governments, including in the United States and mainly in Europe and Northern Europe, even Saudi Arabia. And I think most of our business in China should be with Chinese companies. A lot of multinational companies in China use the business models of Europe or America, but many companies failed because the Chinese market is completely different. So I think making a closer relationship and ties to the Chinese local governments and companies are vital for foreign companies.

Q: Compared with their foreigner competitors, what are the most important things you think Chinese companies should improve on?

A: Of cause it's dissimilar working with Chinese companies, but a similar problem is management expertise - the management confidence. Sometimes the Chinese companies don't get enough managers to run the business. Their strong point is that they are very familiar with the Chinese local market. The next step includes two things, first is to enhance the product's quality, making it more competitive in the global market. Second is to have enough long-term success to do multinational business. Here I see a big value in consulting services in China.

Q: What is your goal in a specific period?

A: We now have three offices in China, in Beijing, Shanghai and Hong Kong. Our clerks were sent to every province in China. Last year our sales revenue grew 400 percent over 2006, and because our business in China grows so fast, we made an ambitious layout for 2008 to increase the number of our strategy consulters from 45 to 100.

(China Daily 05/26/2008 page4)