Question

The potato crisp in question is sold in the UK under PepsiCo’s Walkers brand – as iconic there as Smith’s in the antipodes. Undertaking a comprehensive audit of its carbon footprint (an exercise in detailed carbon accounting), Walkers discovered a perverse incentive in its supply chain.
By paying its suppliers strictly by delivered weight, the chip-maker was encouraging everyone from farmers to its factory door to maximise the potatoes’ water content. This was energy-expensive twice: the suppliers spent money on temperature-controlled humidifiers to protect their precious crop, while Walkers then spent money on extra frying time to drive off the extra moisture. Having discovered the wasted carbon input during a joint project with the UK’s Carbon Trust, Walkers crafted an incentive to reward farmers for lower water content, and cut its own emissions by saving 10 percent of the frying time.

1. Specify the kind of incentives that you would put in place to reward farmers for lower water in potatoes and also reducing the electricity bills (lower carbon footprint).

2. Would your company prefer carbon tax or carbon trading to pay for your carbon emission? Justify your position.

3. What would be the great challenges in Carbon Accounting Disclosure?

Answer 1

SOLUTION 1 :

AS THERE IS DOUBLE SAVINGS( OF ELECTRICITY AND EXTRA FRYING TIME) , THE FARMERS SHOULD BE GIVEN A PREMIUM AMOUNT FOR THE SAME WHICH IS NOT MORE THAN THE AMOUNT SAVED.

SO THERE MUST BE A MONETORY BENIFIT FOR THE FARMERS SUCH AS PER KG. PRICE CAN BE INCREASED.

SOLUTION 2 :

CARBON TAX REFERS TO FEE IMPOSED ON THE BURNING OF CARBON BASED FUELS.

WHERE AS CARBON TRADING REFERS TO A SCHEME IN WHICH FIRMS BUY AND SELL CARBON PERMITS AS A PART OF THEIR PROGRAMME IN ORDER TO REDUCE THE CRBON EMISSIONS.

COMPANY HAS AN OBLIGATION TO PAY CARBON TAX BUT CAN USE CARBON TRADING AS A MEANS TO PAY FOR THEIR CARBON EMISSION. IN OTHER WORDS THE COMPANY CAN SELL ITS EXTRA CARBON PERMITS(WHICH BECAME POSSIBLE WITH THE EFFORTS OF THE FARMERS REDUCING THE WATER CONTENT) AND PAY FOR IT'S OBLIGATION.

SOLUTION 3: VARIOUS CHALLENGES IN CARBON ACCOUNTING DISCLOSURES ARE :

I. WITHOUT PROPER EQUIPMENTS IS BECOMES VERY DIFFICULT TO GET THE PROPER LEVEL OF CARBON EMISSION LEVELS AND HENCE DIFFICULT TO DO ITS ACCOUNTING.

II. THERE ARE VARIOUS UNETHICAL WAYS(IN REAL LIFE) IN WHICH INDUSTRIES TRY TO REDUCE THEIR CARBON EMISSION WHICH FORMS GLICHES IN CARBON ACCOU NTING DISCLOSURES.