Financially tough times may be the biggest factor in getting businesses interested in energy reduction, but green awareness, carbon reduction legislation, corporate social responsibility and technology also play their part.
Cash-strapped businesses are waking up to the importance of saving energy as the credit crunch proves a most effective environmental campaigner.
A recent study by the Carbon Trust, an independent body which was set up by the Government to accelerate the move towards a low carbon economy, showed energy efficiency is now the number one cost-cutting priority for UK businesses
looking to combat the slump.
In the survey, twice as many business leaders (20 per cent) said reducing carbon emissions has risen up their agenda in the last six months as those who say it has fallen down (nine per cent). Most companies ranked energy efficiency ahead of recruitment freezes, redundancies, freezing salaries or giving below inflation pay rises as a cost-saver.
Commenting on the rise in awareness, Martin Baxter, deputy chief executive of the Institute of Environmental Management and Assessment, said: “Businesses are waking up to the fact that if they save money on energy and increase their profits, it can make them more productive than their competitors. It might make the difference between going under and staying in
business. There really is no option now. The volatility of energy prices makes it very hard for companies to make financial plans in the medium-term. And energy prices in the long run will continue to rise because of global demand.”
Recent statistical analysis by the Carbon Trust highlights the scale and urgency of the issue for businesses. The Trust estimates that UK businesses are haemorrhaging almost £7 million a day due to poor energy efficiency. The data indicates
that they could collectively save nearly £2.5 billion a year, simply by implementing cost-effective energy-efficiency measures. The sum is equivalent to 13 per cent of UK companies’ energy bills, or the combined annual salaries of more
than 100,000 employees on an average wage. The potential reductions for SMEs alone are around £1.3 billion.
Most businesses are responding fast - 69 per cent of bosses surveyed are cutting costs, or considering it. Many consult the Carbon Trust, which gives practical advice and carries out carbon surveys for companies with energy bills over £50,000 a year. Interestfree energy-efficiency loans of up to £200,000 are also available to SMEs.
Hugh Jones, solutions director at the Carbon Trust, said: “Our new statistics provide stark evidence that if companies are starting to feel the bite from the economic downturn, the first place to look for cost savings should be their energy bill. There are literally millions of pounds going out of the window every day, across the UK.
“We’re talking about money that could be saved by making quick and easy changes such as encouraging staff to turn off computers and lights, turning down the heating, or maintaining equipment properly.”
The financial case is clear and it has made all the difference to attitudes. But the environmental case for energy-efficiency should also be persuading companies of their wider responsibilities.
Carbon emissions are the key cause of climate change, and business is responsible for around 40 per cent of all carbon dioxide emissions in the UK. The Carbon Trust analysis shows that energy-saving measures would save around 22 million
tons a year of carbon dioxide emissions – equivalent to Scotland’s total annual business and commercial carbon emissions.
The good news is that many large companies, in particular, seem ready to take action, with a 33 per cent of bosses of companies with more than 250 employees claiming carbon reduction has gone up their agenda in the last six months.
The primary motivating factors may be the credit crunch and rising energy costs, but legislation is another driver of change. From April 2010, the Carbon Reduction Commitment will force around 5,000 UK organisations to purchase a number
of carbon permits each year, depending on their forecasted emissions. The legislation targets the second tier of UK businesses; the major emitters are already catered for in the EU’s European Trading Scheme and by Climate Change Agreements
Carbon Trust business development manager Henry Garthwaite welcomes the legislation. “I’m excited about the CRC,”
says Garthwaite. “It’s the first organisation- wide carbon legislation covering a huge swathe of the UK economy – 5,000 organisations compared to the total number may not seem a huge number but when you look at their carbon emissions,
it is a huge number. I feel the right pieces of legislation are coming into place to get us to the government target of 80 per cent reduction of emissions by 2050.”
However, Garthwaite also cautions: “What we also need to see is more detail of how the Government is expecting to get to the 80 per cent target. There’s talk about nuclear energy, and renewables and energy-efficiency, but it can all go further.”
A further pressure on businesses comes from within: Corporate Social Responsibility. Companies are increasingly seen as more than simply their financial results. They have broader responsibilities to society: to handle staff fairly, not pollute
extravagantly, treat the local environment in a sustainable way.
“An organisation’s impact on the environment is key to CSR,” says Garthwaite. “Lots of firms are reporting on their carbon footprint, how they deal with waste and how they deal with water.”
Shareholders and stakeholders increasingly feel this is an important issue. And so do potential recruits: a new generation of graduates is bringing a greater awareness of environmental issues.
“We’ve done some research on recruitment and the vast majority of graduates being interviewed will now ask what a company’s green credentials are,” says Garthwaite.“It’s becoming a key issue for retaining staff, as well as consumers.”
An efficient energy policy also says a lot about the wider ethos of the company. It helps send out the right messages to potential customers. “When any organisation takes an issue like this seriously and embeds climate-change thinking
into its DNA, they tend to be wellmanaged, responsible organisations which can adapt to change,”
Garthwaite says. “If a company is aware of these issues, it’s aware of lots of other issues as well – be that the credit crunch, changes in economic conditions, or a capability of building in new technologies.” New technologies will be crucial in the years ahead, Garthwaite believes. It is almost impossible to envisage the advances to be made by 2050, but research is already providing pointers to the world ahead.
“At the Carbon Trust, we’ve recently launched a new piece of research into photovoltaics, or solar power,” says Garthwaite. “Traditionally, it is expensive because of the cost of silicon and has around a 20-year payback. We’re looking at other forms of organic compounds which can be used instead of silicon. They would make it much more economically viable in terms of overall generation.”
Brewing is one industry benefiting from new technology. Adnams brewery in Southwold, Suffolk, has transformed a disused gravel pit into a £14m environmental distribution centre. The building cost 15 per cent more than a traditional “metal box” warehouse, but will save far more in the long run.
“The centre supports the biggest green roof in the UK, solar panels provide 80 per cent of the hot water and reed beds purify the waste water,” explains Martin Baxter. “The roof helps to regulate the internal temperature and provides a rainwater
catchment area to supply water for the site. All the walls are built from blocks made of lime, quarry waste and hemp. They’ve also reduced the weight of their beer bottles, so they are cheaper to deliver,” he says.
Energy companies are also waking up to the growth of microgeneration. EDF Energy, for example, has worked with large corporations who want to install solar panels, wind turbines, or use newer options such as biomass combined heat and
power (CHP).
“More and more, it is possible to not only obtain funding for on-site generation projects, but even to sell the electricity generated back to your supplier, even if you use it all yourself,” says Dan Gilbert, renewable energy product manager at EDF
Energy Major Business.
EDF Energy launched the Small Generators Power Purchase Agreement (PPA) in 2007 to help microgeneration projects become more financially viable. Under the agreement, EDF Energy buys each unit of electricity generated by a business, even if it is all used on site. To qualify, a business needs a renewable generator, an installed capacity of less than 30kW and an Ofgem-approved total generation meter. Organisations with installed capacities of 1MW will soon also be allowed into the scheme.
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