Going beyond green tokenism
At the same time, many individual companies have made public declarations about environmental action and many more are increasing investment in energy management; however, UK Government data shows that emissions levels have increased every year since 2002.
Paul Lazarevic, Head of Advanced Sales at npower business, assesses this apparent paradox and looks how businesses can effectively integrate the environment into business and avoid accusations of green tokenism.
The Government has now laid the path to the Low Carbon Economy and its commitment to bringing the environment to the forefront of public and business consciousness is to be lauded. What remains unclear, however, is how we can all help translate this ambition into action. To meet the targets, the Bill puts an enormous pressure on business to take substantial measures to address energy consumption over the coming years. However, measures are lacking that offer practical advice on where to invest, or introduce a wider range of incentives to encourage investment.
npower business recently completed its latest npower Business Energy Index (nBEI), an independent, biannual report canvassing opinion from a wide range of companies on energy issues. A key focus of the latest nBEI was the Low Carbon Economy; what this meant to businesses and what priority was placed on reducing CO2. The results showed a lack of common understanding as to how environmental initiatives could benefit commercial operations. This was further underlined by ambivalence from many respondents as to the need to manage emissions.
At the same time, the results showed companies were undertaking more measures to understand energy use than ever reported in the nBEI as energy costs continued to impact on commercial operations.
What is clear is that the real level of action and commitment towards the environment, as well as motivations, varies between sectors. Within the retail sector the carbon agenda is now firmly in the board room with CEOs taking a personal interest in energy efficiency programmes, carbon management and sustainability. Aggressive policies on carbon emissions have been announced by Tesco and Marks & Spencer in recent months, while other retailers such as Sainsbury’s continue to make long-term significant improvements in energy efficiency.
In manufacturing there is a different picture according to sector and size of company. Up until now most manufacturers have responded to energy price increases by working to improve energy efficiency and there has been an upswing in the employment of energy managers and investment in energy saving equipment. This has, however, been driven more by the cost reduction imperative rather than environmental grounds.
Food and drink manufacturers supplying the retailers are now being caught up in the retailers race to be green. Tesco has announced that every product on the shelf, every packet of biscuits and every can of beer will need a label showing the amount of CO2 emitted in its manufacture. Many food companies would typically know their total emissions (because of membership in the EU Emissions Trading Scheme) but would not have the energy information system needed to produce carbon emissions per product. Investment in better metering and energy information systems is increasing as companies struggle to meet retailer demands.
For other manufacturing companies the picture is different. In a theme common in the results of the nBEI, energy cost remains the main driver and carbon emissions are not yet on the agenda. For basic manufacturers in industries like glass and packaging, the increase in energy prices has severely impacted profitability as costs have increased with little or no ability to pass them onto customers. For companies in these sectors, energy use is linked directly to process use and therefore opportunities to improve efficiency are limited. High energy prices have led to many companies re-locating in other countries where energy prices are lower.
Most manufacturing companies have increased investment in energy efficiency measures as an attempt to mitigate increased energy prices but a major barrier to further improvements is the short payback requirements on capital, usually one or two years. This limits the investment available to make significant improvements in efficiency. Many other companies and sectors could take a lead from the retail industry in its approach to green engineering. Sustainability including the carbon agenda has been firmly embedded in strategy within the sector and moved beyond the economics of individual projects (although these projects usually do have sound returns). Whereas 18 months ago an energy project would have been assessed purely on energy grounds, now it will be assessed against impact on market share and also in the case of new stores, the cost of a delayed opening because of planning permission requirements.
By taking the economics to a higher level, projects, such as an embedded wind turbine or a dedicated wind farm, now appear more attractive. It is this approach that should be key to a more sustainable approach to energy management as organisations look to manage their environmental and economic aspirations.
Traditionally in energy management, most investment opportunities were in retro-fit, add-on, projects such as improved lighting, better heating controls or variable speed drives. Today, these should be considered the basics and should be fully implemented in all situations. A sensible capital spend for these kind of measures needs to be established and maintained over two to three years to achieve optimum results.
In sustainable energy management, the focus switches to more wholesale approaches to re-engineer complete energy systems. This includes focusing on optimising whole systems instead of components. The evidence is that this approach produces a step change in reducing emissions through more efficient energy use and maintenance costs, 50% or more in many cases. It is not yet widely understood or taught and manufacturers are more interested in pushing larger capacity equipment which although high efficiency in itself, may not be the optimum when looking across the whole system.
It is apparent that there is more to be done to help all businesses understand the benefits of environmental action and their responsibilities in this area. Responding to this and the findings of the nBEI, npower business recently published its White Paper: Making Sense of the Low Carbon Economy. The report, written by the UK’s leading sustainable charity Forum for the Future, outlines the challenge facing business and the broader community if concerted action to address climate change is not commonplace soon.
This will require effort from Government and the energy industry, as well as businesses themselves. Some commentators accuse organisations of paying lip service to the environment and cite the continuing rise in CO2 levels as evidence of this. Those companies that embrace a sustainable approach to energy management will not only be able to refute allegations of green tokenism but also profit from it through the reduction in energy expenditure.
The Climate Change Bill may set out the path to the Low Carbon Economy, but businesses need a guide to get to their destination. Few will argue against the need for action to address climate change, but to be effective it should be put in the context of continued UK economic success. A solution must be found that is sustainable for business, as well as for the environment.