Greening your Carbon Footprint

The Government's ambitious carbon reduction commitment is an opportunity as well as an obligation.

by Ian Wylie
Last Updated: 09 Oct 2013

To the surprise and consternation of the few remaining climate-change Jonahs out there, the demands of weathering the recession haven't led to businesses abandoning the green agenda in a desperate bid to survive. Rather the opposite, in fact: with the realisation that green initiatives can be as good for your bank balance as they are for the planet, going carbon-neutral has gone mainstream. Thanks to the recession, many firms are only too eager to make cost-savings - all in the name of the environment.

Take the example of print and packaging firm Roberts Mart. Its warehouse in Cross Green, Leeds, is only five years old, but for reasons that sales director Ben Roberts has never been able to fathom, it experiences power cuts with irritating regularity. 'It might last a second, or an hour, but, either way, we were finding that only 70% of the lights would relight. Each time, we'd have to move machinery to bring in a cherrypicker just so we could replace bulbs.'

So the existing lighting system - intended to run 24/7 - has had to go, replaced with a £100,000 energy-efficient one that's designed to switch on and off, and paid for with an interest-free loan from the government-funded Carbon Trust. Roberts reckons his company will save £3,000 a month on its electricity bill, so within three years the new lighting system will have paid for itself, just as the loan expires. The firm has also used a Carbon Trust loan to buy £200,000 worth of drying equipment that reduces its consumption of gas required to heat its printing inks. It will save the company £6,500 a month - another three-year payback - and reduce its CO2 emissions by 900 tonnes.

Roberts Mart, a 150-year-old family firm now in the hands of the sixth generation, hasn't been taken over by sandal-wearing hairshirts. It operates in an extremely competitive sector, trying to please supermarkets, food and drink manufacturers and pharma companies. 'We're heavy energy users - that's just the nature of what we do - and we're here to make money, so most of these things we've done are purely to cut costs,' admits Roberts. 'If we can reduce our carbon footprint at the same time - well, that's just an added plus.'

Whether we're mid- or post-recession, many businesses still find themselves in survival mode, interested more in chasing debtors and delaying creditors than saving the planet. But 'carbon footprints' are no longer dirty words at companies eager to improve their bottom line, and climate change continues to climb up the business agenda.

Last year's Climate Change Act, which aims to lower UK carbon emissions by up to 80% of 1990 levels by 2050, challenges firms across the UK to change the way they use energy and looks to business to make much of those savings. Business activities account for roughly half of all emissions in the UK. Scotland's target is even tougher: 42% by 2020.

The UK government was the first in the world to introduce legally binding long-term targets on climate change, but next month the delegates from 192 countries meeting in Copenhagen are expected to hammer out a global agreement on emissions reduction - and perhaps arrive at a global price for carbon. Some business interests in the US and EU will lobby hard to keep targets low or vague. But Shell, BP, EON, EDF, Coca-Cola, eBay, Starbucks and Virgin are among big-name brands persuaded by the Prince of Wales to sign a declaration calling on world leaders to commit to cutting emissions worldwide by at least 50% by 2050.

Climate-change experts say businesses should aim for a minimum 4% annual reduction if they're to meet the UK's ambitious targets. So far, the Government has focused its attention on the biggest emitters. The Carbon Trust has estimated that 16,000 firms - 2% of the total - account for 80% of emissions from industrial processes and business use of buildings. The Government is expected to make it compulsory eventually for big companies to issue an environmental report in the way that they have to disclose their financial figures. The October report of the Carbon Disclosure Project suggests that more than 80% of the world's biggest 500 firms are making public their policies on emissions - although only a third have set carbon-reduction targets beyond 2012.

To make this link between a company's carbon emissions and its bottom-line reporting, the Government is pinning its hopes on April's introduction of the Carbon Reduction Commitment (CRC), a carbon-trading mechanism that will apply to any business consuming more than 6,000 megawatt hours of electricity a year - reckoned to be about 5,000 firms, as well as public-sector organisations such as schools and councils. The idea is to reward organisations that reduce their carbon emissions and penalise those that don't (see panel). It's reckoned that a typical firm would pay £130,000 a year under the scheme, while an organisation the size of Tesco could expect to pay as much as £40m a year.

CRC enforcers - eco-coppers already dubbed 'the boys in green' by some wags - will have the power to demand access to company property, view power meters, call up electricity and gas bills and examine carbon-trading records.

The Government has not yet stated any plans to widen the scope of the CRC. In relative terms, SMEs have only a small carbon impact, but collectively they account for the remaining 20% of business emissions. So few would bet against the CRC being extended in due course to smaller companies that consume less energy. 'Next year's CRC takes the idea of the EU's emissions trading scheme and brings it to all sectors,' explains Dermot Hikisch, a senior researcher at environmental data service ENDS Carbon. 'It's the start of a trickling-down effect and a signal that, in the long term, we are going to see it extended to all businesses.

'But there's an opportunity side to this too. One benefit of the Government driving this so hard is that UK businesses will become very carbon-lean and able to compete better on a global platform. And look at some of the major supermarket chains; they're already asking suppliers for evidence of emissions reporting and reduction. The companies that are proactive in reducing their carbon footprint will be the ones to get picked for major contracts.'

That is why some firms that fall outside the scope of next year's CRC - Adnams, for example - are putting in place systems to minimise energy consumption and emissions, and realising immediate financial savings.

Adnams, which has been brewing beer in Southwold, Suffolk, for more than 100 years, sees climate change at first hand. 'We watch the sea rise and fall,' says chief executive Andy Wood, 'and when there's a spring tide that coincides with a North Sea surge, parts of our business flood. We deal with climate change on a daily basis, but, longer term, we believe the polluter will be made to pay. So when we're renewing assets, we renew them with low-impact ones.'

Wood believes Adnams' new distribution centre is one of the most energy-efficient buildings in the UK. The bricks, made from hemp, lime and chalk, are more energy-efficient to manufacture and help keep the internal temperature at a constant 13 degsC. A door-release system creates a tunnel of insulation that obviates the need at Adnams for refrigeration units for its beers, saving CO2 and energy. Excess rainwater from the sedum roof is collected and used to wash the lorries, flush the loos and supply the staff showers. Photovoltaic cells in the roof provide four-fifths of the building's hot water.

But Adnams has also spotted an opportunity, and now brews the UK's first carbon-neutral beer - made using locally sourced high-yielding barley in a brewery where the steam created in the brewing process is captured and used to heat 90% of the next brew. Adnams has also created a lightweight bottle that reduces its carbon footprint by 415 tonnes a year and glass usage by 624 tonnes a year.

But does this beer taste any good? Tesco seems to think so: in an exclusive six-month distribution deal, it will stock the beer in 508 stores.

'I see it as future-proofing ourselves,' says Wood. 'You might think it is hugely more costly to do this kind of stuff, but that's not our experience if you look at the total cost of ownership.

'On the issue of the environment, our generation has dropped the ball - and business has to pick up its fair share of the cost of sorting it out. But tub-thumping from government won't work. Nor will sending people on a guilt trip and painting a picture of Armageddon 50 years out. You've got to win hearts and minds and give businesses a reason to act now. And saving money for our business is a good enough reason for me.'

MAKING THE CARBON REDUCTION COMMITMENT

- What is the CRC?

The Carbon Reduction Commitment is a mandatory emissions scheme, targeting emissions that are currently not included in the EU's emissions trading scheme or in climate change agreements.

- Who is it aimed at?

Some 5,000 large organisations, including supermarkets, hotel chains, office-based corporations, government departments and large local authorities - in essence, all organisations whose electricity consumption through half-hourly meters is greater than 6,000MWh/yr (that's all energy other than transport fuels).

- How will it work?

There are two parts to the scheme: an emissions trading system under which organisations must purchase allowances to cover their annual energy greenhouse gas emissions (expected to be priced initially at £12/tonne of CO2); and an annual league table highlighting organisations that are making positive progress in reducing their emissions.

- Where does the money go?

Revenue made from the sale of allowances will be redistributed back to the organisations based on their ranking in the league table - best performers will receive a bonus and the worst performers a penalty.

- What will businesses have to do?

Measure and track their emissions, report annually and maintain auditable information, increase energy efficiency, reduce emissions, forecast future emissions (so they can determine how many allowances need to be bought for the coming year) and then purchase allowances from the Government auction each year.

- When is it going to happen?

The scheme is expected to start in April 2010. All organisations with half-hourly metering systems will be required to register or submit an exemption in 2010.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today