In the past, many firms have simply ignored the energy efficiency ‘elephant in the room'. But by reducing their dependence on energy, businesses can cut costs, improve reputation, and stay one step ahead of environmental compliance.
MT asked Hugh Jones, director of solutions at the Carbon Trust, for his top ten tips:
1. Build a business case
Any size of business can quickly and easily establish the ‘size of the prize' to be had from energy efficiency, by using our Cut Carbon, Cut Costs tutorial online. A calculator evaluates the energy savings you can make and develops an action plan to help you achieve them. You could shave 20-30% off your annual bill.
2. Appoint an energy team
Simple improvements, such as cutting energy use ‘out-of-hours', are often overlooked if someone isn't in charge of implementing them. Firms should ensure there is responsibility within the organisation for driving improvements and cutting costs. An open-door policy will enable staff on the ground to make suggestions, and buy into your energy efficiency goals.
3. Seek advice
For businesses spending over £50k a year on energy, the Carbon Trust offers free in-depth, on-site surveys, conducted by an accredited expert. The surveyor assesses every aspect of energy consumption - from heating, lighting and IT, to core plant machinery - and identifies ways to cut energy use. The Carbon Trust will then provide ongoing support to help make those savings a reality.
4. Spend to save
Many businesses continue using old equipment, rather than pay the up-front cost of replacing it. This is false economy, as old equipment uses considerably more energy than newer models, and in the case of plant machinery can impact on productivity by 20% to 30%.
The first step is to identify old equipment that's become a cost burden. If you're not sure how efficient your equipment is, seek guidance from the Carbon Trust. In many cases the likely payback period on energy bills is short enough to justify making a replacement.
5. Find out if you're eligible for an interest-free loan
Last year, our interest-free loan scheme helped nearly 1,900 businesses replace £60m of equipment. By installing new, state-of-the art kit, these businesses now save £20m a year. And these savings pay the loans back over one to four years - after which the savings go straight to the bottom line.
6. Look out for the ECA
Even if you're not eligible for an interest-free loan, all businesses can benefit from 100% tax relief on equipment replacements through the Enhanced Capital Allowances (ECA) scheme.
The scheme provides a qualified list of energy-saving products, and offers a financial incentive: 100% tax relief on qualifying capital expenditure on plant or machinery. This means businesses can write off the whole cost of qualifying equipment against the taxable profits of the year of purchase. This can provide a cash flow boost of up to 28% of the purchase cost.
7. Stay one step ahead of the CRC
The CRC Energy Efficiency Scheme is a Government carbon trading initiative, designed to change the way large public- and private-sector organisations consume energy.
It requires organisations to prepare a comprehensive record of carbon emissions - and ultimately to reduce consumption over time. Companies will need to invest in carbon allowances, sold at a fixed price of £12 per tonne of CO2 for the first three years of the scheme. The revenue from the sale of allowances will be recycled back to participants after six months, with a bonus/penalty element based on emissions performance and their relative position in the scheme's performance league table.
8. Take early action on the CRC
The CRC has significant financial and reputational implications for businesses, so it is vital that larger businesses understand fully how it will impact them. And it rewards businesses that take early action to reduce emissions in advance of March 31 2011.
To reduce the cost of participation in the scheme and secure a higher ranking in the CRC league table, companies can voluntarily install advanced metering, and achieve the Carbon Trust Standard certification or equivalents.
To date, more than 250 organisations have already achieved the Carbon Trust Standard. These organisations have collectively realised savings of over £62 million - which is a compelling case for businesses to take action now.
9. Certify your efforts
The Carbon Trust Standard is a respected certification, which helps counter stakeholder scepticism. So as well as helping firms to secure a high ranking in the CRC, reducing energy costs and improving operational efficiency, it's also a valuable marketing tool. Organisations such as First Direct and Marks & Spencer are already using the Carbon Trust Standard in their external communications.
10. Act now!
A common response from businesses which have implemented our energy efficiency advice is ‘we only wish we'd tried this earlier'.
By dedicating resources to energy efficiency, businesses can shave significant amounts off the bottom line in a low-risk manner - improving reputation, and placing themselves at the forefront of the low-carbon economy.