Climate Change and Business: Keep up or get left behind
The opportunities being offered to business by low carbon technologies are comparable to those of the fledgling car industry at the beginning of the last century, where those who remained committed to the horse and cart very quickly went out of business, says Tom Delay, Chief Executive of the Carbon Trust. He explains why climate change should be viewed as a business opportunity rather than an economic threat.
The Kyoto summit in 1997 was a turning point in how the international community was prepared to face up to the responsibilities and challenges of dealing with climate change. For the first time, the debate had moved from questioning the existence of ‘climate change’ or ‘global warming’ to addressing the issue head on. The key issues were now about determining what could be done to avert the threatened environmental disasters and to deliver a sustainable future.
Established in April 2001 (see related story), the Carbon Trust was created to work with business and the public sector to deliver on the necessary emissions cuts whilst supporting the technological and business innovation, which would be key to achieving emissions targets. A core part of the Carbon Trust’s remit rests in recognising that meeting these targets will not only bring environmental benefits, but also the potential for significant commercial advantages to businesses in the UK.
What does tacking climate change mean for your business?
Investment in improving environmental performance has been viewed by many companies as a worthy ideal but not a commercial priority. Traditionally, environmental investment has lost out by virtue of falling too low on the business agenda. Now, this is changing and a combination of tougher legislation and increased pressure from customers keen to do business with environmentally responsible organisations has made corporate social responsibility a significant commercial priority. We believe that this trend will continue and that the results will be monumental. Addressing environmental performance will become vital to competitiveness and profitability. The move to a low carbon economy has the potential to create or destroy billions of pounds of shareholder value.
A first step in addressing CO2 emissions is improving energy efficiency. The Action Energy programme was introduced by the Carbon Trust in June 2002 to help businesses and organisations cut their energy costs through the provision of free, professional advice and assistance (see related story). The programme, in its former guise as the Energy Efficiency Best Practice programme (EEBPp), has already helped many organisations save up to 20% of their energy bills, which equates to total UK energy savings of around £800 million a year.
The Enhanced Capital Allowance scheme (ECA) is another scheme available to help businesses investing in low carbon technologies. The scheme has been developed to permit businesses to deduct expenditure on energy-saving plant and machinery against taxable profits.
The low carbon economy – exploiting new and existing technologies
Alongside the advantages for companies and organisations gained from becoming more energy efficient, opportunities exist for many businesses to capitalise on the development and commercialisation of technologies that will improve environmental performance in the UK.
To promote the development of these technologies – which could include products as diverse as a new design for a photo-voltaic cell or advanced engineering in wind power design – the Carbon Trust has established the Foundation Programme.
The Programme is the first part of a larger and wide-ranging initiative – the Low Carbon Innovation Programme (LCIP) – which will make up to £75 million available over a three-year period to a range of partners including researchers, the public sector, investors and entrepreneurs across the UK. Funding opportunities will be progressed with schemes that meet the Carbon Trust’s investment criteria and will deliver identifiable carbon savings. LCIP is a key initiative under the Carbon Trust for reducing UK CO2 emissions and addressing climate change.
The first call for proposals under the Foundation Programme was issued in May and the level of response has been high. This enthusiasm for innovation in low carbon technologies is indisputable evidence of the potential for UK companies to capture major commercial markets and take a global lead in this area. Companies that move fast have the potential to realise major commercial benefits and this is an exciting opportunity for UK business.
Comparisons between innovation in low carbon technology and innovation in motor transport in the early 20th century provide an interesting parallel. People who moved fast and embraced the new opportunities of the automobile industry achieved great commercial success. Those who dismissed the fledgling industry as a ‘flash in the pan’ and remained committed to the horse and cart very quickly went out of business.
The energy efficiency and low carbon innovation message for UK companies is as simple as that. Grasp the opportunities, and addressing climate change has the potential to create shareholder value. Lag behind and, at best, your business will become less competitive. At worst, you could go out of business.
Enhanced Capital Allowance scheme