Drive to cut carbon is opportunity to cut costs

With climate change now firmly on the global agenda, governments around the world are furiously legislating against the problem. There is much talk of boosting renewable energy production to provide the solution but the quicker fix of energy efficiency improvements are largely being ignored.

For its part The European Commission, has set the ambitious target of cutting carbon emissions across the region by 20% before 2020. In the UK, the House of Commons is currently discussing the Climate Change Bill, which includes targets to reduce emissions by between 26% and 32% by 2020, and by at least 60% by 2050.

Bolstering renewable energy production will play a significant part in tackling climate change. However improvements in energy efficiency would achieve the bulk of emissions reductions necessary to meet EU targets and help the UK to become a leader in a low carbon world.

Business will be key to achieving these targets, with Government likely to expect growing sectors of the business community to play their part. However, rather than an onerous burden, businesses should look at this as a great opportunity to improve their bottom line performance, and at the same time boost their green credentials and it is not often that a company gets the chance to keep their head of investor relations and finance director happy at the same time.

A report by management consultants McKinsey & Company says that improving energy efficiency will provide half of the emissions reductions needed to prevent the Earth warming by more than 2 degrees centigrade – the general international consensus for a manageable level of climate change. It also highlights the fact that energy efficiency techniques as the only technologies with a material impact in terms of emissions reductions that actually save money.

With a modest investment, companies can make immediate reductions in emissions and long term savings in energy costs. As energy prices continue to soar, the savings will only get bigger and bigger. Wholesale electricity prices have more than doubled in the last 12 months which has put a huge strain on British business in already financially challenging times.

However, it only takes between 18 to 24 months for a mid-sized retailer to make its money back on a holistic energy savings package. And the quicker energy prices rise, the quicker the payback time. As David O’Reilly, the chief executive of oil and gas giant Chevron, has said, energy efficiency is the cheapest form of new energy we have.

Businesses can make the savings in a number of ways, either from the machinery and processes they use – refrigeration, IT, heating etc – or from the buildings themselves. Approximately 35% of the UK’s emissions come from buildings.

There is talk, but little action, of building new environmentally friendly offices, shops and homes. But it is worth remembering that the new building stock only represents 2% per annum of the total UK building stock and this still remains largely inefficient.

To ensure that these old buildings function sustainably now and in the future, there is a pressing need to address their energy usage. At Evolve we have worked with a diverse range of businesses and buildings from the Natural History Museum, the Palace of Westminster and the Savoy Hotel, right through to modern retail outlets such as Tesco, and Centerparcs. In each case we have helped businesses cut their energy bills by up to two-thirds through a series of technical measures.

These often start with the critical first steps of installing monitoring and metering equipment, based on the doctrine that what gets measured gets managed.

Companies from retailers to manufacturers need a constant gauge of their energy usage to find out which parts of the business are the main offenders in terms of wastage.

Then it is a question of making technical changes to improve processes, and behavioural changes like switching off lights, and not leaving devices on standby.

Systems can be installed that dim lighting at midday, control heating and air conditioning according to a store’s opening times, and recycle anything that can be reused, from rainwater to heat.

But to really make a difference long term these need to be continuously managed through ongoing monitoring and control systems – a cost-effective process with high tech remote technologies.

These are the sort of unglamorous but effective steps all companies should take to mitigate their impact on the environment and cut costs. Putting a wind turbine on the roof of a company’s HQ may save carbon and look good on the cover of the annual report, but it’s the measurable energy and carbon emission savings achieved through cost effective efficiency projects that truly impress shareholders.

While the economic rewards of energy efficiency measures are attractive, Evolve believes they should also be encouraged by government policy; businesses sometimes need to be pushed to take the right decisions.

A package of financial rewards would be the best option. As it is, governments tend to consider punitive taxes for the least energy efficient buildings – focussing on the stick, rather than the carrot.

It is up to business to pre-empt those moves, rendering the regulation unnecessary before it is even drafted.

As energy prices keep rising, and economic circumstances bite harder, businesses’ approach to energy usage needs to evolve beyond looking for the cheapest supplier. In these troubling times, they should be looking for ways of not needing to use it in the first place.

Gary Parke is chief executive of energy management company Evolve Energy, which works with companies to reduce their energy usage, costs and emissions.