No more business as usual
Angela Terry sets out the priorities for businesses in the fight against climate change
We might look back on 2018 as the year we woke up to the severity of a warming world. There’s a new urgency surrounding climate change, and several national and international landmark reports have made people take note of what is happening.
The revelatory report on 1.5C of warming by the Intergovernmental Panel on Climate Change in October heralded a widespread awareness of the scale of the challenge that faces us during the next decade. It tells us we have just 12 years for governments, businesses and communities across the globe to take urgent action and cut 2010 greenhouse gas emissions by nearly half. In 2018, however, global carbon dioxide emissions increased by 2.7%.
Here in the UK, the government has issued stark warnings about what the country will face in the coming decades. The Environment Agency and the Met Office have released the latest set of UK climate change impacts, which confirm that if action isn’t taken, we face more drought, heatwaves and floods; sea level rise in London this century could be as much as 1.15m. Michael Gove has said that the report gives governments, local authorities, land managers, infrastructure bodies and businesses an invaluable set of tools to help them assess the nature and scale of the challenges ahead and take decisions accordingly.
And the challenges are significant. The Government’s own national statistics on greenhouse gas emissions show that progress to decarbonise has stagnated in many sectors. Figures for 2016 to 2017 show no progress at all in reducing greenhouse gas emissions from the UK transport sector. Waste management emissions increased by 1%, industrial sector emissions increased by 2% and there was a small reduction of 2% from the business sector. To put these figures in context, the IPCC has called on emissions to reduce by 45% in the next 11 years.
In order to make meaningful changes, a commitment to low carbon operations has to be embedded at every level of the business, and most importantly at the very top. Combating climate change must be a top priority for senior board level members so that the necessary training and resources are in place to make real progress. Unilever is a good example of this. Led by Paul Polman and the senior management team, the company has implemented a Sustainable Living Plan, which sets out environmental goals including halving the environmental footprint of its products by 2030.
As energy prices for both gas and electricity increase every year, well above the rate of inflation, the importance of reducing energy bills is increasing. Companies that reduce energy demand and improve efficiencies will be tackling a financial liability, as well as making the best choice for the environment. A report by Centrica found that a 20% cut in energy costs can represent the same bottom line benefits as a 5% increase in sales. The same report found that firms that manage their energy are two and a half times more likely to be efficient, well run and financially robust. One relatively simple way to cut energy costs is to find ways of shifting energy use to off-peak hours. Businesses can sign up to Demand Side Response schemes, where customers are incentivised to reduce or move energy consumption away from peak hours.
The Energy Savings Opportunity Scheme – the mandatory energy assessment scheme for businesses with at least 250 employees or annual revenues of more than €50m (£44m) – has gone some way towards getting large businesses to identify energy saving measures. However, some companies have paid consultants to write a report that sits on a shelf gathering dust, even though many of these measures would pay for themselves in less than three years. Worse still, companies including eBay, Gumtree and STA Travel have failed to comply with the legislation and have therefore been fined.
Legislative pressures are only going to increase. In the UK, Theresa May has vowed to at least halve the energy usage of new buildings by 2030 through the use of new technologies and modern construction practices. The government also aims to halve the energy costs for existing offices and homes. Heat and power for buildings currently account for 40% of national energy usage.
The benefits of energy leadership go beyond cost savings. Customers, staff and shareholders are becoming more demanding of environmental standards, so the competitive advantages are obvious. A survey published in November by sustainability consultancy Futerra showed that an overwhelming number of consumers want companies to not only be sustainable themselves, but also to help consumers live a more sustainable lifestyle.
So, beyond energy savings, what are the key actions businesses can take that will have the biggest impacts? As fossil fuels are the main producer of greenhouse gas emissions, it makes sense to focus on measures that remove fossil fuels from operations and replace them with renewable technologies, such as solar on roofs and switching to electric vehicle (EV) fleets.
By upgrading to EVs, businesses will make a major cost saving because electricity is significantly cheaper than petrol or diesel – and maintenance costs are lower. Electric cars are also exempt from ‘clean air zone’ charges that are being introduced around the country. The tax regime is designed to incentivise the purchase of EVs through Benefit in Kind (BIK), Vehicle Excise Duty (VED), capital allowances and salary sacrifice regimes.
As well as carbon savings, there are many financial advantages to renewable energy generation. The Renewable Heat Incentive provides financial support for organisations that generate their own renewable heat through, for example, ground source heat pumps and biomass. Solar power is usually cheaper to install than buying electricity from the grid, and low-interest finance schemes are available to fund the upfront cost. The price of solar panels has fallen 80% since 2008, making it a more affordable option. Morrisons is one of many companies that is using solar energy on distribution centers and stores to offset rising energy bills.
Joining forces to share ideas and ambitions is an important part of maintaining momentum. The RE100 project is a great example of a collaborative global initiative with a simple goal that businesses can commit to. Companies joining RE100 set a public goal to source 100% of their global electricity consumption from renewable sources by a specified year – whether that be self-produced or purchasing renewable electricity from the market.
One of the most important messages to have come out of both the IPCC and UK government reports on climate change is that incidences of extreme weather events are set to increase, and businesses need to work on their contingency planning. Resilience must be built in businesses’ own operations and throughout their supply chain. The effects of climate change pose serious safety and financial implications for people, property and infrastructure, with flooding being of particular concern. One in six properties are at risk of flooding, and this figure is set to double as sea levels rise, storm surges increase and heavy downpours break more records.
In his speech to launch the government’s climate change projections, Michael Gove urged businesses to play a more proactive role in flood management efforts, arguing there was a need for communities and businesses to work alongside the government to reduce their own flood risk. This means businesses should be designing in resilience measures when they invest in new buildings. The Toy Shop in Cockermouth, Cumbria, is a good example of how a business can take simple measures that make a big difference. After it was first flooded in 2009, it was shut for several months; it then installed new concrete flooring and took various other actions, and was able to open just two days after the floods returned six years later.
While climate change presents us with numerous, wide ranging and significant challenges, there are many advantages to be had for organisations that plan ahead, invest and embrace the opportunities that arise from clean technologies. Advances in technology and flexible financing means energy transformation is more possible than ever. Changes that make good business sense, save carbon and help increase productivity are plentiful. The key now is to act. The one thing we do know: we do not have time to wait.
Angela Terry is founder of climate action website One Home