19/01/2011

By Max Clarke

Due to the ever increasing importance for businesses to account for their carbon footprint, energy reduction specialists M&C Energy Group discuss the practical benefits of emission reductions with Fresh Business Thinking.

"For most large businesses it is understood that managing greenhouse gas emissions is no longer an activity that is optional or even a low priority. There are a number of factors which determine why this should be, not least the impact of legislation in several countries mandating that action be taken by emitters to reduce their impact on climate change.

"Regulation forms an important part of the driving force behind carbon emissions reductions with schemes raging from those which reward improvements through the delivery of carbon credits which can be sold, to those which are more punitive. However, there are many reasons why organisations need to manage emissions beyond those compelling them to do so.

"Cost is a factor of course — it’s expensive to emit CO2 whether as a result of carbon taxes and levies or simply by virtue of the fact that for most organisations, CO2 is emitted primarily as a direct result of the fossil fuel energy they use and energy is increasingly expensive. However for most, this is, while a vitally important reason for curbing emissions, not the only consideration - there are others which are more indirectly responsible for costs and others which impact on the bottom line via their influence on the revenue line rather than overheads.

"A recent report produced on behalf of the UK Government found that of those organisations which report their emissions, the majority found indirect financial benefits were generated which more than offset the cost of collecting the information. These benefits resulted from the fact that in carrying out the measurement of emissions, incentives to reduce them were produced, including spending less on energy.

"Those organisations which are reporting emissions found that measuring them helps to set meaningful and achievable reduction targets as well as advancing better risk management and creating awareness of business opportunities.

"One of the key factors in the process is that usually the largest or biggest impact emissions or energy reductions are also the most costly to achieve and conversely those which are easiest to implement may only have a marginal impact on overall emissions reductions. One company which had set a 10% CO2 reduction target for its product found that the bulk of the emissions were in parts of the supply chain that are outside of its direct control and therefore its options for improvements required working with its suppliers to establish alternative sources of raw materials and processing techniques.

"Cost, efficiency and competitiveness remain major driving forces in the need for organisations to reduce the consumption of energy generated from fossil fuels, however bound up in these objectives are the demands of consumers who are increasingly conscious of the impact on the environment of the products and services that they buy. One result of this is the impact on changes to packaging materials in terms of volume and weight and their production from recycled materials.

"The important aspect of this is that driven by the retailers acting on behalf of consumers, any organisation, at any stage in the supply chain, can expect to be challenged on the performance of its products. If they want to remain competitive, if they want to retain major customers and if they want to break into new markets, they will need to take account of their emissions - both those arising directly from their own use of energy, which form the bulk of what are usually termed Scope 1 and 2 emissions, as well as the Scope 3 emissions which result from things like outsourced activities and the production of purchased materials.

"A producer of raw materials say, which can advise a supermarket acting in the interests of consumers, either directly or indirectly via its customers, of the greenhouse gases emitted as a result of the production of those materials will be in a strong position to ensure that it continues to be a part of the supply chain in the future.

Even better, if they can demonstrate that these emissions are being scrutinised and ways to reduce them are being identified and targeted, they will find that they are in a better position to win new business through opening up new market opportunities. If they do not do so, or they wait until this becomes a requirement of the customers, they are likely to find that it is too late and that others have got there before them.

"The good news is though, that the process measurement and reporting results not only secures new markets and protects exiting revenue streams, but at the same time provides a basis for cost reductions that further improve the bottom line.

"There are not many business activities in these challenging economic times that can boast such a wide-ranging and wholly positive impact.