Companies that fail to adapt to climate change will go bankrupt
‘Companies that fail to adapt to climate change will go bankrupt’ – that’s the dire warning from the former Governor of the Bank of England, Mark Carney.
However, what is less widely reported is that Carney also said, “There will be industries, sectors and firms that do very well during this process because they will be part of the solution.”
So, as well as the existential threat to your business, there are also the opportunities to be gained by taking decisive action now rather than in the medium or long term.
Businesses that embrace going greener often see benefits from being more efficient to becoming more innovative. Other opportunities include:
- Eliminating unnecessary costs
- Improved resilience by being prepared for future changes, either regulatory or climate related
- Winning new business and retaining existing customers
- Better staff recruitment and higher levels of retention
- Enhanced reputation
- Better access to finance as lenders recognises the actions you’ve taken
COP 26 in Glasgow proved beyond doubt that climate change has become a boardroom issue and must be on the agenda of every forward-thinking organisation. The moral and ethical imperative has never been stronger.
Everyone in a senior management role needs to get to grips with the impact this is going to have on business-as-usual. At Optimal Monitoring we live and breathe energy measurement and are already helping organisations on their journey to Net Zero and doing it in a way that is good for the business as well as for the planet.
We have over 20 years of industry experience in the design, creation, and delivery of energy & carbon monitoring. That’s why we thought we would share some key insights from the lessons we’ve learned along the way to, we hope, make your mission a bit easier.
The first thing you need to do is to establish your carbon footprint through measurement of your emissions. You can’t reduce what you can’t measure and monitor (more on this later). If you haven’t come across the terms scope 1 and 2, you soon will.
Under the Greenhouse Gas Protocol, Scope 1 emissions cover all direct emissions generated by your organisation from sources you own or control, like vehicles or on-site boilers.
Scope 2 are the emissions your business makes indirectly and covers the electricity or energy you buy for lighting, heating, and cooling your buildings.
Scope 3 are generally defined as the emissions through the organisations supply chain. As you can imagine these are harder to quantify and control.
Once you have established your baseline, the next step is to start work on reducing it. There are lots of ways to do this – for instance, updating heating, lighting, and air conditioning. A simple first step is to eliminate unnecessary energy (and therefore carbon) consumption.
Beyond that there are green energy tariffs and carbon offsets, but our advice is do the simple stuff first.
Set a target
Nothing concentrates the mind more than a target and a deadline. In 2019 the UK became the first major economy to commit to being net-zero by 2050, meaning it would remove as much greenhouse gas from the atmosphere as it produces.
In addition, the government has banned the sale of all new petrol and diesel cars by 2030 and will phase out coal and gas fired power stations from 2035. The sale of all fossil-fuel home heating systems will also stop by 2035.
There’s a lot of value in setting your own targets as a way to motivate staff and to show the world you mean business. According to recent research, more than a fifth of the world’s largest companies have already set their own net zero target. Do this as a bottom-up exercise, by department not as a big top down overhead reduction that everybody agrees to but nobody actually owns.
In the UK, the government has announced that large listed companies will soon be required to establish comprehensive net zero plans. Experts predict that this demand will be extended to smaller companies in the not-too-distant future.
If you are looking to get ahead of the game, take a look at the Science-Based Targets Initiative, to set credible emissions reduction targets in line with a 1.5C warming scenario.
Use KPIs to drive change
This may seem a bit like setting a target in step 2, but using key performance indicators (KPIs) is a smart way to track progress within your organisation. Set them as a reverse waterfall so that the firm’s target is the roll up of every department target and you’ll be perfectly aligned all the way up the organisation.
Setting dual KPIs for energy and carbon reduction will make your business objectives clear for everyone to see. They are two sides of the same coin, less energy consumed = less CO2 generated (and less money spent). Used well they will ensure continuous improvements.
However, for them to produce the positive change you are looking for it is essential you have good data, that is easy to read and understand. As information becomes available these KPIs will be regularly updated to reflect your progress, or the lack of it.
Create a C-suite chamption
Gone are the days when a chief executive was just employed to run a business, nowadays CEOs are expected to take a lead on the issues of the day. Of course, climate change is right up there in terms of expectations.
It’s important that any organisation that wants to be taken seriously on its net zero journey is seen to be leading from the front. That can either be the CEO or someone else in the boardroom. However, this can’t be a greenwashing exercise.
Whoever is given the role must have real influence over the business. Employees, clients and customers will take a dim view of an organisation that is only paying lip service to the targets it prints in its annual report. Energy has long been under-represented at C suite level. The team down the line need to know there is someone supporting them at board level, not just a part time job given to a board member to do in their spare time.
This C-suite climate change champion needs to be able to hold people to account if the transition to carbon neutrality isn’t on track. They must be cheerleaders for new practices but also be prepared to call out underwhelming performance.
Creating a champion in the boardroom is a great way to send a message to both internal and external stakeholders.
Create an energy manager
If you haven’t already, give someone the energy/carbon management brief. Depending on the size of your organisation that someone could be a department.
Whoever ends up with this challenging role will need training, the right tools to do the job and the time within their schedule to actually do what you’ve asked of them. We find that many energy managers are that in name only.
For instance, at Optimal Monitoring we recently spoke to people in the health sector whose job title is energy manager, or something similar. This is what they told us:
- They spend less than 25% of their time managing energy demand and usage
- They spend less than 30% of their day running energy related projects
In other words, the vast majority of the time they’re not doing what they are skilled at. We suspect that if the situation is like this in these organisations it’s the same elsewhere.
Create a bit of competition
For each department report their energy use in kilowatt hours (kWh) so every business unit can be compared and their savings tracked. To do this will require the installation of more meters. Reward those areas of the business that are making the most progress and highlight good practice in your internal newsletters.
Make the link between energy use and your company’s profits explicit so staff can see that the more money is spent on energy the less that can be spent on wage rises.
We’ve found that people are keen to be part of the solution but first of all they need to understand the problem. Then they need to be shown how they can be part of the solution and once they have taken action how that has had a positive effect on the environment and your organisation’s bottom line.
Making line managers accountable for carbon and energy reduction is another good idea. Ensure the energy manager (or team) can support them so they are not overwhelmed.
Take a hard look at who is doing what
Are you running separate initiatives but they’re not pulling together? Perhaps a building services manager is looking after your heating systems, while a sustainability champion is urging staff to turn down the office temperature and someone in finance is looking at ways to cut the energy bill?
Various different schemes can be underway and no one has a single view of what’s working and what’s not. Data is key to understanding what is working and the more granular it can be the better.
While there may be some quick wins with stand-alone projects, the danger is enthusiasm wanes leaving these schemes as isolated islands in a turbulent sea. Step back and take some time to develop an energy strategy.
This can cover the way you buy energy, how you collect data, analysis of that data and bill validation, energy efficiency projects as well as energy reporting and regulatory compliance.
A comprehensive strategy will pay dividends in the long term.
Don’t be shy
There’s still a competitive advantage to committing to going net zero so make sure you let your existing and potential customers know what you are doing. Organisations that have already made the leap are seeing improved operational efficiency, greater customer loyalty, easier recruitment and higher capital market attractiveness.
Brands who show that sustainability is important to them are reporting up to four times average sales growth. Listed companies are enjoying market returns nearly a quarter higher than the overall market.
Younger generations particularly want to buy from organisations that are putting the planet first and also want to work for such businesses.
The first you may not have heard of: Change your view of meters
It’s easy to write off meters as dull lumps of hardware that are installed and then forgotten. Too often meters and sub-meters are thought of as capital expenditure (capex) when a better way to view them is as a service.
Energy managers and facilities managers can’t do their jobs without accurate information and that means you need to do everything you can to ensure the data is spot on, not just on day one but in Year 2 as well. That means regular audits and maintenance.
At Optimal Monitoring we preach the idea that meters are a source of future data, not just hardware assets and you should look at these the same way. What sub-metering, below the fiscal meter level, do you need to provide the granularity of data that will allow people and systems to use it to their advantage?
It must be spelt out to purchasing teams that meters come with a service contract, otherwise when the year 2 bill turns up you have an interesting discussion (argument) trying to get the money for a service which is not in anyone’s budget.
The second you may not have heard of: Make departments report their energy use
Large organisations are required to report their energy use in their annual accounts. As a result, in our view, no one in the business really owns it – it just gets written off as an overhead.
If, however, every department had to report their energy use (we’d love to see this become the standard but that’s a fight for another day) and how much it was costing it would be easier to change behaviour. Make them report it and set targets for reducing it.
To enable this you would need to invest in more sub-metering so that each business unit could see their own data, but we’re confident that would be money well spent.
There’s nothing stopping you reporting this voluntarily either internally or externally. Scrutiny of energy use is only going to intensify in the future so why not get ahead of the game now?
The third you may not have heard of: USe the best tools
It’s possible that your organisation already has a few systems and tools supposedly helping you to control your energy use, perhaps an energy management system (EMS) or a building management system (BMS).
If they were fitted some time ago, it’s unlikely they are doing the job you need them to do. The data may be inaccurate, difficult to understand and not being seen by the right people. Nothing is joined up.
There are many new tools on the market but we’d argue ours is the best. It’s called EMMA AI, think of it as 21st Century EMS.
EMMA AI, like its name is a cutting edge artificial intelligence tool that automatically monitors your buildings, finds problems and tells you where and what they are. It does all the joining up you need. On top of that, the clever bit, it also suggests how your team can fix these problems. Thanks to artificial intelligence, as it works it learns, so it gets better at understanding the way you use energy and spots anomalies quicker.
We believe EMMA AI is the most advanced energy monitoring system available. If you want to be serious about cutting energy use and reducing your carbon footprint you need EMMA AI.