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Power play
24 Apr 2007
Topics: Energy management, Environment, Carbon market, Emissions trading, ETS, Climate change
The environmental case for better energy management has been made time and again. It's underlined in the news every day, with reports on impending disasters "due to climate change" and political parties announcing their green credentials and efforts to save the planet. But while environmental and climate change issues in the media have put the onus on the individual - whether telling people to cut down on air travel, ditch the car or scrap the standby - what about companies that rely on large amounts of energy to do business?
It's no small question. According to BSI research, businesses in the UK will account for 38 per cent of the UK's greenhouse gas emissions by 2010 (Source: Focus on climate change: BSI Environmental Management Report by Jan Vernon, 2006), and these have been recognized as a major contributor to global warming.
With the Kyoto Protocol in force since December 2005, the task of meeting these targets has begun in earnest. Business should no longer be thinking in terms of "why", but "how". For most companies, this will come down to a straightforward question: is there a business case for energy management?
It's a question that has been at the forefront of the Carbon Trust's mind for years. Founded as "a private company set up by government, to accelerate the transition to a low carbon economy" according to its website (www.carbonconversation.co.uk), the Carbon Trust has worked with some of the UK's biggest names on the business case for energy management. The results are hard to debate:
>GSK's Horlicks factory reduced energy costs by more than five per cent, equivalent to £35,000.> BMW's already energy-efficient Hams Hall plant improved control of manufacturing equipment, allowing the investment BMW made in new technology to be paid back in less than a year - and savings in 2004 amounted to almost £250,000.
>Overall, in 2005-06, Carbon Trust helped its business and public sector customers identify 3.9 million tonnes of annual CO2 savings - with potential annual cost savings of approximately £390m. (Source: Carbon Trust)
In addition, "Independent research commissioned by the Carbon Trust (Opinion Leader Panel, November 2006) revealed that around half of business leaders feel that the difference in the gap between words and actions on carbon policy will be more readily spotted in 2007, in particular by customers. And that the issue that should be of most concern to CEOs in 2007 is ?energy and the environment'."
Clearly, there are savings to be made in the short term and energy management will remain a priority for business - if only from a reputation management perspective - but is there an argument for long-term business investment in the problem?
The business of climate change
"Most companies regard energy consumption as a cost of doing business. But if you look at it, you see opportunities to make savings," says Tim Sunderland, global product manager with BSI Management Systems, responsible for sustainability. "The less energy you use, the more money you save."
Consider companies that have addressed energy management seriously: DuPont found ways to keep energy use flat from 1990 to 2000 and increased production by 35 per cent, saving US$2bn; Sainsbury's set out to control the amount of electricity it used in refrigeration in 2003 and saw a 12 per cent reduction in consumption with savings of £3.8m a year.
In November 2001, Lafarge took the lead in the cement sector, aiming to cut emissions by 20 per cent by 2010 against a 1990 baseline. Each of the company's installations is bound by targets for emission levels and energy assessments, set by the EU Directive on Integrated Pollution Prevention and Control (IPPC), but Lafarge took a step further.
"We have joined both voluntary initiatives: the UK Emissions trading scheme and the Climate Change Agreement, which encourages better energy management," says Jim Rushworth, Lafarge Cement's national energy manager. "We found we could reduce CO2 from our raw materials by using more pre-calcide waste raw materials, blending different materials together rather than using the traditional lime base."
He points out that there was an incentive, and not just in the form of a rebate on their IPPC climate change levy, if certain targets were met: "Alternative fuels and raw materials tend to be derived from waste products. While there is an up-front cost in getting equipment to handle these and store them, and getting the trialling and testing done so you can get permission to use them, there tends to be a lower cost in purchasing the materials than traditional fossil fuels or virgin raw materials," he explains.
With increased competition from outside the UK and the Eurozone, it makes sense: "If you want to lead the world in business, you'll need to lead the world in energy efficiency," Rushworth concludes.
Approaches to regulation
The Lafarge experience raises an important point: for many businesses, investment in better energy management may not be a matter of choice, but of governmental control. For example, the aforementioned EU Directive on IPPC is the second major pillar of Europe's climate change policy. This mandates standards in energy processes from companies like Lafarge in sectors with high-energy requirements such as aluminium, chemicals, iron and steel, and ceramics.
One of the IPPC's central mechanisms however, is the promotion of Best Available Techniques (BAT), offering road-maps for companies looking to switch to gas (which emits less CO2 than coal or oil) or renewable sources such as solar, wind or hydropower. It also maps the most effective ways of managing waste better, cutting the release of methane, another major greenhouse gas, or fixing leaks, a major contributor to greenhouse gas emissions. And it is these areas that organizations such as BSI feel are essential for bringing on board businesses currently outside the remit of mandatory regulation embodied by the IPPC.
Taking the win-win approach
"Standards are based on best practice - if a company wants to do something differently and doesn't know how, then it can refer to a standard as a framework for best practice. Companies can follow it without re-inventing the wheel," says Sunderland. "Standards are in place to pre-empt regulation that might force companies to go down that road in the future - and in some cases can stave off regulation. So they can help themselves that way too."
"One of the key drivers is climate change, so reducing carbon emissions is a priority for government and businesses aiming at sustainability," adds Katherine Hunter, sector development manager for sustain-ability at BSI British Standards, "but cost is a big driver for industry since energy prices have risen so rapidly in recent years." Thankfully, Hunter points out, standards can address both the business and the environmental cases for better energy management.
"For example, ISO 14001 provides a framework for businesses to manage their environmental impacts and demonstrate they are doing so on a continuing basis," she says. "That's good for business, as there's a lot of pressure from the supply chain since many companies now insist their suppliers have environmental policies in place."
While there is a misconception that implementing standards means changing processes or adopting new technology - which could impose extra costs in new materials and equipment as well as management time in addressing issues and sourcing solutions - according to Sunderland it's a matter of looking at it in terms of investment: "It's like waste management: most businesses think it's a cost they have to pay. Until they start measuring and managing it they won't get the benefit. Those that do will get an immediate benefit," he says.
Setting standards
That industry standards are at the heart of the business case is something BSI is keen to demonstrate, drawing up new and often bespoke standards aimed specifically at energy management.
Alexandre Bykov, consulting team manager for BSI Professional Services, for example, has been working with National Grid on a series of Gas Industry Standards (GIS), which the company and its suppliers can adopt to maintain safety and efficiency across the entire gas distribution network. As part of this process, the Gas Distribution Networks - National Grid, Scotia Gas Networks, Northern Gas Networks, and Wales & West Utilities - now specify Kitemark® certification for products used on the network, conforming to the initial set of GIS implemented in October 2006.
"By rolling out these standards, we can help gas companies lighten the regulatory burden, comply with regulations in a cost-effective manner and use standards as a powerful marketing tool," he says.
What else is in the green business pipeline? An energy management systems standard, which will allow organizations to demonstrate that they are continually improving the efficiency of their energy use, and a standard on energy efficiency and savings calculations, which aims to give organizations a common method for calculating energy consumption, energy efficiency and energy savings. These moves accompany other EU developments such as Directive 2005/32/EC on the eco-design of Energy-using Products (EuP).
For Tim Sunderland, these developments are vital not just for helping businesses reap material benefits from better energy management, but for giving such green initiatives the credibility they need: "The sooner we tighten up on standards, the sooner businesses can start to work to those standards and the more credible the claims start to be," he points out.
For more information visit:
www.bsi-global.com/apr07energy
Business Standards © 2010. Editorial produced by Caspian Publishing in association with The British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.
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