What’s the connection between climate change and good cost management?

The climate change summit in Copenhagen focussed so much on who is going to stump up the bill, it would be easy to conclude that reducing our carbon footprint is a costly business.

Here’s the good news – reducing your company’s carbon footprint doesn’t have to cost anything and has saved some companies millions of pounds.

Just considering direct energy use, we would expect companies to be able to reduce their energy consumption by at least 10% with little or no capital expenditure. This would result in significant levels of cost reduction for most businesses as well as a reduction in their carbon footprint. If your company uses c1MWh of electricity pa, depending on the tariff you have with your energy company, it could cost you in the region of £80k pa and your related carbon emissions would be c537 tonnes. Reduce this by 10% and you would have a cost reduction of £8k pa and reduce your carbon emissions by over 50 tonnes pa.

Where larger capex is required, interest free loans are sometimes available and companies often find that the cost reductions on energy bills outweigh the cost of servicing the loan.

The CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) comes into play next year, resulting in all companies with a half-hourly electricity meter settled on the half-hourly market & who used more than 6,000 MWh during 2008 (c£500k spend) having to buy credits to allow that level of use. A cap and trade mechanism then provides financial incentives to reduce energy use. If your company falls into this category and can reduce energy consumption, then additional cost reductions will be generated once the Scheme is in place.

As time progresses, it is expected that the CRC Energy Efficiency Scheme will affect more businesses as companies are required to drive improvements through their supply chain.

Reducing your carbon footprint and associated impact on climate change can therefore make your company more profitable due to associated cost reductions, with the added benefits of becoming more attractive to many of your staff and clients and helping you to achieve your Corporate Social Responsibility objectives – a definite WIN-WIN situation.

In conclusion, there is a strong business case for reducing your company’s carbon footprint and a strong connection between tackling climate change and good cost management. If you would like to know more about how to do this and how to extend it beyond your direct energy use, watch out for my next blog or give me a call.