What is happening in the world that’s driving the change towards sustainability?
Over the last ten years, there has been an unprecedented international drive towards energy generation without using fossil fuels. This has stimulated industries all over the world that produce equipment to handle this (especially in major Global economies such as China & India) at scales that would have been unimaginable 10 years ago.
This has resulted in the huge reduction in the costs of materials throughout the industry, particularly with solar as an example. Also, supply chains are now much more efficient; businesses have become better at installing, and the equipment itself has become a lot more efficient. The end result is a much better output per unit installed, which collectively is great because it makes it easier for people to make the right decisions on renewable energy, both for philosophical reasons and as a sensible economic decision.
Where does sustainability come into the decision making mix for SME businesses?
Ultimately, everyone still has to pay the bills. We are buying energy, there is no choice about that, but the traditional cost of that energy, electricity for example, is continually rising.
The UK Government has tried to help by introducing caps on the amounts that electricity companies can charge, but they have already had to allow the caps to rise as the wholesale cost of electricity has risen too much, driven by the international costs of energy and its availability.
So, the big question is, ‘how can we reduce the overall cost of our energy, and stop the continual price rises?’
The key point for business owners to remember when looking at their day to day costs, is that they could actually be looking at investing in renewable energy to reduce their energy bills in the long term. It’s all about making the correct investment decisions to manage the long term sustainability of your business, as well as the environment.
One of the historical barriers to this, however, is the need to find capital to invest in renewable energy in the first place. Today, there are lots of ways to generate that capital – it can be borrowed, come from cash reserves if available, be achieved through various financing arrangements such as power purchase agreements or leases where systems are inherited after a period of time. You could also consider a hybrid of these options to suit your own requirements. This means that the traditional capital barriers are being reduced with the availability of funding options at very low interest rates, making it a lot easier to make the right choices.
Another potential barrier is choosing where to spend your money wisely in the face of many different options available to you. One of the big advantages with renewable energy is its longevity – with a minimum of 10 years (or 25 year production warranties on solar), you would be investing in something that is protected for an extremely long time, not to mention the tax advantages by investing in this equipment.
But, ‘What about how long you need to be in a property?’ I hear you ask. Well, if it’s owned, that’s great as renewable energy will undoubtedly add value to your property and provide a good asset value, but if you’re in rented accommodation, then an agreement would need to be made with your landlord to depreciate the asset over a period of time. However, you would still see large reductions in your ongoing power bill, which makes it an attractive proposition for both you and your landlord.
But what about business life expectancy and mobility – can people really make longer term decisions in today’s business climate?
The pressure to ‘do the right thing’ supports the need to make longer term investments, not just for businesses today, but also for the future with sustainable buildings and future occupants, even if the current businesses are not around in their current form 20 years from now.
But businesses don’t need to focus just on the ‘big ticket’ items for renewable energy – if they are not able to make larger investments, they can still demonstrate their green credentials with simple items such as LED lightbulbs, more efficient heating, looking at efficient transportation and vehicle emissions etc. which will have the added benefit of lowering their day to day operating costs.
This puts an interesting perspective on the ‘real-life’ impact of renewable energy, as historically people will have looked at it as a significant capital investment which therefore potentially makes it cost prohibitive, whereas now we are all much more aware of other operational costs within a business – money that is being spent anyway – that could be better deployed to save money, as well as reducing the impact on the environment. Things like utilities, transportation and lighting, which also drive behavioural changes and awareness throughout an entire workforce to support performance improvements.
A 20% cut in energy costs represents the same bottom line benefit as a 5% increase in sales in many businesses.
Source: Carbon Trust
The traditional business model is to focus on driving growth through more sales and turnover, but controlling costs is equally as important for business success, with a major impact on the bottom line.
Where is the pressure coming from to make sustainability a key part of the business agenda?
In the beginning, there were no real economic drivers – customers were driven by a philosophical desire to support the environment and do the right thing in the longer term – it would actually cost them more to be sustainable!
Over the years, doing the right thing (since the 2008 Climate Change Act) has become a legal requirement along with other treaties and agreements. This is because 97% of Global Scientists agree that if we don’t do the right thing, our own lives are being affected by constant climate records being broken, extreme weather events, pollution issues and more – all of which are set to continue if we don’t do anything.
Individuals and businesses are now increasingly responding to that pressure, with recent publicity and awareness coming from a variety of sources, including well known and respected figures like David Attenborough, leading politicians and Government committees and climate change pressure groups, leading to declarations of climate emergencies across the globe.
What we are beginning to see now is that it’s not as hard as you may have thought to contribute and make changes that can reduce your impact on the environment. Making the right decisions can actually be good for your business.
Attitudes are genuinely shifting towards energy being a necessary operational cost – it doesn’t need to make a profit, you have to have it anyway, so manage the cost effectively but make the right moral judgements on where it comes from.
Some quick and easy areas that businesses can immediately focus on to reduce their environmental impact, whilst saving money could include:
- Draught excluders
- Efficient insulation
- LED Lightbulbs
- Efficient radiators
- Power saving on IT equipment
- Heat pumps as an alternative to traditional boilers
- Solar PV
- Solar thermal to generate hot water
These are all investments of different levels, but without exception they will all save you money, making them easy choices to make – it is just a matter of committing to those choices and removing some of the barriers for installation and funding, which are becoming easier and easier to navigate.
We’re encouraging business owners to look at the way they do business and manage their business performance in a different way.
Don’t just focus on the usual ‘reduce costs and sell more’ approach, but also think about a 3rd dimension of creating a sustainable environment for the future whilst identifying new ways to improve your business performance.
Increasingly, responsible businesses are being run using a method called the ‘triple bottom line’ – they are clearly looking at traditional economic accounting, but are also accounting for the environmental impact of their business, whether that is through renewable energy or waste management for example. Many businesses are now actually turning waste via recycling into an income stream, rather than the historical cost of disposal, which is just one example of how doing the right thing can actually ‘win’ economically.
But it doesn’t stop there – there are also social implications as there is statistical evidence that shows people want to work for environmentally responsible companies; it helps with recruitment and retention. There is also evidence to show that businesses in the supply chain want to work with other responsible businesses, sometimes for legislative reasons, but more often its because they want to be associated with reputable high quality organisations that are focused on ‘doing the right thing’. And finally, more customers will be attracted to responsible businesses and want to do business with them, often prepared to pay a premium to demonstrate their support for sustainable industries.
And the benefits continue as it also helps to enhance your business reputation, both externally and internally, helping to recruit and retain quality staff by demonstrating your Corporate Social Responsibility (CSR) credentials and being seen to be a ‘good business to work with’.
If you were to recommend some sustainable initiatives to focus on, where would you start?
The easiest place to start is by looking at your business premises and understanding your energy usage. Based on your longer term plans, decisions can be made on how you use electricity – for example, you can immediately start by changing to a green tariff; it’s simple to do and doesn’t really cost anything to implement.
Following that, there are a range of items to think about:
Start with easy wins of basic insulation, LED lighting and other items mentioned above. Then you can look towards installing Solar PV for generating electricity – if you have a roof, it’s so easy to set up.
If you’re renewing heating systems or changing a boiler, it’s an easy move to install heat pumps rather than traditional boilers. For example, the best traditional boilers on the market are 90+% efficient, in comparison to the lowest performing heat pumps on the market at 270% efficient, which is a major game changer. There are also schemes in place to support the growth of renewable heating, from grants to heat incentives to help fund this growing market.
For logistics, look at replacing vehicle fleets with more efficient vehicles, reduce fuel consumption with more efficient driving and journey planning outside of peak hours.
Socially, everyone should be thinking more about the personal impact they are making on the environment, changing behaviour to consider things such as waste management and energy usage.
Encourage everyone to accept that there are real benefits in understanding environmental issues at all levels, but also start taking actions now to make a difference – it doesn’t have to cost a fortune to be sustainable, we all need to play our part with a hugely increased sense of urgency.