Managing sustainability profitably

M&C Energy Group discuss the range of factors that have changed the perception of large businesses when managing greenhouse gas emissions

IN 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 that determine why this should be, not least of which is 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 that can be sold, to those that are more punitive. However, there are many reasons why organizations need to manage emissions beyond those compelling them to do so.

Cost is one such factor – it is expensive to emit CO2 whether as a result of carbon taxes and levies, or due to the fact that, for most organizations, CO2 is emitted primarily as a direct result of the fossil fuel energy they use and energy is increasingly expensive. For most, however, while this is a vitally important reason for curbing emissions, it is 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 organizations who report their emissions, the majority found indirect financial benefits were generated that 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 organizations that 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 impacts on emissions or energy reduction 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 that 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 were outside of its direct control and therefore options for improvements required working with suppliers to establish alternative sources of raw materials and processing techniques.

Cost, efficiency and competitiveness remain major driving forces in the need for organizations to reduce the consumption of energy generated from fossil fuels, but 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.

The important aspect of this is that any organization, at any stage in the supply chain, can expect to be challenged on the performance of its products. If an organization wants to remain competitive, if it wants to retain major customers and if it wants to break into new markets, it will need to take account of its emissions – both those arising directly from its 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 such as outsourced activities and the production of purchased materials.

Producers of raw materials who can advise their customers, either directly or indirectly, of the greenhouse gases emitted as a result of the production of those materials will be in a strong position to ensure that they continue to be a part of the supply chain in the future.

Better still, 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 their customers, they are likely to find that it is too late and that others have got there before them.

The good news though, is that the process measurement and reporting of 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.

Article by M&C Energy Group