Sustainability - the Balanced Scenario

Oh no, not another article on green issues! We’ve got a recession to dig ourselves out of, we’ve got the dreaded cuts just round the corner...

But...

We need to stimulate growth, we need to get our businesses going again...

But...

Yes, we’re very sorry about the polar bears and the Gulf of Mexico is a bit of a mess, but the economy needs energy and we all need jobs...

But...

And anyway the scientists can’t agree, can they? And what about that lot down at the University of East Anglia?

But...

You still here?

It’s not easy being an environmentalist. One of the major problems I find is other environmentalists, whose ideas are often impractical, naive and extreme. Of course if you believe that we are on the threshold of a total global catastrophe and no-one is doing anything about it, it’s tempting to climb up a power station chimney, ram a whaling ship or devastate a field of GM crops. It’s easy to write people like that off as vandals (and some of them are!) and go back to business as usual.

Business is what it’s about. Sustainable business. Staying in business and staying in profit, in spite of what’s happening in the environment at large. Business has always faced threats - from competitors, from technology, from politicians, from the bank! Successful businesses - sustainable businesses - have recognised these threats, made plans, taken action and survived and prospered. They have recognised that business as usual is an illusion, and all too often a primrose path to ruin.

So what’s changed? All the traditional risks are here, with the added excitement of government cuts and a global recession. I could add a whole litany of environmental threats, with the added assertion that it’s all the fault of business as so many activists like to believe. Passing round the blame will not get us anywhere, but nor will ignoring realities and failing to plan. And let’s not forget there’s good news - opportunities - as well as bad.

If we look at the whole field of sustainability, it’s about a whole lot more than just climate change. Yes, climate change is a significant threat. Regardless of whether it’s our fault or not, increased-intensity weather events can devastate markets and cut supply chains. Since most governments believe that it is our fault, businesses are increasingly faced with taxes for emitting CO₂.

From a physical point of view there are increasing constraints. Rare earth metals, key components of wind turbines and electric cars, are becoming rarer. Helium will run out well before the end of the century at the current rate, and that won’t just mean no more party balloons but no more MRI scanners, LCDs or fibre optics! Agriculture is struggling to keep pace with ever-increasing population and natural disasters. Floods in Pakistan this year and wild-fires in Russia have sent up the price of grain. The loss of habitat and bio-diversity means the loss off potential new medicines and new crops. Peak Oil and the increasing reliance on oil from hostile nations and hostile locations threaten the price and security of our energy supply.

All right - that’s the bad news, and I accept that the natural reaction of most people is that it’s very sad and very serious but they don’t have the time or the clout to do anything about it. True. But whatever happens you can take action to protect yourself.

Planning, and in particular scenario planning, is becoming increasingly vital. Let’s just distinguish this from contingency planning.

Contingency planning is being ready to keep the business going in an emergency; so you’ll have a plan for a public transport strike that keeps half your staff from getting to work, for a power cut that could threaten your freezers, for a suspicious parcel in the post room and other things like that. It’s essentially about preserving the current business model.

Scenario planning is taking a point in the future - five, ten, twenty-five years ahead - the period will be governed by your capital investment cycle - and predicting what the world will then be like from a social, economic, competitive and technological point of view. It is usual to produce one or two scenarios, changing the major assumptions each time. The key question is then “In the projected scenario, is my business going to be viable?” For example, in the face of increased health propaganda, will a tobacconist be a viable business in 2020? If the government achieves its 35% CO2 reduction by 2020 should we still be selling petrol cars or electric ones? Remember what happened to the radio valve when transistors were invented? What happened to saddlers and harness-makers when Henry Ford brought out the Model T? And who makes a living out of developing photographs these days?

So sustainability is all about staying in business, as well as saving the planet and doing what we can to preserve a future for our kids. We need to reduce, re-use, recycle - and re-engineer if our businesses are going to survive. But first, forget about the alligators and draining the swamp for a minute. Take a moment to look at some future scenarios and ask yourself whether where you’re heading is where you want to go - or even if you’re likely to get there!

Anthony Day is director of Cyber Associates, the environmental management consultancy He worked on the Management Accounting Guideline on Sustainability published by the international accountancy bodies and joined the DEFRA consultation on the greenhouse gas reporting standard.

He delivers workshops to senior management on scenario planning for sustainability, has made conference speeches throughout UK and Europe and now facilitates regular webinars. http://cyber-associates.com/scenario-planning

More on CRC

944 down, 9 weeks to go - Registration: use an agent - how safe is saved? - online guide - Last call for disaggregation - EAM: Kitemark Energy Reduction Verification scheme; don’t forget gas meters - Help the helpdesk - Is your guidance up to date? - Chris Huhne has seen our energy future, but you can make up your own mind on the DECC website - You too can have an energy monitor like DECC - Next CRC Webinar

944 organisations had registered as full participants for CRC by 27th July. Original estimates were a total of 5,000; some people have calculated as many as 12,000, so on the face of it with only 9 weeks to go the situation looks pretty dire. The reality is somewhat different. Many organisations are gathering their data in stages and have already started the registration process. Beware, however, if you are one of those who has started and saved, that the system only stores incomplete registrations for 30 days and after that they are irrevocably deleted.

If you are still not sure about how to approach registration there are two detailed guidance documents showing showing shots of each screen at each stage of the process. This one is for private sector organisations http://tinyurl.com/2v9eagx and this one is for the public sector: http://tinyurl.com/35r4jg8 . Of course these only show you how to enter the data. If you have issues with getting the data together Cyber Associates can help and can handle registration as your agent.

Of the remaining 15,000 or so organisations that must make an information disclosure but are not full participants, some 3,900 have registered. If your organisation comes into the disclosure category don’t miss the deadline. There are penalties for you, too!

The deadline for disaggregation is 31st July, which in practical terms means tomorrow. If you don’t know about disaggregation, don’t worry. You’re too late. (Special rules apply for the public sector.)

Early Action Metric. The Environment Agency has now approved the Kitemark Energy Reduction Verification scheme to count towards the Early Action Metric. This is based on the new BS EN 16001 Energy Management Standard. You now have a choice of this, CEMARS or the Carbon Trust Standard. Get any of these in place by 31st March 2011 to qualify.

Voluntary AMRs complete the other part of the Early Action Metric. As noted before, it’s the percentage of total annual energy that goes through the meter in 2010/11 that is taken into account, so the sooner you instal the AMRs the greater the benefit. And gas meters also qualify.

There are signs that the CRC Helpdesk, not surprisingly, is coming under increasing pressure. Of course there are extensive guidance documents on the website, but some people have raised concerns that they don’t carry version numbers. From time to time they are updated, so how do you know that you are referring to the latest edition? Document properties should give you the creation and modification dates, though that won’t tell you what’s changed. (I suppose you could open two versions in Word and get it to do a document comparison, but you really shouldn’t have to do that!)

This week Chris Huhne, Energy and Climate Change Secretary, presented his first Annual Energy Statement to Parliament. His objectives are to keep the lights burning and to meet the 80% carbon footprint reduction by 2050. The model which his department has used, balancing supply against demand, is available for anyone to work with at http://2050-calculator-tool.decc.gov.uk/. What is most revealing is the sort of changes we will need to make to achieve these targets - including heating homes to no more than 17°C, reducing our use of gas, installing micro wind generation on 450,000 properties and extensive use of electric and fuel-cell cars and vans. Fascinating! Realistic? You decide.

Incidentally, if you go to the DECC website www.decc.gov.uk you will see that they are displaying the energy consumption and carbon footprint of their HQ building in real time. I wish I could say that it’s an example of the work of our strategic partner, NoWatt, but it’s not. In fact NoWatt does better than that: it can report not just to the nearest building, but to the nearest floor, department, circuit or appliance. It’s a key tool for managing energy efficiency and for feeding back to all groups of staff to show how they are doing and to reinforce their engagement with energy saving.

I’ll be presenting the next CRC webinars for the Low Carbon Best Practice Exchange on 7th and 14th September. You can find full details at www.carbon-innovation.com

This content is available as a podcast at www.susbiz.biz And if you want to talk to me live about any of this, I’m available at on 07803 616877

CRC Update

More than 4,000 organisations still to register - less than 12 weeks to the 30th September cut-off - more time for disaggregation - PFI: who’s responsible? - landlord and tenant - Early Action Metric - monitoring carbon footprint - buying allowances - evidence pack and audit - super-smart metering to save energy and save cost.

The total number of CRC full participants was estimated at 5,000 and according to the Environment Agency only 651 have so far registered. That leaves less than 12 weeks for the remaining 4,349 to complete the process by 30th September. Of course you may already have started, but if you’re waiting to clear up some minor query or you have some doubts about your particular case the Environment Agency urges you to register now and sort out queries and errors later. No doubt there will be increasing pressure on the system as we get closer to the cut-off.

Good news if you were planning for disaggregation. The Environment Agency has extended the initial deadline until 31st July, although all your SGUs still have to be registered on their own account by 30th September.

Some organisations operate facilities provided under PFI and the PFI company has claimed that the organisation which uses the facilities is responsible. The Environment Agency has now made it clear that the “counterparty to the supply contract” principle applies, so if the PFI company is paying the bill then the PFI company is the participant.

CRC remains an issue for landlords. Remember, if you bought more than 6,000MWh of half-hourly electricity in 2008 you are a full participant even if you sold that electricity on to your tenants. When we get to the reporting phase, the landlord is responsible for reporting the total carbon footprint from all energy sources, including energy used by tenants. Can you negotiate an amendment to the lease? The CRC legislation gives you obligations, but no additional rights vis-à-vis the tenant.

If you are a tenant and taking steps to improve your energy efficiency, will the landlord pass on the benefit of lower CRC costs to you? Again, can you re-negotiate the lease?

Your Performance League Table position and your total CRC cost are both affected by the Early Action Metric and it’s not too late to get the benefit. The earlier you put in voluntary AMRs (automatic meter reading) the better, because the benefit is calculated on the proportion of your total energy that flows through them in 2010/11. Don’t forget gas meters. You have until 31st March 2011 to achieve the Carbon Trust Standard. As long as you have it in place by that date you qualify in full. The Environment Agency has just approved CEMARS as an alternative to the Carbon Trust Standard. Other standards are under review.

Quite apart from the Early Action Metric and your league table position, the surest way to reduce your CRC costs is to improve your energy efficiency and cut your energy bills. Have I told you about the super-smart metering that gives you instant feedback and detailed analysis for close cost control? Give me a call on 07803 616877 and I’ll tell you more!

Once registration is complete the next task is to prepare for the annual report and for the purchase of carbon allowances in April 2011. You need to have an evidence pack, and 20% of all participants will be audited. Have you been monitoring your carbon footprint since April? Have you got detailed records and an audit trail?

If you would like to discuss any of these points in more detail please give me a call on my direct line: 07803 616877. Together with strategic partners, Cyber Associates can help and advise on CRC registration, obtaining benefit from the Early Action Metric, monitoring your carbon footprint and establishing an employee engagement programme to maximise your energy efficiency.

I look forward to talking to you!

Best wishes,

Anthony Day

PS NoWatt, our super-smart metering partners, have a window in August due to customer holidays. If you want a rapid assessment and installation we can help you to start saving money on energy in a matter of weeks. Call me on 07803 616877!

CRC - do you need to buy allowances next April?

The CRC Energy Efficiency Scheme which came into effect on 1st April 2010 is a sort of carbon-trading system for larger organisations. I say “sort of” because the government sells carbon allowances in April and gives all the money back in October. Those organisations which do really well in controlling their emissions, and hence find themselves at the top of the league table (more of that later!), will get their money back with a bonus of up to 10%. In order to pay these bonuses those who do less well will be penalised to the same extent. Over 5 years this bonus/penalty will rise to 50%.

Let’s look at the first year. In April 2011 you have to buy allowances to cover your EXPECTED emissions in 2011/12. In October 2011 the cost of those allowances will be returned to you with a bonus or penalty depending on your ACTUAL performance in 2010/11. Your cost is therefore the cost of having your money tied up from April to October, offset or increased by the bonus/penalty. This bonus/penalty, by the way, at 10% of your allowances will be less than 0.7% of your energy bill.

What if you don’t buy any allowances next April? You don’t have to surrender them until July 2012 and there will be another sale of allowances in April 2012. By then you will know exactly how much you need and allowances can be transferred from year to year within each phase. If you adopt this procedure you will defer the cash flow effect (not increase it, because you will not buy anything for the following year either. When you get to the end of Phase 1 you can buy exactly the allowances you need, which is important because if you have any extras they cannot be carried into Phase 2 and so will be worthless.

Of course, if you do this you’ll miss out on a possible bonus in Year 1, but is 0.7% of your bill such a big deal?

Disaggregation could save you money, if you move fast!

Carbon Reduction Commitment

The key issue here is that if part of a group of companies uses enough electricity to make it liable to participate in CRC, the whole group must register and report. Every part of the group must measure and report its carbon foot print and purchase carbon allowances under the scheme. Disaggregation is a concession which means that groups can apply to exclude those parts of the organisation which would not be liable under CRC on their own, but only on certain conditions:

• You must register the whole group by 30th June 2010 if you want to take advantage of this. This gives you the time to re-register the parent company before the 30th September deadline.

• You cannot split up the group so that no element is big enough to be liable. The parent company must register with enough subsidiaries to bring usage up to participant level.

If you don’t disaggregate you must report on the whole group and buy allowances for the whole group for the three years of the first phase before you will get a chance to apply for disaggregation again.

So, to save both time and money you must make a decision on disaggregation as soon as you possibly can. Call us now on 01904 654986

The Low Carbon Innovations Network has invited Anthony Day to present a series of webinars on the Carbon Reduction Commitment. He will also be presenting a conference session - How to Win at the CRC Game - at the Best Practice Exchange at London Olympia in June 2010. More...

CRC - is the league table a red herring?

For most people, the Performance League Table is a red herring.

Depending on how scheme participants manage their carbon footprints, they will be assigned a ranking on the Performance League Table. This will be publicly available, so the theory is that organisations will not wish to be named and shamed for appearing low down in the league. Secondly, there are financial penalties associated with your league table position.

Since the Environment Agency took over much of the information on CRC seems to have become both more complicated and more vague. For example, the fixed price for carbon allowances was originally announced at £12/tonne. This does not appear to be confirmed on the current CRC website. When participants get their money back through recycling payments, the original plan was that they would get a bonus or a penalty depending on their position on the league table. This could be between 5% and 50%. Again, these figures do not appear on the new CRC website.

Cyber Associates has requested clarification of these points from the CRC helpdesk, but in the meantime let’s use the original figures. On that basis a 5% bonus or penalty on your recycling payment is about 0.3% of your bill. That’s why we believe that the League Table is a red herring.

You will gain far more by reducing your energy usage than by trying to improve your league table position.

After all - as will be revealed at the 10th June conference - many participants will be prevented from taking advantage of the early Action Metrics and will have no way to improve their position at all.

This is all part of the obligation under the Climate Change Act to cut CO2 by 34% by 2020 and 80% by 2050. With UK emissions still growing, even standing still will be difficult. The oil price has been on the rise for most of this year, so energy is going to be expensive to buy and if you use it inefficiently the government is making it even more expensive to use!

Cutting Fuel Costs

Petrol duty rises today by 1p/litre.

Have you had that email forwarded and re-forwarded from a friend of a friend of a friend? The one that urges you to boycott Esso and BP when buying petrol, to force the wicked oil companies to bring prices down to £0.90/litre?

I class it as a "quasi-virus". It urges you to send it to all your contacts and if everyone does that it truly means millions of messages. Why a virus? Because it's just setting out to clog up and slow down the internet with all these messages.

What about the boycott of Esso and BP?

First, it's not true when they claim that the oil price is "as low as it has been for a while." It hit $147/barrel in July 2008 and then fell back, but it's been climbing since the beginning of last year and today is at $83. In sterling that's £73 in July 08 and £55 now - the gap is closing because sterling has fallen against the dollar. The long term average for oil is around $30, but as it runs out and we have to get it from increasingly remote and unstable regions the cost of production goes up and up. Industry experts predict the $200 barrel within 5 years!

So what happens if we stop buying from Esso and BP? The truth is that Morrisons, Sainsbury's, Tesco and all the rest don't own oil wells or refineries. They buy petrol from the oil companies - like BP and Esso. Even if we managed a 100% boycott there would be no change to the price - though there might be queues at the supermarket forecourts! As with electricity and gas, we cannot do anything to drive down the price of what is becoming a scarce resource in the face of growing world demand and population increase. The only solution is to get the very maximum out of every gallon: drive carefully, drive only when you have to, choose an economical car. Very boring, but I'm afraid it's the truth.

FUEL DUTY RISE DEFERRED

No 3p petrol duty increase on 1st April - instead it will be 1p, with the rest phased in after the election. Undoubtedly rising petrol prices will increase inflation, but we cannot soften the blow of rising oil prices through the tax system. Oil is running out - or hadn’t you heard? Yes, we may be able to get it from tar sands, from corn or from beneath distant oceans, but it is still running out and as we attempt to mop up the last resources it will get more and more expensive.

Should we encourage people to use less oil by pushing the price up? In the long term that may work, but in the short term it will make life difficult for many “hard-working families” and most other people as well. Few can afford a £20,000 electric car; fewer still can find anywhere to charge it. Will there really be a significant number of buyers prepared to put up with a range of only 100 miles?

Taxation is always a blunt instrument, and never a substitute for policy. Instead of arguing about petrol we should be debating the whole transport and mobility issue. Instead of reserving £30bn for new high-speed rail links across the country shouldn’t we be looking at the millions of shorter journeys that millions of people make every day? Considering how video links and high-speed broadband can reduce the need for travel? Planning to increase home working? Questioning why our lifestyle and working patterns demand more and more travel?

[Written on a train]