The introduction of a carbon reduction scheme next year will force large retailers to think harder about how they use energy but it will also save them money, says Sara McCorquodale.

Next year a new green scheme is set to begin that will affect the way large retailers operate. While it will add to their compliance workload, the good news is that a push to lower energy consumption is also a push to lower energy bills.

Led by the Department of Environment, Food and Rural Affairs (Defra), the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a CO2 emissions trading programme, which will be mandatory for 5,000 organisations in the UK. Groups and businesses that used more than 6,000 megawatt hours of electricity last year must sign up to the scheme.

The goal is to reduce carbon annually by 1.2 million tonnes by 2020; so the business and public sector organisations that generate more than a third of CO2 emissions annually are being targeted.

The introductory phase of the CRC will begin in April next year, and for the first year businesses must report their emissions. Following this, carbon allowances will be sold at a fixed price. Failure to register for the scheme between April and September next year will result in an initial fine of £5,000. A further charge of £500 a day will be imposed until the company in question signs up for the CRC.

And monetary loss is not the only threat facing retailers, should they fail to comply. In 2011, all participant organisations will be ranked in a public league table demonstrating their progress to decrease their carbon footprint. A company’s success will be determined by how early they took action to prepare for the CRC. Those that fare poorly may find this has a
negative impact on their reputation and brand.

Jake Ridge, business energy expert from price comparison website Uswitch, believes the league table implications of doing badly should be good motivation for retailers. He says: “The CRC is something businesses should embrace. If they do, they could get themselves to the top of the league tables and this could be very positive for their company. Being seen to be green is more and more important in the eyes of the consumer.”

Time to green up

Retailers affected still have about six months until the programme comes into force. General Manager of the Carbon Trust Harry Morrison says that businesses must start putting their carbon reduction plans into action now if they are to be ready for the reporting phase to begin in April next year.

“The CRC has significant financial and reputational implications for retailers so it is vital they understand fully how it can affect their business and how they can profit from early action to reduce the cost of compliance and minimise risk. That means starting now,” he says.

There are two ways to take early action. The first is to achieve Carbon Trust Standard status. The standard replaced the Energy Efficiency Accreditation Scheme and provides a definition of good practice. It also judges an organisation’s commitment to, and its success in, reducing its carbon footprint.

To achieve standard status, an organisation must measure its greenhouse gas emissions. This includes the electricity and fuel used onsite and fuel used by company vehicles. The company also needs to demonstrate good carbon management and investment in energy efficient equipment, maintenance programmes and staff training to prove its commitment. Lastly, a company must prove it has reduced carbon emissions. Carbon Trust Standard certification is valid for two years and within nine months of the end of this period, businesses are advised to reapply.

The second method of early action is installing advanced metering. This allows retailers to observe energy consumption continuously. Shop Direct took this latter approach and believes it has played a definitive role in its progress so far.

The retailer achieved standard status through early action and group property director Matthew Jacques says: “We were one of the first retailers to install smart metering to every site we own. This data was pivotal in monitoring and targeting carbon. From this our IT team has recently developed software to automatically turn off our PCs out of hours, saving more than 2,500 tonnes of CO2 a year.”

The key to success in CRC compliance, says Jacques, is having the carbon consumption information Defra requires and keeping these figures up to date. And after getting the figures together, retailers may find newly motivated staff pushing in-house green developments forward and more money to plough back into their companies.

“It’s a different and compelling way to engage employees. The money we have saved will support us through these challenging times and also let us develop green computer data centres – a key carbon impact of an online retailer.”

In addition to Shop Direct, Tesco, Morrisons, Marks & Spencer, Asda, B&Q, Next and Ryman are among the 150 organisations to have taken early action. According to the Carbon Trust, this move will reduce their energy bills annually by about £50m.

Ryman is working with the Carbon Trust to review the retailer’s energy consumption. It will then advise the retailer on the action it needs to take to reduce CO2 emissions. Having initiated the process of preparing for next year, Ryman chief executive Theo Paphitis also urges others to assess their energy consumption sooner rather than later.

He says: “The most common uses of energy in retail are for heating, lighting and air conditioning – which retailers can easily measure by installing smart energy meters.” He adds: “The CRC league table will name and shame the best and worst performers, but there are many other pressures on businesses to be green, not least customers. Actively managing your emissions and energy consumption is required by the CRC, but it is also great for reputation building, which means a more positive experience for customers.”

Steps to success

While collating data on energy consumption may be a huge task, moving forward to having a reduced carbon footprint can require fairly simple changes for small to medium-sized retailers.

Ridge says: “I think negligence is to blame for energy consumption in a lot of cases. A lot of businesses provide light in areas where it is redundant and in rooms that are rarely used. They leave equipment on overnight and use inefficient air conditioning. Attending to things like this can make a huge difference.

“Larger businesses need a dedicated strategy and a green team responsible for implementing change and ensuring it is continued. Again, fairly simple strategies can provide good results. Making sure that equipment is turned off when not in use, having movement-activated lights, a green bin policy or using natural light where appropriate will make all the difference.”

The benefits of preparing for next year are a prominent position in the league table come 2011 and a potentially significant financial saving. This does require devising a green strategy and investing in change with time and money, but the resulting monetary and reputational gain promises to make the effort more than worthwhile.

The standard: How to prepare

Get a long-term carbon action plan Faced with significant energy costs and a rising cost of carbon, it is important to put a long-term carbon management and reduction strategy in place.

Get on top of data Organise data management processes from the start. Carbon management software systems can help streamline these processes and installing advanced meters will ensure data can be regularly captured, stored and retrieved.

Understand tenancy and franchise arrangementsThe CRC has specific rules allocating responsibility for emissions between tenants and landlords and franchisors and franchisees.

Get staff involved Reducing carbon emissions requires action at every level, from the shopfloor to the boardroom. It is important everyone in the company understands carbon reduction plans and how they can get involved.