Forget rainforests and melting glaciers, think regulation, corporate image and the bottom line. The world is turning a bright shade of green and businesses must act now, finds Lisa Miles, before it's too late
As the country prepares for another sweltering summer of workers wilting in temperatures predicted to reach 40 degrees Celsius, there are few people left who can honestly say they do not "believe" in global warming. Unless you are a professional cynic or you are in an extreme state of denial, the truth the scientists have been quietly screaming at us for years is becoming clearer: our climate is changing.That change is on the verge of spiralling out of control and scientists say that the planet has already reached a tipping point at which a two degree rise is unavoidable. While there is still ongoing debate around whether climate change is directly attributable to mankind's CO2-emitting habits, businesses across the world are nonetheless starting to envisage a world in which working practices will be affected by extreme heatwaves, strengthening tropical storms, flooding and drought.
The economic impact of climate change was laid out forcefully in Sir Nicholas Stern's report of October 2006. The report stated that a rise in global temperatures of two to three degrees could reduce global economic output by 3 per cent, rising to 10 per cent for a five degree increase. Stern's conclusion was that in the worst-case scenario global consumption per head would fall by 20 per cent.
And in May 2007 the Intergovernmental Panel on Climate Change (IPCC) released its third report of the year, which laid out how the growth in greenhouse gas emissions can be curbed. Global emissions, says the IPCC, need to peak and start declining within one or two decades. It calculates that the sharpest cuts in emissions might cost anything up to 3 per cent of global GDP by 2030, although milder curbs could actually enhance growth.
The climate change agenda is gathering momentum to such an extent that business can no longer afford to ignore it. Companies across the North West are shouting about their green credentials, the trees they have saved, their light-sensitive lighting systems.
But not all businesses are convinced of the need to change, believing that their sector has little environmental impact, that they are too small to justify making changes or that they are better off waiting until regulations force their hand. Some threaten that they will leave the UK if the new green agenda impinges too much on their business. But most are more concerned about the cost implications of going green - they need to see a financial payback in the short term. Smaller businesses in particular need convincing that there is a good financial argument to act.
"Climate change is a significant business risk. The cost of energy and the cost of waste disposal are risks that businesses are already starting to act on to bring their costs down. We need to get businesses to build the potential impact of climate change into their risk management models too," says Mark Atherton, the Northwest Regional Development Agency's (NWDA) head of sustainable development. "Most smaller businesses only plan a couple of months ahead. Climate change risk is not on their radar. There is very little we can do about some of the change that is already happening because of the lag and some businesses will find that their market or supply chain will be impacted by that. It is good practice to start planning now."
Insurers are also urging businesses to fully prepare for the effects of climate change and businesses without proper provision will no doubt face greater insurance premiums in future. Findings of research completed for the British Insurance Brokers Association in February 2007 found that nearly half of businesses have no plans to deal with the impact of flooding and a third of businesses had no strategy to deal with the impact of a storm.
Even for the most reluctant businesses, change is inevitable as environmental legislation and taxation strengthens. The UK government is leading the world in tackling emissions through its Climate Change Bill and businesses can expect to bear the brunt.
The draft bill, on which consultation closes on 12 June 2007, sets out a framework for moving the UK to a low-carbon economy. It includes ambitious targets to reduce CO2 emissions by 60 per cent by 2050 under a legally binding system of five-year carbon budgets, with government being held accountable for missing these targets. These targets will increase certainty for businesses and individuals that they need to invest in low-carbon technologies.
Mechanisms and sanctions are as yet unclear, but as the first country to legally enshrine a low-carbon vision, the UK government will be pushing this bill through, eager to make the new laws work. Rather ambitiously given the snail-like pace of most Parliamentary activity, it hopes to gain royal assent for the new act in 2008 and may cut a few corners to do so.
Certain himself that the timetable will slip, John Moritz, planning and environmental partner at Cobbetts, says: "There is a political imperative. They will back off on quite a lot on the basis that they can introduce secondary legislation. They want to be shown to have got the bill through Parliament."
Many business practices are already governed by environmental laws or are subject to taxation, but the range of regulations will widen under future legislation and impact more deeply on the business community. Full details of current and future legislation are available on the government NetRegs website.
The business community is unhappy with the current approach to environmental taxation, which raises £332bn to £335bn each year for the Treasury coffers. A survey by business advisory firm Grant Thornton in March 2007 revealed that 80 per cent of corporates reject any proposal that the tax burden should rise to accommodate new green taxes. This is partly due to cynicism over where revenues are being spent. (Read more about green taxes in our Advice section on p91).
As a rule, businesses do not respond well to being told what to do by government. "Businesses are suspicious of government when it comes to the environment. If government tells them they will benefit, they are immediately suspicious. The CBI has a climate change taskforce and that's due to report in late summer 2007. That will be business saying: "Here are things you can do for free and here's stuff that will cost you, but save money.' They will be more receptive if it comes from other businesses," says CBI regional director Damian Waters.
Stories abound of companies throughout the North West that have saved thousands of pounds through energy efficiency. Business support service Environment Connect calculates that companies could be making annual savings of at least £3500 per employee by making simple changes.
As energy costs continue to rise and the long-term threat of major shortfalls in supply surfaces, the savings to be gained from turning off the lights or printing double-sided are clear. Every business can reduce its carbon emissions and save money in the process.
According to the Environment Agency, companies with high environmental standards can financially outperform other companies by up to 43 per cent. Good environmental performance leads to good business performance and bottom line benefits through not having to pay fines, a reduction in taxes or investment in more efficient technologies.
Generating your own renewable energy is an option, although the initial financial outlay can prove too big a hurdle. Manchester-based Ecocalc.com's Sunnycalc online simulator produces tailor-made reports for businesses, analysing the amount of energy that can be generated at a site so they can analyse the cost saving.
"To meet emission targets, businesses have a choice: adapt new technologies to become more energy efficient or switch to renewable energy sources," says Ecocalc.com managing director James McGovern. "Switching to renewable energy is the easiest option because businesses can carry on as normal. Whether micro-generators are viable investments usually depends upon the price the owner receives from the electricity suppliers for excess electricity generated, and to a lesser extent upon the cost savings the owners will make on their electricity bill."
When it comes to recycling, many companies will enthusiastically tell you about the number of trees they have saved this month. Office workers in the North West use an estimated 2.3 million sheets of paper each month. But not all people are recycling converts.
Jeff Wellard, UK operations manager of Prime Spanish Properties in Maghull, Liverpool, says: "In our office, beyond having our used ink cartridges collected, we could be more proactive in how we recycle our used paper. It is something that we are willing and able to do. Our concern is that the operations we have put in place to ensure we are recycling are so pedantic. I feel churlish inspecting people's bins to make sure they have ripped the windows out of envelopes before we send them to the green tub that sits outside our offices."
Meanwhile, across the city, the Liverpool office of global law firm DLA Piper is embracing change under a group-wide sustainability initiative that includes recycling, eliminating unnecessary travel and better use of resources through, for example, printing double-sided. Lawyers are notorious for consuming reams of paper, but DLA's recycling bins are bulging.
Office managing partner Philip Rooney says: "It makes business sense, but it's not an initiative focused solely on saving money. Every business has a responsibility to be greener. For some of our longer documents there could be 100 pages and you can quite easily print four pages on a single side just for a file copy and sometimes you can scan documents rather than copy them. Your energy bills will come down and your paper consumption will too."
An innovative scheme in Blackpool shows how companies can actually make money from their waste in the right circumstances and cut the costs of landfill tax. The Emprise trade waste recycling service takes waste paper, card, plastic bottles, glass and metal from clients. The cost per collection is £32 for a standard 240 litre wheelie bin, substantially cheaper than the council's traditional trade waste collection service.
David Bowker, managing director of project partner Nimtech, says: "The response is growing dramatically because people can see the benefits of sending their waste for recycling. If waste is segregated and sorted and can be collected in economical volumes then the values become apparent in waste. Cardboard is worth £330 to £340 a tonne if it's bailed and enters the market in the right form. If we can build a scheme that generates income out of the recyclers then we can reduce the cost to zero. And if companies are big enough operations they can buy a bailer themselves and we will buy the cardboard from them."
Businesses with high aspirations can embark on achieving the ISO 14001 standard or the less onerous BS 8555 for smaller businesses. CJ Services in Runcorn has just started down this route with the help of an external consultant. The company installs and maintains point of purchase and display equipment, which involves large quantities of cardboard and plastic packaging. In the interests of the environment and saving on waste disposal costs, the company is investing in recycling facilities, as well as looking at its lighting systems and its fleet of vans.
Pressure from its clients has also had an impact and CJ Services is getting ahead of the competition. "The clients we're working for such as Tesco and Orange are also pushing environmental issues, which is forcing their suppliers to comply," says Chris Langford, managing director.
"There is going to come a time when they start pushing it because for them to be compliant all their suppliers will have to be. We're hoping to see a difference in about three months. It's a good turnaround to start seeing the effects of your investment."
Dr Paul Hooper, senior lecturer in the environmental and geographical sciences department at Manchester Metropolitan University, says that the supply chain factor is gaining weight. Now is the time to act. "For a company starting to look at its carbon footprint the next phase is the carbon footprint of their purchases," he says.
"They will have to ask the suppliers these questions, which will mean more pressure on small companies. To be ahead of the game now would be beneficial to companies. And a systematic accounting of your environmental footprint also provides a very useful mechanism to address environmental problems or maximise environmental opportunities."
There are opportunities to be grasped and now is the time to act. "There is a lot of doom and gloom about climate change and we need to see it as an opportunity as well as a potential risk," says Atherton at the NWDA.
"If the North West can move towards a low-carbon economy that will have a positive impact on our competitiveness and productivity. In Europe we may become a better place to live and work if we take action now. Some people move from lack of awareness to despair in one fell swoop - action can make a difference."
Also in: June 2007
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