Category Archives: environmental

Business need for reduced costs drives Cleantech demand

By David Bicknell

New research from audit specialist Grant Thornton has highlighted the change drivers behind the growing demand for cleantech products to reduce business costs.

Grant Thornton’s third annual International Business Report (IBR) report on the global cleantech industry shows that in general the adoption of cleantech products and practices is motivated by the commercial need to reduce costs and increase profits. It is no longer about being ‘green’.

For example, despite short-term fluctuations, the trend for key commodity prices continues upwards for example, Brent Crude oil recently rose back above US$120 a barrel. The outlook for nuclear energy is unclear following the Fukushima disaster – Germany, for example, has opted for the renewables route – and partly due to this uncertainty, cleantech is emerging as a suitable alternative source of energy or a means of reducing  consumption of expensive resources.

Over half of the business practitioners surveyed for the IBR who choose cleantech options do so to reduce their costs (52%); with 45% making the choice as a way to increase profitability. Corporate social responsibility (CSR) requirements and environmental concerns also remain important, but are not the main reason for adoption.

This increasing maturity of the sector is filtering through to expectations of cleantech business for the year ahead creating a bullish outlook for 2012.

Compared with companies in other sectors, the Grant Thornton report suggests that privately held businesses in the cleantech sector are now among the most confident enterprises in the world when it comes to future prosperity, far outpacing the optimism found in most global industries – and with good reason.

64% of cleantech businesses interviewed expect revenue to increase this year, up from 54% the previous year. 64% of respondents also expect higher profitability this year compared to 42% in 2011.  Cleantech providers currently see the greatest demand from the developed economies of Europe (51%), and US and Canada (39%).

Nathan Goode, head of energy, environment and sustainability at Grant Thornton UK said: “Interest in cleantech is no longer just about environmental concerns, it’s about whether it offers solutions that can boost the financial performance of companies. What we’re seeing is the potential for these technologies to compete with traditional forms of energy and the expectation that over time, they should.

“Governmental support remains key in many sectors and jurisdictions for cleantech to be successful, and fluctuations in this support are causing short term volatility for the cleantech arena. The mood of optimism in the sector appears to be driven by fundamental trends and reflected in broader indicators such as oil prices.

“Cleantech is a sector on the road to commercialisation but it is not necessarily all the way there yet. We’re at a stage now where the value proposition for cleantech is to save money and consequently demand for cleantech is set to increase meaning we could be on the cusp of something very big indeed.”

Cleantech and IT

The Grant Thornton report demonstrates how the cleantech sector is in transition. There are more companies involved in R&D (42%) and IT (29%) than in previous years (31% and 22% respectively).

Goode said: “Judging by this analysis, cleantech appears to have parallels with the biotech industry in that R&D is being used to explore new concepts and applications for existing technologies. As a result, R&D and IT is receiving greater focus as companies exploit advances in areas such as storage and smart grid technologies. In addition, the sector is adopting a broader base on which to apply its learning, putting greater focus on areas such as waste and water.”

In contrast, manufacturing activity has become relatively more subdued. The number of businesses citing involvement in manufacturing of energy efficient products has decreased over the past year from 26% in the 2012 survey to 19% in 2011, although manufacturing of products for cleantech energy generation has increased marginally to 17%, up from 14% the previous year.

There could be a number of reasons for this, but the Grant Thornton report stresses that the issue of capital constraint represents a big challenge for the sector and as a result, governments.

Goode added: “Manufacturing items such as wind turbines and waste processing plants is an incredibly capital intensive business.  However, what we’re seeing is a slowing in the pace of growth as a result of constraints on raising capital.  This continues to be an issue, especially in European economies where credit is constrained.

“Governments must be mindful of acting as a brake on investment, as it will quickly become a barrier to achieving carbon reduction targets and the desire to supply businesses and households with alternative supplies of energy – and at a time when it’s really starting to compete.”

Government to invest £1bn in carbon capture and storage technology

By David Bicknell

The government is to commit more than £1bn of public funds to develop carbon capture and storage (CCS) technology with the prospect of generating an industry with 100,000 jobs.

It follows  the publication of plans yesterday to create a government-sponsored competition to design the first workable demonstration project.

CCS uses technology to capture carbon dioxide from power plants and store it permanently underground. Such a move, it is said, will help meet climate change targets.

The government has also published the first UK CCS Roadmap which it says sets out the steps that the Government is taking to develop a new world-leading CCS industry in the 2020s. The Roadmap includes:

  • The competition, the ‘CCS Commercialisation Programme’, to drive down costs by supporting practical experience in the design, construction and operation of commercial scale CCS with £1bn capital funding, and additional support, subject to affordability, through low carbon Contracts for Difference;
  • £125m funding for Research and Development, including a new £13m UK CCS Research Centre;
  • Planned long term Contracts for Difference through Electricity Market Reforms to drive investment in commercial scale CCS in the 2020s and beyond;
  • Commitments to working with industry to address other important areas including developing skills and the supply chain, storage and assisting the development of CCS infrastructure

Here is the Guardian’s view on the story

UK CCS Commercialisation Programmme

Osborne’s Budget signals possible end of Carbon Reduction Commitment energy scheme

By David Bicknell

George Osborne’s Budget earlier today has raised significant question marks over the future of the Carbon Reduction Commitment (CRC) energy efficiency scheme.

Osborne said this, “Environmentally sustainable has to be fiscally sustainable too. The Carbon Reduction Commitment was established by the previous Government. It is cumbersome, bureaucratic and imposes unnecessary cost on business. So we will seek major savings in the administrative cost of the Commitment for business. If those cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax.”

It will be interesting to know how those ‘major savings’ in the administrative cost might be achieved. That sounds like a softening up for the end of CRC to me.

Related Links

The Guardian: Green ‘stealth tax’ attacked by business groups

Data centre temperatures go up to cut costs and reduce carbon footprints

It’s only a few weeks since the United Nations summit on climate change in Durban at the back end of last year and  I came across this story.

The piece argues that IT managers can save money and reduce their carbon footprint by increasing the temperature in their data centres.

Intel, for example, is reportedly advising its customers to increase the temperature in data centres, arguing that companies can actually save four percent in energy costs for every one degree in centigrade they turn up the heat.

That is because most data centres in Europe run at a temperature of between 19 and 21 degrees centigrade to avoid creating hot spots that might cause equipment to malfunction. The cooling equipment required to maintain that temperature costs around $27 billion a year to run and consumes 1.5 percent of total world power, according to Intel.

Many companies worldwide are now looking at increasing the temperature of their data centres up to 27ºC (80.6ºF), in a move that could help them save costs and reduce their carbon footprint. Facebook has saved over $200,000 a year in energy bills by reprogramming its cooling to run at 81ºF. Microsoft too has saved $250,000 a year by increasing the temperature by just 2-4ºC.

Interesting story – I think there is more to come on this as the year develops though I’d venture to suggest that rightly or wrongly, in today’s austere times, the driver is more likely to be saving costs than reducing the carbon footprint i.e. talk green, mean lean.

IT and Climate Change: out of sight, but not out of mind?

By David Bicknell

There isn’t a much bigger example of fundamental change than climate change. And there aren’t any bigger examples of breaking down the barriers to change than trying to get some meaningful action to cut greenhouse gas emissions. At a time of economic autumn, there is a risk of climate change and sustainability heading down the business/government ‘must-do’ pecking order.

So it’s good that the United Nations conference on Climate Change has come round this week to concentrate minds. This year, it’s in South Africa, in Durban.

I liked this blog written by Colin Curtis, director of sustainability at Dimemsion Data, who sums up some of the issues and discusses how the company’s own IT department has performed in reducing the organisation’s carbon footprint, notably through virtualisation.

I suspect with the travails of the Euro, we may hear less about the UN conference this week than we did a couple of years ago in Copenhagen. But out of sight needn’t mean out of mind.

Why the public sector must stop buying printers

In the first in a series of Campaign4Change guest insights, Tracey Rawling Church, Director of Brand and Reputation at Kyocera Mita UK explains what steps the public sector needs to take to transform its procurement of printers and make its ITTs more cost efficient and low-carbon friendly

To cut its costs and carbon emissions, the public sector should stop buying printers. That may seem a ridiculous statement, coming from an imaging company executive, but actually there’s a serious point here. Most ITTs are written around a notional product – calling for a certain number of machines of a certain specification. And the tender process is quite rigid, so companies invited to tender are forced to propose a solution that fits the criteria in the ITT.

But in many organisations, the number of devices has crept up over time and device to user ratios are unnecessarily high – so replacing machines on a one-for-one basis only perpetuates a system that has become bloated and inefficient.

Sometimes the decision is made to consolidate devices, replacing desktop printers with shared multifunctional devices and an ITT is written on that basis, but to achieve real efficiencies that could reduce costs by typically 30% and carbon by as much as half, a detailed print audit should be undertaken to determine precisely what hardware is needed at which locations to support business processes.

However, even this approach misses the opportunity to obtain a solution that is properly optimised not just at the point of implementation, but into the future.

In the private sector, there is a growing trend towards managed document services, a holistic approach that encompasses every aspect of the printing and imaging needs of an organisation.

A managed document service project begins with a detailed audit of both the machines currently in place and the document flows through and within the organisation. Then a solution is designed that aims to reduce reliance on hard copy by combining document management software with a fleet of machines that have exactly the right functionality to support the document flow.

In most cases, this results in a much smaller number of devices, usually with more extensive functionality than those they replace. A bespoke service contract is crafted that includes remote monitoring of device states, service support to agreed service levels and detailed reporting of device use that can be segmented and analysed in a myriad of ways. And using the business intelligence gained from the reporting suite, the service can be continuously optimised to ensure it remains efficient, accommodating changes in the organisation over time.

For example, the managed document solution provided for insurance giant RSA has reduced paper consumption by 21% in just one year – despite the fact that their product depends on having a printed certificate. And energy consumed by imaging devices has been reduced by 55% with resulting savings in both electricity costs and CRC levies.

As you can imagine, this type of service doesn’t fit easily into a device-centric ITT. So vendors who know they could save cash and carbon through applying a managed document service are forced to respond with a ’round peg, square hole’ solution that is less than ideal, simply because the tender process focuses on products rather than outcomes.

Concerns about carbon emissions and resource scarcity are driving the evolution of innovative business models that overturn conventional norms and challenge the status quo. But unless procurement processes keep pace with these changes, the benefits of this fresh thinking won’t be realised.

To really drive through change, let’s have ITTs written by commercial managers and procurement departments that focus on objectives and targets rather than feeds and speeds. Throw down a challenge to reduce paper consumption by x, cut energy use by y% and drive down costs by z and see what the industry comes up with. I guarantee it will deliver solutions that are more resource efficient, productive and economical.


MDS in the public sector
RSA case study
For more information on the full results of the latest independent research into printing attitudes and behaviour,  email Tracey Rawling Church:

Letter to No 10 opens up energy prices and climate change policy discussion

By David Bicknell

It seems as if with the party conference season not far off, discussions are taking place around the edge of government over energy policy, which may have some implications down the line as far as business energy costs and climate change legislation are concerned.

It follows a leak to the Daily Telegraph of a note to David Cameron  discussing the impact of energy and climate change policies on energy prices, Although the focus of the letter is on consumer energy prices, it is possible that a wider review may also need to examine the effect of government policies in the form of climate change legislation on businesses.

The letter suggests that four policies stand out as having the most significant impact on household energy bills: carbon pricing (both the carbon price floor and the EU emissions trading scheme), the new Energy Company Obligation, the Electricity Market Reform package and the Renewables Obligation.

The letter goes on to ask whether policies can be opened up, particularly support for relatively high-cost technologies such as offshore wind, in a way that minimises cost and disruption to investment.

It’s possible that, as the Guardian suggests, the leaked letter is part of a sabre-rattling exercise ahead of the conference season. On the other hand, with consumers strapped for cash, energy prices on an ever upwards spiral, and businesses struggling in a stagnant economy, a healthy debate over energy policy is  perhaps not a bad idea, though, as the Guardian headline puts it, that risks pitting fossil fuels against renewable energy.

There is some more background to the story here:

Why corporate sustainability strategy is now part of the CFO’s role

By David Bicknell

The organisational politics around sustainability are an ongoing issue. So far the need for a  sustainability strategy has touched those responsible for corporate social responsibility (CSR),  marketing (because of the brand and reputation implications of Carbon Reduction Commitment (CRC) league tables) and IT and Facilities who are having to manage and measure energy usage.

Now, an Ernst & Young report recommends, it is the CFO’s turn to pick up the baton.  As this piece suggests, sustainability trends are shifting the role of the CFO in three key areas:

  • Investor relations:  “Shareholders are speaking much louder and much more stridently than they did just a few years ago.  During the 2011 proxy season, 40 percent of shareholder resolutions were related to ESG issues. And over a quarter of ESG-related resolutions gained a 30 percent “Yes” vote, which Ernst & Young describes as a critical threshold (other observers say anywhere from a 10 to 20 percent vote can motivate companies to rethink their policies).  Mutual fund companies are paying more attention to sustainability related issues, and the rating companies (which have received, ahem, a fair bit of scrutiny lately) are directing more focus towards ESG matters as well.  All this leads to a shift in the duties of companies’ investors relations staffs; and CFOs, according to Ernst & Young, will lend more than a few hands with the demands placed on IR departments.
  • External reporting:  More than 3000 multinationals issue sustainability (or CSR or ESG) reports, and many of these companies now provide more than static or trite glossy PDFs.  Companies including UPS, Timberland, and Microsoft are raising the bar in offering frankness while encouraging increased stakeholder engagement.  To that end, more companies are having their sustainability reporting audited by third parties (such as the Carbon Disclosure Project for carbon emissions performance).  And that experience with third party performance falls into the CFO’s lap because they know how to balance the challenges and opportunities that arise from third-party verification.
  • Operational controllership and financial risk management:  Early last year, the Securities and Exchange Commission issued guidelines to companies on how to disclose risks possibly related to climate change.  Carbon data, and more frequently, water data, is becoming financial data because of these resources increasing price.  What was once tangential to the costs of running businesses has and will be central to the financial risks that come when running a company.  Whether evaluating the costs of large capital projects or ascertaining the reliability of sustainability data, CFOs and the departments they head will be careful when ensuring that all this data is accurate.”

Admittedly, currently this is probably a more US-focused development. But then it’s probably only a matter of time before CFOs here have to start considering the sustainability implications of their job, if they are not doing so already.

Here are five immediate actions CFOs can take to enhance corporate value through sustainability:

• Actively pursue a sustainability and reporting program.
• Ensure that those responsible for sustainability matters do not operate in isolation from the rest of the enterprise — especially the finance function.
• Enhance dialogue with shareholders and improve disclosure in key areas, particularly those related to social and environmental issues.
• Ensure that directors’ skills are relevant to the chief areas of stakeholder concern, including risk management tied to social and environmental matters.
• Consider using nontraditional performance metrics, including those related to environmental/sustainability issues.

Ernst & Young report: How Sustainability has Expanded the CFO’s Role