INTERVIEW CARBON TRUST: Profit of Doom

It’s becoming increasingly difficult for companies to shirk responsibilty for climate change, but, according to Dr Garry Felgate of The Carbon Trust, you can save the planet and save money at the same time.

Dr Garry Felgate doesn’t wear sandals. Neither does he sport a beard, or dress in tie-dyed hemp or, it seems safe to assume, hug trees on his days off. He is, however, deeply concerned by the issue of climate change. And it is his role, as a director of The Carbon Trust, to make businesses aware of both the threats and opportunities that climate change presents. There can be no denying that reducing our current carbon dioxide output would have a profound long-term impact on the world that our children inherit. But, as Felgate points out, in the short term it could have a similarly dramatic impact on your company’s bottom line.

The Carbon Trust was established five years ago to help businesses cope with the Climate Change Levy, the legislation that was implemented to help the UK meet its Kyoto Protocol obligations. The Trust is a limited company financed by government with a remit to advise organisations on the steps necessary to reduce emissions in a financially viable way. The advice it dispenses follows a relatively simple and indisputable logic: “The best way to address climate change is to reduce carbon dioxide emissions. The best way to achieve that goal is to use less energy, and by doing that you save money.” It is, by Felgate’s own admission, “not exactly rocket science … but this is how the planet is saved”.

Close to 30% of all the energy used by UK companies is the result of wastage and inefficiency, and Felgate’s top priority is to drastically reduce this. Last year, The Carbon Trust identified some 3.9 million tons of carbon dioxide generated unnecessarily by UK business, at a cost of over £400m. “That’s four hundred million reasons why business should be concerned about climate change.”

When The Carbon Trust was established the subject of climate change was very much the preserve of the woolly environmentalists. In the intervening five years it has been embraced by the serious scientific community – it was formerly a rather peripheral issue, but has gradually been acknowledged by scientists as the most pressing issue on the agenda. And in the last few months, spurred along by the publication of the Stern Review Report with its stark warning of the economic apocalypse that will result from inaction, it has become an issue that industry simply cannot ignore.

Size matters
According to Felgate, most large organisations have had an eye on the issue of cutting emissions for some time, and the recent upsurge in awareness has had a marked effect on the interest shown by big business. The Carbon Trust now advises almost a third of FTSE 100 companies, and he reports that in the two-week period prior to speaking to the drinks business he had been contacted by a further five leading corporations seeking advice on how to reduce their emissions and increase efficiency. The uptake from smaller organisations, however, has been rather slower.

Naturally, the pressures on time and resources that exist in small- and medium-sized enterprises (SMEs) make it all the more difficult to focus on seemingly abstract issues such as climate change. But the financial savings that can be made and the resultant boost to the business mean that this is simply not a valid excuse. “At the smaller end of the scale people are so busy that they probably haven’t done the obvious and easy things; when it comes to SMEs there’s a lot of low-hanging fruit.” Recognising the simple and manageable steps that can be taken, dispensing cost-effective advice and offering the support needed to implement change are central to The Carbon Trust’s activities.

While the specific advice required to get one’s house in order differs depending on the nature of the business, the most basic (and efficient) measures apply to virtually every business. The most important change is almost embarrassingly obvious – switching off machines that are not being used. If the average office turned off all appliances between Christmas Eve and January 2, they would knock 3% off the annual energy bill. Yet, around the country, computers remain on standby and water coolers continue to purr away in the corners of empty offices, wasting both energy and money.

In order to reduce wastage, it’s important to first understand how much energy is being used, and how. Again, an incredibly simple concept but, says Felgate, “You can find some real surprises the first time you do it.” By checking the meters and verifying energy usage at certain times of day it soon becomes obvious where the most effective savings can be made. There is no need for the dedicated environmental officer that larger organisations have the luxury of employing as the Trust can advise on the basic measures that can be taken to afford the most significant benefits.

Once changes have been made within the business, The Carbon Trust advises companies to look at the supply chain to identify other areas where energy is expended unnecessarily. This can be particularly notable in industries that require high volumes of raw materials and high transportation costs. When the entire chain is examined holistically – from producing the raw materials to the moment of consumption – Felgate suggests that there are frequently “contractual” inefficiencies that can easily be removed.

Investing in change
Ageing or damaged equipment results in huge amounts of carbon dioxide being emitted needlessly. Replacing such items can incur major one-off expense, and often this is simply not possible for SMEs. But here, too, The Carbon Trust is able to help out. The organisation has drawn up a list of approved products. “We understand that the resource is probably not there to spend time researching the various products on the market,” says Felgate. “So we have drawn up a list to reduce the barriers and make it easier to choose the right thing.”

Once a company has identified what energy-efficient goods it requires, there is a substantial fund available from which companies may borrow £5,000-100,000 in order to meet the costs – though Felgate is at pains to point out that this represents an interest-free loan, not a grant. “Using the best technology pays for itself,” he explains. “More efficient equipment means your fuel bills will go down, so it makes good business sense. We’re here to help out companies who have difficulty getting hold of the capital.” Loans are agreed only when it can be demonstrated that the cost will be saved in terms of reduced energy bills within a five-year period. The number of loans that have been made indicates quite what dramatic savings can be made.

The Trust is also responsible for administering the energy efficient Enhanced Capital Allowance scheme. Simplification of the process has been the key here, “When we first looked at the loan application form, you’d have needed to be an accountant to fill the thing in.” The form is now far more manageable, loan decisions are made rapidly and the loan is paid upon invoice in a concerted effort to “unblock the process”.

Image conscious
With energy costs steadily rising, there’s a strong incentive for businesses to reduce consumption in order to cut expenditure. But Felgate points out that this is by no means the only reason why cutting emissions must be a priority for business. Climate change has become an increasingly important factor in society’s collective consciousness. While it has been on the radar for many years the intensity of interest is growing at a rapid rate and changes to the weather are getting harder to ignore. Al Gore’s An Inconvenient Truth was a massive box office success; David Attenborough, “the most trusted man in Britain”, now cites global warming frequently in his popular natural history programmes. These factors have all played an important role, but, according to Felgate, “I knew the issue had finally become mainstream when it was the subject of Radio 4’s Thought for the Day.”

Whatever the reason for this upsurge in interest, it is clear that the population at large is increasingly bothered by the subject, and this represents both a threat and an opportunity for business. “Imagine the opportunity that presents itself if a company can say to the consumer ‘We do more to address the issue of climate change than our competitors do’.” Felgate cites the example of genetically modified food; the subject became a major concern for worried consumers and, as a result, retailers were forced to avoid stocking GM products. The campaign against fast food that forced McDonald’s to drastically rethink its offering is another clear example of the power of the consumer to force change.

At the moment there is no way to accurately determine the “carbon footprint” of a product, but you can be sure that a concerted effort is being made to develop a system that will make it possible to quantify how many grams of carbon dioxide have been emitted to get that product into the consumer’s hand. Felgate is certain that this will be possible before long, and he points to the benefits to the image of a brand that is seen to be proactive, and the enormous cost to the reputation of a brand that is wasteful. “It may be anathema to many people in the drinks trade, but in the consumer’s mind there is frankly not a huge amount of difference between Product A and Product B. By taking care in the manufacturing and distribution process to create a lower carbon footprint – could that be a major differentiator?”

Off-setting has become one of the key buzzwords surrounding the climate-change debate. Felgate explains that The Carbon Trust is in favour of companies pursuing this route, but is at pains to point out that it is a secondary step – the priority must be to cut emissions first. It is also important to carefully scrutinise the off-setting scheme to which you contribute to ensure that it is a reputable project and that it makes a material difference. He agrees that if businesses decide to off-set the difference after they have already implemented energy-saving policies this is clearly a positive, but adds, “I can’t stress enough, nothing is a substitute for saving your own energy use in the first place, off-sets don’t excuse wastage.”

Addressing the issue of climate change finally seems to be receiving the attention it deserves in the UK, but there is clearly an uphill struggle ahead – and the challenge can appear insurmountable when you consider the rate of industrial growth in the developing world. The quantity of carbon dioxide that is being emitted to fuel the growth of China and India in particular is a major cause for concern, but Felgate is adamant that the UK can play a crucial role in changing this. “We are an enormously influential country, and the best way to influence others is by example,” he argues.

Again, he repeats his mantra that this makes not just environmental, but also business sense. “The developing nations will need the best low-carbon technology available, and that’s being developed in our universities. We’ll bring these products to market; it’s a real opportunity for UK Plc. The industrial revolution started in the UK, we became incredibly wealthy by taking a leadership role in industrialising the world. I think we can continue to take this leadership role with climate change.” And, crucially for Felgate, we can turn a profit doing it. 

Dr Garry Felgate’s CV

Felgate is an engineer by training. He earned a PhD in building engineering with research focused on energy efficiency and renewable technologies. His professional background has included consulting work with a range of major companies, including Yorkshire Energy, Siemens, Daewoo Motor and Ofgem, advising them on energy issues. A respected leading expert on the subject of reducing energy usage, Felgate is a fellow of the Energy Institute, a member of the Chartered Institution of Building Services Engineers Carbon Taskforce, a member of the British Energy Efficiency Federation and the Greater London Authority’s London Energy Partnership.

He joined The Carbon Trust shortly after it was founded in 2001 as director of delivery and external relations. His primary responsibilities include overseeing the Trust’s Carbon Management programme for large organisations, managing regional delivery and building and maintaining relationships with the investment community, industry trade unions and government. “I joined The Carbon Trust because I believe that climate change is the biggest challenge that we face and I want to be part of the solution,” he says. “I’m passionate about the subject, but my background and logic is entirely pragmatic. I understand the main drivers of business, and my job is to underline the link between climate change and profitability.”

© db January 2007

To find out how The Carbon Trust can help your business, call 0800 085 2005 or log on to www.carbontrust.co.uk