Cutting emissions: a new competitive frontier
Toby Pickard, Senior Sustainability Analyst at the Institute of Grocery Distribution (IGD), explores how reducing greenhouse gas emissions is more than just acting responsibly; it’s becoming a means of creating a competitive edge.
According to Defra, the food and drink sector is responsible for approximately 20% of the UK’s greenhouse gas emissions. Energy savings in the sector therefore have the potential to make a significant positive impact on total UK emissions and save companies considerable amounts of money. Defra claims that British businesses in general can save around £23 billion a year by improving the way they use energy and water, and by reducing waste.
Some of the larger companies in the food sector have led the way and showed impressive progress in reducing energy consumption.
Tesco is working to cut emissions from its own operations and through numerous initiatives within stores and distribution. It has made savings of over £200m in its energy bills.
But to reach the greenhouse gas (GHG) reduction levels that are required by the UK’s Climate Change Act, there will need to be a systemic step change.
Those companies that can start reducing their emissions now will be better placed to comply with current and future regulation; not only that, it will help them save money and meet a growing stakeholder expectation about doing the right thing from an environmental point of view.
“If we are to meet the sustainability challenges that lie ahead, it is important that companies such as Sainsbury’s invest in the future right now. We do not see this plan as a luxury, it is rather, an essential investment.”
Sainsbury’s Chief Executive Justin King
The impact of emissions on the UK
At the beginning of 2012, Defra published the UK’s first Climate Change Risk Assessment. This report looks at risks posed by climate change due to GHG emissions across UK regions and sectors from now to the end of this century. For the majority of the risks identified, the severity of impact increases with time in scenarios where emissions are not constrained.
Extreme weather and climate variability have already caused millions of pounds worth of damage to UK businesses. Many have been forced to close temporarily or permanently and the same can happen again if strategies are not developed to manage these impacts.
For example, the total economic costs of the summer 2007 UK floods are estimated at about £3.2 billion in 2007 prices. Overall, around £2.12 billion of those costs were incurred by households and businesses. Damages to agriculture, associated with inundation of over 40,000 hectares, accounted for about £50m of the costs of the floods.
Risks and opportunities
Risks and opportunities are strongly linked; many new business risks can also be seen as opportunities because there is a possibility of gaining competitive advantage through better strategic planning.
Asda’s sustainability strategy is set to deliver £800m in savings by 2020.
Successful businesses will need to ensure they are resilient to changes in climate, look at new technologies, business models and production processes, use resources and energy more efficiently and respond to changing consumer demand. The transition to a green economy will bring a broad range of advantages to an organisation.
Adnams, the brewer, invested in a new more efficient distribution centre which resulted in it using 58% less gas and 67% less electricity per square metre. The energy efficiencies save Adnams £50,000 per annum. Source: BitC
Reducing emissions will help organisations manage risks, such as those from increasing and fluctuating fossil fuel prices, and increase resilience to the impacts of climate change. It will also help them to seize the opportunities from new and emerging markets, both nationally and internationally. Furthermore, organisations can save money through increased energy and resource efficiency.
The business case for reducing emissions
Organisations will increasingly need to take sustainability issues into the boardroom and factor them into strategic business planning.
Nearly one half of CFOs see sustainability as a key driver of financial performance and two-thirds are involved in driving strategies in their organisations.
There is a need for the food and grocery industry to become more environmentally sustainable, along with more resilient to significant changes to the price of fossil fuel and other natural resources. The industry is also well placed to take advantage of the massive business opportunities presented by the global shift to a green, low-carbon, resource-efficient economy.
Energy prices are projected to rise and become more volatile.
Source: The Future of Food and Farming
There is a strong and growing case for moving an organisation onto a more environmentally sound trajectory, due to regulatory requirements, cost savings and reputational issues.
IGD has developed a free guide which is designed to help businesses understand what they can do to reduce their GHG emissions, and communicates it in a way that will provide the business case for investment in GHG reduction initiatives. It demonstrates what organisations are doing to become more sustainable and shows best practice examples of the financial savings that have been achieved. It also provides checklists and links to further information that will help you and your organisation reduce its emissions and remain competitive.
68% of shoppers would be unhappy if they found out that the food and grocery products they choose to buy have a poor environmental record.
Source: IGD, ShopperVista
The guide focuses on three key drivers, regulation, financial considerations and reputation, that organisations need to be aware of and address to help them reduce their GHG emissions and become a more environmentally sound business.
- The business case for reducing emissions: available to download
This article was originally published on the IGD website.
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