Step one – reduce your energy use
Step one is to reduce your use of energy. Whether governments make energy more expensive in order to mitigate climate change, or whether the simple laws of supply and demandforce prices upwards, one thing is certain: Energy will continue to become a lot more expensive.
Many large organisations have already taken this first step. Food retailer Tesco, for example, halved the energy use in its stores between 2000 and 2008. It wasn’t that difficult - more energy efficient fridges, ovens, and air conditioning, replacing incandescent light bulbs with LEDs and compact fluorescents, and turning off lights and equipment when not needed.
Telecoms giant BT found an even better way of reducing the energy bills in its offices – close them altogether and encourage staff to work from home. BT, with 14,000 home workers in a UK workforce of some 90,000 estimate that a home based worker has a carbon footprint half that of an office based worker – partly because houses are cheaper to heat and light than big offices, and partly because travel is drastically reduced.
In short, reducing your energy costs is easy to do and saves you money. But on its own, step one is not enough to ensure your success in the low carbon economy.
Step two – reduce your total resource intensity
Step two is to reduce the total resource intensity of your existing products and services – all the way down the supply chain. Walkers Crisps worked with the Carbon Trust to identify the carbon footprint of a packet of crisps. It takes energy to grow potatoes, make them into crisps, put them into packages, transport them to the shops, and dispose of the packaging afterwards. Walkers reckoned that a standard packet of crisps produces 80g of C02.
So did they
Why would Walkers want to do that? Two reasons. Firstly, the bigger the carbon footprint, the more energy used and the more expensive it becomes to make those crisps – and remember, that in the low carbon economy, energy is going to become much more expensive. By identifying the carbon footprint of each stage of the process, Walkers was able to identify opportunities for cost savings.
For example, in the crisp business, manufacturers traditionally pay farmers so much per tonne of potatoes. Farmers tend to store potatoes in slightly damp conditions, so that they absorb a little moisture and therefore earn the farmer more per spud. But damp potatoes are more expensive to turn into crisps, because you have to dry them before you can fry them. Having analysed the potato’s life cycle from tuber to crisp, Walkers agreed to pay the farmers slightly more if they promised to keep the potatoes in slightly drier conditions. The farmers are happier because they’ve increased their profit margins, and Walkers are happier because they’ve cut their manufacturing costs.
There’s a second compelling reason for Walkers to identify the carbon footprint of their crisps – increasingly, their customers will demand it. Walkers’ biggest customer in the UK is Tesco, and Tesco would like to label the carbon footprint of every one of its 50,000 products. In the highly competitive food retail business the big retailers have huge power, and suppliers generally give them what they want.
Because the UK is comparatively well endowed with potatoes, when Walkers wanted to reduce the total resource intensity of its supply chain it focused on carbon footprint and energy use. But in other industries, other resources may be the focus of your attention. Raw materials, water and even land are critical resources for many businesses – critical resources that will become scarcer and more expensive over the coming years.
Step three – develop new products and services
Step three to success in the low carbon economy is the most challenging, but is the one that leads to the most rewards. It is to identify new products and services for the low carbon economy. What might these new products and services be? Some are very obvious, like renewable energy and low carbon transport, which is why Siemens is investing heavily in wind turbines, and Nissan in electric cars. But great opportunities are to be found in less obvious areas.
Illuminating
Harvard Engineering is small company based in Leeds, in the North of England. It makes electrical components for fluorescent lights. Six year ago it began to develop a new product – a small electrical device with some ingenious software. When you put this device into a street light it enables you to vary the brightness of the light throughout the night. Until recently, most towns and cities have their street lighting on a simple timer – when it gets dark the lights come on, and they blaze away all night until they flick off again in the morning. But Kirklees Council, have installed Harvard Engineering’s little widget into their street lights so they can control the level of lighting. The dimming is subtle – few people notice that some lights are dimmer at 3am than they are at 7pm or 7 am on a winter’s day, but it saves Kirklees £282,000 a year in electricity costs.
Innovation has always been a great route to success for any business. With all the changes that the low carbon economy will bring, it remains the strategy of choice for those who wish
to build enduringly prosperous businesses.