Energy efficiency is the quick route to sustained savings and decarbonisation

UK businesses are missing out on big benefits with millions of companies of all shapes and sizes yet to tackle energy efficiency in the workplace.

Two reports underline this puzzling picture and both emphasise that building a sustainable energy efficiency strategy is the big prize within easy reach of every company.

The non-profit Climate Group analysis says that energy efficiency is the low hanging fruit for UK business and smart energy measures often come with rapid rates of return on investment and significant financial rewards. The EP100 Progress and Insights Report 2020 found that 21 members of the initiative, including H&M, Hilton and UltraTech Cement, had collectively saved £93 million.

The group advises that any effective decarbonisation strategy must embrace smart energy use as its foundation simply because there are not enough resources for everyone to just switch to renewables or invest in carbon capture technologies.

Energy transition

This is echoed by global risk management and energy research company DNV in its Energy Transition Outlook, now in its fifth year, which provides an independent forecast of developments in the global energy system, up to 2050.

Business energy efficiency is the biggest opportunity for tackling climate change, DNV says, so “securing significant improvement” in this area is the most significant lever for the transition.

The International Energy Agency (IEA) reports that energy efficiency improvements can deliver over 40% of the reduction in energy-related greenhouse gas emissions needed over the next two decades to meet climate goals. But progress on energy efficiency has continued to slow due to the economic impacts of Covid-19.

Allied to decarbonisation, there are significant financial benefits from reducing energy usage. For example, government data shows that a company with a 5% profit margin over 3 years can make a £500-a-year saving from energy efficiency, which makes the same profit as £30,000 of extra sales.

SME easy wins

For the 6.0 million SMEs in the UK – over 99% of all businesses – this is an easy win. They account for 47% of commercial energy use and the government’s Building Energy Efficiency Survey shows that a 40% energy reduction is achievable in this sector, which has huge potential to contribute to the UK’s net zero goals.

As well as cost savings, greater energy efficiency bring other benefits for SMEs. The IEA says this can improve competitiveness, product quality, materials efficiency, staff commitment and relations with the wider community, and can enhance a company’s public profile. Studies indicate that the value of the productivity and operational benefits derived can be up to 2.5 times the value of the energy savings.

The IEA emphasises that energy costs are increasingly restricting SME profitability. SMEs are also more sensitive to energy supply disruptions as they may not have back-up systems or on-site generation. Greater energy efficiency can reduce these risks and enable access to lower insurance premiums and lower finance rates.

Across the broader economy, government analysis shows that energy efficiencies could save businesses up to £6 billion in cost savings annually from 2030 and with a carbon reduction contribution of up to 22MtCO2e towards the fifth carbon budget.

Improving energy efficiency

The Clean Growth Strategy (CGS) sets out a commitment to expanding national income while cutting greenhouse gas emissions, providing an ambitious framework for decarbonisation during this decade, while ensuring a secure and affordable supply of energy for businesses. With this in mind, the aim is to support businesses to improve their energy efficiency by at least 20% by 2030.

So, what’s stopping businesses, particularly SMEs, from seizing this great opportunity? According  to the IEA, perception and focus is important, along with the recognition that energy costs may form a smaller part of operating costs.

Most crucial is the lack of expertise, knowledge and concerns over expenditure. Millions of companies need the confidence to make the move and require a roadmap to plot their course to smart energy use. They need to know details of their energy supply, the best supplier contracts, comprehensive data on energy usage and carbon emissions, and options for financial support.

It’s clear from the IEA report that the burdens and overheads of managing multiple suppliers and solutions providers paralyse many companies. A single trusted partner to manage these many processes is what is needed – and that’s where we come in. SaveMoneyCutCarbon provides the end-to-end solution, from survey and detailed data analysis on energy usage and carbon footprint, to energy-efficiency options, installation and project management, financial choices, and full reporting.