Board room engagement on carbon management will be critical if the UK government’s CRC Energy Efficiency Scheme (CRC) is to be effective. CRC requires firms to nominate a legal company director to sign the carbon emissions compliance reports, introduces fines for non-compliance and includes a public “league table” that ranks performance during each compliance year.
To help organisation improve their chances of getting a high spot in the UK government’s carbon reduction league table, Verdantix interviewed 202 carbon management experts in some of the largest private and public sector organisations covered by the CRC in a study commissioned by CA.
These are the questions and the results.
1) What is the quality of our carbon compliance data?
Executives need to ensure that the quality of energy and carbon data reported under the CRC meets the requirements of Environment Agency audits. This is a level of scrutiny which has rarely been applied to energy consumption data in the past. Eighty-one per cent of the 202 carbon experts we spoke with believe that firms achieving leadership in the CRC will avoid CRC penalties and fines from non-compliance.
2) What CO2 reduction goal will secure leadership in Year 2?
The CRC ratchets up the pressure on private and public sector organisations to communicate and deliver on a carbon reduction target. By the end of 2010, 83% of the 202 experts in the survey stated that their organisations will have sign-off from the CEO for a multi-year carbon reduction goal. Even though reducing carbon emissions under the CRC is voluntary, 67% of the survey respondents “agree” or “strongly agree” with the statement that “the CRC scheme will require my organisation to reduce its CO₂ emissions between 2009 and 2011″.
3) What is the accuracy and completeness of our energy spend data?
Few firms have complete, accurate, timely and granular data on energy spend for the entire organisation’s operations. 66% of the 202 energy and carbon experts interviewed believe that CRC leaders will achieve significant energy efficiency cost savings. The regulation requires the timely consolidation of non-estimated energy consumption data.
4) When did or will we achieve certification with the Carbon Trust Standard?
10% of organisations have set an objective to lead the UK on CRC performance and 68% expect they will have achieved the Carbon Trust Standard by the end of 2010. This achievement will provide organisations with a 100% score on 50% of the Early Action Metrics in Year 1 of the CRC.
5) What is our energy metering strategy?
The arcane world of electricity metering systems is not a subject for executive discussion, but what is important for the CEO is his or her firm’s strategy to achieve 100% coverage of CRC emissions with half-hourly meters. By doing so in the first year of the CRC scheme, which runs from April 1, 2010 to March 31, 2011, it will be possible for executives to bask in the glory of top marks in the CRC League Table with very positive benefits for the brand.
6) How will you forecast future CO₂ emissions accurately?
The CRC decision-makers in our survey believe the ability to forecast CO₂ emissions in 2010 is an essential leadership trait. Thirty-eight per cent of the respondents stated that creating reliable forecasts for future emissions is “very important” for leading carbon management and a further 52% stated that it is “important”. Forecasting CO₂ emissions is an important skill to develop since organisations need to buy CRC allowances in April 2011 to cover the next year’s expected emissions. Without a forecast the CFO will struggle to budget correctly.
7) What is the cost of CRC compliance including energy data collection?
Forty per cent of the respondents believe that 10 or more individuals will be involved in energy data collection. Eighty per cent of the organisations spoken with have set aside a budget for energy and carbon data collection, 73% have a budget for smart meters, 63% have an energy efficiency Capex budget and 54% have budgeted for carbon management software. Seventy-seven per cent of the respondents believe that it is “important” or “very important” to provide a ring-fenced budget for energy and carbon efficiency.
8) Have carbon costs been included in financial planning for 2011?
CFOs need to engage with carbon management and the CRC in several ways. Among the 202 experts spoken with, 82% think that carbon costs need to be integrated into financial data to achieve carbon leadership in 2010. On a separate point, 65% of the organisations surveyed have already set aside budget to buy CRC allowances in April 2011. What’s more 29% of the respondents believe the CFO should sign off the CRC compliance reports.
9) Are you relying on spreadsheets to manage CRC compliance data?
Today, 79% of the organisations in the survey rely on Microsoft Excel to manage energy and carbon data. By contrast, 56% believe that top-performing CRC organisations will deploy energy management software and 50% consider top performers will use carbon management software. By the end of 2010, 78% will have launched an IT project to consolidate energy and carbon data and 87% believe a centralised database for energy and carbon data is “important” or “very important” for leadership on carbon management.
10) What quantified financial benefits will our CRC strategy deliver?
The 202 carbon management experts interviewed make a strong case for the financial benefits of CRC leadership. Sixty-six per cent “agree” or “strongly agree” with the idea that CRC leadership will help their organisation to achieve significant energy efficiency cost savings, 64% tout the benefits of a reduced impact on cash flow from the purchase of CRC allowances and 57% agree that CRC leadership will drive incremental sales.
“For the first time, the CRC Energy Efficiency Scheme requires participating organisations to make a legal company director accountable for carbon emissions data. Almost the same proportion of those interviewed thought the CFO should be accountable (29%) as the CEO (30%)” commented David Metcalfe, Verdantix director. “Why is the CFO moving to centre stage? Our interviewees talked about budgets for new carbon management initiatives, the need to integrate carbon costs into financial data and the cash flow implications of the CRC. Verdantix expects CFOs to come under increasing pressure to tackle CRC compliance.”
You can read more about the survey here