Just four years ago, the price of oil was below $50 a barrel.
Now Brent crude is typically selling above $100 a barrel. While
there have been some short-lived falls in prices recently, the
sudden rebound to over $100 shows that businesses cannot rely on
any long-term dips in prices.
Indeed, the International
Energy Agency (IEA) has warned that a continuation of this
prolonged price inflation, combined with systemic volatility, could
put the fragile global economy at risk - and it puts increasing
pressure on businesses to reduce their dependency on the 'the black
There is no doubt that businesses need to find ways to insulate
themselves against the unstable energy market. But to do this
successfully, they will not only need to invest in alternative
fuels and technology, they will have to fundamentally alter how
they view energy efficiency.
For many years the Carbon Trust has helped businesses identify
where to cut their energy use and therefore their costs. The
benefits of this cannot be underestimated. Often, the best gains
come from simple measures, such as better insulation, cutting waste
and turning down thermostats. When rolled out across a large
property portfolio, these small changes have a significant
But abandoning wasteful practices must be the bare minimum
undertaken. Sustainability needs to go beyond corporate
responsibility - it should be at the heart of corporate strategy.
Businesses' real priority should lie in understanding how they can
catalyse their entire organisation to change, potentially redefining
their business models and taking a holistic, rather than
piecemeal, approach to carbon management and energy reduction.
At the Carbon Trust we have been passionate about the need for
corporate Britain to curb its CO2 emissions long before the latest
market uncertainty. For the past decade we have been advising
businesses on the symmetry between sustainability and profitability
- and indeed we believe that in the long-term the former is
essential for the latter.
We know from our own recent research that investment in energy
efficiency produces an internal rate of return of up to 48% - four
times the minimum rate of return demanded by most finance
directors. And yet our analysis of over 1,000 carbon management
projects shows that large UK businesses are wasting at least £1.6bn
every year on unnecessary energy.
Energy efficiency is already on the agenda for some. Ladbrokes,
the UK's largest bookmaker, has introduced an innovative way of
involving employees in the energy use of each of its stores. An
interactive dashboard allows staff to monitor and react to changes
in energy use at any given time. The changes will allow the company
to reduce its energy usage by 21% by 2013, thereby dramatically
saving money, without a having to make a huge upfront
Heinz has reduced its
energy usage by 13% at two of its largest production plants in the
UK. This is in addition to improving its ability to source recycled
materials and to reduce the footprint of its supply chain. Most
eye-catchingly, the company found a more efficient way to cook its
iconic baked beans.
However, there are companies for whom reducing their energy
dependency, and in turn the carbon footprint of their products and
services, has long been a leadership issue, such as Marks and
Spencer through its ambitious 'Plan A'. And organisations like Kingfisher plc have
put green business growth at the heart of their corporate strategy.
The company's Future Homes strategy - which aims to help its
customers, employees and suppliers to make the homes of the future
more sustainable and affordable - has been developed in recognition
of the potential to reduce costs through better energy efficiency
and to boost sales by tapping into demand from consumers for eco
products and services. It is using carbon reduction to develop a
competitive sales strategy, differentiate its products, boost
operational growth and enhance supplier, partner and staff
To thrive in a future likely to be characterised by volatile
energy prices, businesses need to commit to a long-term, strategic
approach to environmental and energy management.
The board members of UK plc should view sustainability as a
game-changer at the heart of every aspect of their organisations,
chain management and engaging staff and partners through to
stimulating demand for products and services.
Focusing on near-term measurement and monitoring of energy use
is to be commended as the first step to becoming a sustainable
enterprise. But leading businesses recognise that to avoid
operating at the mercy of fluctuating oil prices, they must place
sustainability at the core of their business strategy.