The world is starting to realise that action is needed to save the planet from environmental destruction. Businesses, which account for 40% of carbon emissions, need to be on board. Promoting green business is central to The Green Party’s manifesto. According to The Green Party’s policies, “by nurturing low-carbon industries and community economies, and by making polluters pay, a prosperous and resilient Green economy will thrive in harmony with our environment”.
In aGuardian article, Green Party Leader Natalie Bennett and Green Party MP Caroline Lucas have also underlined the importance of encouraging businesses to be more sustainable, writing that “innovation and entrepreneurship by the business community will be at the heart of the transition to a low carbon and sustainable economy”.
One of the big questions which hovers over the ideal of businesses going green is profitability, however. Are there are enough financial incentives for businesses, both big and small, to improve their environmental credibility?
The financial case for businesses to use sustainable forms of energy and become more energy efficient is clear. According to The Carbon Trust, energy saving measures can slash up to a fifth from business’ energy bills. Energy wastage costs UK businesses up to £2bn every year and the overall yearly energy bill for small businesses in the UK comes to £3.5bn. The average small business could save up to £7,000 every year by boosting their energy efficiency, according to research.
There is clearly a strong desire among businesses to reduce the amount that they spend on energy too; 60% of businesses have tried to research for a better energy supply deal since the deregulation of the market. Moreover, going green can be good PR for a company wanting to differentiate itself from its competitors and stand out. There is mounting evidence to suggest that consumers want to buy their products from green businesses. Two thirds of consumers are more inclined to give their business to a green firm, according to The Carbon Trust.
There are encouraging signs that attitudes are changing too. A survey by the consultancy firm Accenture found that 93% of 766 CEOs questioned believed that sustainability would play an important role in their future success. Ninety six percent also felt that issues surrounding sustainability should be completely integrated into their firm’s strategy and operations. Furthermore, 91% claimed they intended to use new technology, including renewable energy, to improve their business’ sustainability in the future. Another report by the consultancy The Future Laboratory also found that 60% of 500 surveyed CEOs felt sustainability could improve their market share.
The tools for businesses to assess how going green can save money are out there too. Price comparison engines allow businesses to calculate how much it would cost them annually to source their energy sustainably and how much they could save. For example, a simple search through the site money.co.uk shows that a green energy tariff with Ovo Energy can mean an annual saving of £369 and a similar one with EDF Energy can trim £204 of an annual energy bill. Furthermore, the government’s Green Deal program enables businesses to be more energy efficient by making improvements like insulation, double glazing and renewable energy production without having to pay for all of the costs up front. Businesses can also benefit from free green energy auditing services by professional companies. These schemes are often state-funded. For example, thanks to EU and local council funding, free audits are available to SMEs based in East Sussex which spend more than £1,500 on their energy bills.
Yet there are also clear signs that, although British businesses are generally positive about green technology and sustainability in theory, enthusiasm can become more diluted when it comes to making concrete changes. For example, an investigation by the Carbon Trust has found that finance directors within large British companies are undervaluing the financial returns that can be derived from more efficient energy by over 50%, contributing to the £1.6bn worth of money lost by large businesses every year through energy wastage.
Businesses also feel they are not getting enough direction or push from government to adopt green business practices. According to research by The Tenon Forum, 48% of UK managers think that the government is not taking enough action to get companies to go green.
In the aforementioned Guardian article, Caroline Lucas said that the government needs to appeal to business by demonstrating more “clarity, consistency, and certainty than it is right now”.
That is certainly still the case. David Cameron’s recent announcement that he will cut green levies to trim £50 a year off household bills and wants to review green subsidies will raise confusion among both businesses and domestic energy consumers about whether renewable energy saves money or not. The fact that Energy Secretary Ed Davey has contradicted David Cameron by expressing his hostility to a review into green subsidies, and ruling out any reinvestigation into renewable energy projects sends out an extremely inconsistent message to businesses about what the government actually thinks about renewable energy.
The government should also certainly be doing more to incentivise businesses to go greener by introducing tax credits. It could do more to engage with small businesses on green energy too. In particular, The Federation of Small Businesses (FSB) wants to see a recipe of short, medium and long-term incentives to get smaller firms to go green. Short-term incentives include the installation of energy saving equipment. Medium term measures should “maximise the potential of smart metering and micro-generation technology” according to its website. Long-term actions should tackle “the structure and financial barriers that stop small businesses from greening their buildings”.
Moreover, the FSB has criticised the Green Deal, the government’s scheme to get businesses making energy savings, for overlooking small firms;. According to the FSB, the Green Deal is missing a guarantee that small companies will have equal access to big companies. The FSB’s website reads: “Small business involvement is essential for low carbon skills and knowledge to spread across the whole economy and to allow small firms to reap the rewards of a low carbon economy.”
If firms across the UK are to be truly convinced to go green, however, the message that embracing more efficient, renewable forms of energy can make businesses more profitable also needs to come across much more strongly. That means more research into how the “green credentials” of a firm can win over consumers. That way businesses can be presented with a solid body of evidence that they cannot ignore.
With just 4% of energy consumed in the UK derived from renewable sources, there is a long way to go before British businesses become truly green. The campaign will not be easy; firms need short-term financial incentives to make necessary improvements to go green. They also need to be convinced that these changes will help their profitability in the long term.
Crucially, green energy can also help create a more equal economy. According to the UNEP, “a package of green investments coupled with policy reforms aimed at making growth socially inclusive offers economically viable options to reduce poverty and hunger, and address challenges of climate change and degradation of natural resources, while simultaneously providing new and sustainable pathways to economic development and prosperity.” It is a well-known fact that the destruction of natural resources ultimately leads to a poverty trap, which in turn causes further degradation of natural resources and then, again in turn, even worse poverty. In contrast, green policies can help combat poverty. For example, making small subsistence farms greener by introducing sustainable farming techniques could help increase world food supplies, improve water efficiency and also create new connections between the marginalised poor. According to one report, green farming techniques including agro-forestry, the integration of livestock and water harvesting can increase productivity by up to 179%. Energy savings by companies may seem relatively modest in the context of this dream of combating poverty through a green society. Nonetheless, these lofty goals for a more equal and environmentally friendly society are unlikely to be realised unless we change mindsets and one of the best places to start is in the workplace- getting both big and small businesses to realise that being green can be a positive, prosperous thing.