The business case for a genuinely green energy supply
Climate is moving up the priority list for UK businesses. Whereas once an emissions reduction strategy was an optional extra to prove your green credentials, it is now becoming standard. The proposed introduction of mandatory TCFD reporting will, as our blogpost explains, “embed climate change into the organisational culture of companies”. Regulatory compliance is driving some of the change, but a bigger driver is that stakeholders such as investors, customers and partner businesses are increasingly demanding action on the climate crisis. Yet many businesses are still unaware that climate concerns should be a factor in their choice of energy supplier, and it may fall to you as their energy consultant to explain this. Here are three reasons why the business case to switch to a genuinely green energy supply is so strong.
Reporting requirements
Thousands of large UK businesses have to comply with the Streamlined Energy and Carbon Reporting (SECR) scheme, which requires them to report on their energy use and carbon emissions. SECR makes it compulsory to report on your Scope 1 (direct) emissions and their Scope 2 emissions (those from purchased energy). A company’s choice of supplier will have a huge impact on what they report under Scope 2. If they simply choose the cheapest possible tariff, their energy bills will translate directly into greenhouse gas emissions, which could be hefty if they are a heavy energy user. But if they choose a genuinely green supplier, they can legitimately list their Scope 2 emissions as zero in their SECR reporting.
When SECR replaced the old Carbon Reduction Commitment scheme two years ago, the number of businesses in scope increased from 4,000 to over 11,000, and this widening of scope should continue in future. Currently, SECR only covers listed companies, large unlisted companies and large limited liability partnerships, but smaller businesses should be prepared for the possibility of having to meet some kind of carbon reporting requirement in the future.
The Energy Savings Opportunity Scheme is another one to watch. While this has historically focused on achieving cost savings through efficiency measures, a new consultation proposes making it more focused on emissions reduction. Even if there is no regulatory requirement for your business to actually cut emissions, decarbonising your energy supply is an easy way to simplify your Scope 2 reporting under any scheme.
Pressure from other businesses
As businesses work to reduce their own emissions, many are looking at their value chain: the other businesses they work with, such as suppliers, waste management, transport and more. For most businesses, these value chain emissions, also known as Scope 3, make up the bulk of emissions relating to their business activity. This is why any valid system for setting emissions reduction targets, such as the Science-Based Targets initiative, includes Scope 3.
As increasing numbers of businesses set net zero targets, your Scope 2 emissions could come under scrutiny as part of another company’s Scope 3 emissions. There could be pressure to share data on your emissions and make an effort to reduce them. Our blogpost on greening supply chains explains why no business can afford to ignore the growing focus on Scope 3.
Reputational risk
Almost every week the news brings more evidence of the devastating effects of climate change, and the pressure to take action is growing. This means that businesses with no strategy for reducing their greenhouse gas emissions are exposing themselves to reputational risk. Failing to tackle emissions could lose you customers (and potential customers), and it may also harm your standing with other stakeholders such as investors, businesses in your value chain and employees.
But simply opting for an energy tariff labelled as “green”, without doing the research first, could do more harm than good. A legal loophole allows suppliers to market their electricity as green despite actually dealing only with fossil fuel generators, thanks to a system of certificates known as REGOs. Choosing a supplier like this and then claiming to use green electricity could leave your business open to accusations of greenwashing.
Good Energy is completely upfront about our electricity sourcing: we support independent renewable generators, so our energy really is 100% renewable. You can learn more about how we source our electricity here, and learn more about REGOs and greenwashing here.
Offsetting is a popular way to address emissions you can’t currently avoid, especially on gas tariffs. But some offsetting schemes are more valid than others. Our three-point checklist is a quick way to find out how genuinely sustainable a gas supply tariff is. Good Energy is proud that 10% of our green gas comes from UK-sourced biomethane and the rest is offset through investment in biomethane projects overseas. So for every unit of green gas you buy from us, a unit of green gas is generated.
Decarbonising a company’s energy supply is a great first step to future-proof the business against legislative demands, value chain pressure and reputational risk. But the complexity of the UK energy market means that business clients need your expertise, not just to find the best price but to cut through the greenwash.
