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How organisations are responding to the global energy crisis

We spoke to Jamie Oliver, Associate Director at Carbon Intelligence, about the impact volatility is having on organisations’ net zero plans, and how businesses can balance the demands of planet and profit.

Carbon Intelligence brings together a world-class team of strategists, technologists, data scientists and engineers, to help organisations move towards a zero-carbon future. Jamie Oliver joined Carbon Intelligence in 2017 and leads on developing net zero pathways for global organisations. He has 12 years of experience in energy optimisation and carbon reduction in Europe, North America and Africa. Jamie holds a BASc in Process Engineering and a MEng in Clean Energy Engineering from the University of British Columbia, Canada.

We interviewed Jamie about the impact that market volatility is having on organisations’ net zero plans, and his advice for organisations looking to find the right balance between planet and profit.

What impact are you seeing market volatility have on organisations?

It’s having a tremendous impact. Within the UK, there’s been uncertainty around pricing and supply chains for a few years now, due to Brexit. This latest global energy crisis is next in a series of challenges that businesses must manage.

Looking ahead, it seems quite clear that energy prices aren't necessarily going to go down or become more stable right away. They will continue to be a pain point – we need to recognise that, and bake it into our plans and strategies, so that organisations have resilient business planning going forward,

Do you think it’s possible for organisations to find a balance between planet and profit?

The balance of planet and profit are not in contradiction against each other. If you look at the pillars of a credible net zero strategy or science-based carbon reduction target – energy efficiency and renewables – these are the two things that are going to give you long-term business resilience.

There are many examples of this in action. Investing in energy efficiency measures will reduce how much energy you use over time. That’s going to tick the boxes for your sustainability strategy. But it’s also going to help get costs under control and mean that you’re less exposed to price volatility. It delivers for both planet and profit. The same can be said when looking at onsite solutions to produce your own renewable energy. It ticks all the boxes for net zero, and it means you’re less exposed to market price volatility.

“When leaders start to recognise the impact that their company has up and down the value chain, they start to realise that the steps they take to pursue net zero affect more than just their own business.” Jamie Oliver, Carbon Intelligence #itbeginswithme

How are different countries reacting to the energy crisis?

We’re seeing lots of different reactions and strategies, and one of the main factors that’s driving this variation is the differing spark spread – the ratio of gas price to electricity price. This can vary quite substantially depending on which country you look at.

The UK has a fairly high spark spread, which means electricity is quite expensive compared to fuel. It’s not like that in all countries, though. In certain parts of Norway, for example, you can have cost parity between electricity and fuel. This has a huge influence on the business case for decarbonisation. 

The second important factor to consider is climate legislation, such as carbon taxes. In Germany last year, they introduced a new carbon price of €25 per ton. This will continue to go up and up - by 2025, it will be €55 per ton. In Norway as well, they’re expected to introduce some very progressive carbon taxes in the near future. These factors are completely different from one country to the next. They will affect the regional approach to volatility, and certainly help to create a real sense of urgency to reach net zero amongst businesses.

Do you think business leaders feel a sense of personal responsibility for net zero?

There's definitely a lot more awareness now than there used to be. I think one of the key drivers is their growing awareness around Scope 3 emissions. When leaders start to recognise the impact that their company has up and down the value chain, they start to realise that the steps they take to pursue net zero affect more than just their own business. It affects their employees, their customers and their shareholders – and it affects a lot of other businesses too.

Business leaders are increasingly recognising that if they take the right steps now and do the right thing, they’re not only helping their own organisation, but they’re helping every other business who buys from them or sells to them. It creates a real ripple effect that magnifies and spreads out everywhere.

What steps are organisations taking to better understand their Scope 3 emissions?

Businesses are very keen to understand their Scope 3 emissions, so that they can then start to take action and make meaningful reductions going forwards. They know it’s important, but what often prevents it from happening is a lack of good quality data.

Many organisations don’t have access to the data they need, or don’t have the right level of maturity around data collection and processing to really understand it. That’s the main barrier we’re seeing. It’s a challenge that organisations can chip away at over time, by implementing programmes to improve data quality and understand blind spots. But it's a long journey, and one on which organisations need to walk before they can run.

A simple first step that organisations should take is to communicate their ambition to their top suppliers. Even if organisations don't understand what their Scope 3 emissions look like yet, they can easily look at who their largest suppliers are by spend, and communicate their net zero ambition. Once there’s alignment, both organisations can start working together to achieve it. This kind of transparency really helps with data sharing and collaboration. And, if the supplier is not really onboard, perhaps there’s a bigger question that needs to be addressed around whether you still want to work with them in the future. Either way, communication really is key.

How are businesses thinking about the financing side of their net zero plans?

There are three questions that organisations need to answer when building their net zero plans – what do we need to do? When do we need to do it? And how much is it going to cost? If you can answer those three questions, it’s going to give stakeholders the confidence they need to move forward with their emission reduction target.

But it’s important to remember that not everything that can reduce carbon has high costs associated with it. For example, there could be a lot of quick wins around energy efficiency – very sensible changes which may require little capital investment. These can get the programme started, and build some momentum. Switching to a renewable energy supply is another piece of low-hanging fruit. Some organisations haven’t really looked at this closely in the past, as resource restrictions within finance or procurement teams haven’t made it a priority. However, the energy price rises that we’ve seen recently is causing teams to really sharpen their pencils and think carefully about their energy supply – how much it costs, and where it’s sourced from. 

Get your practical guide to accelerating a sustainable energy pathway for businesses

What can organisations do to future proof their sustainability plans against upcoming technology developments?

Challenge your equipment suppliers on the art of the possible. If you’re doing heating or combustion processes that use fossil fuels, go to those equipment suppliers and ask them how you can work together to make decarbonisation happen. There’s a lot of exciting innovation happening at the moment, around heat pumps, hydrogen electrolysers and more. Organisations are demanding solutions that address both their cost and carbon concerns, and equipment suppliers are pushing their innovation more than they ever have done before in response. You need to know what’s out there and what’s available for you as a business, so you can decide on the right steps forward.

What would your top piece of advice be for businesses on the pursuit of net zero?

Don’t just set and communicate a target. Make sure you’ve got an action plan and a roadmap for how you’re going to actually meet that target. What do we need to do? When do we need to do it? How much is it going to cost? Who’s going to take responsibility for each element? Because 2030 is going to come around very quickly, and if you don’t have a clear roadmap in place now, you’re not going to achieve your near-term ambitions. There’s a real urgency to act now - and having a clear roadmap in place will give the confidence you need in your net zero strategy.

Centrica Business Solutions and Carbon Intelligence have a strategic partnership, with Carbon Intelligence provides expertise in Scope 3 (supply chain) emissions as part of our Net Zero Pathway Consulting solution.