Does your business sell to other businesses? Then here’s how to make a small change to your electricity contract – for free – that can help you win large customers.
The change is simple – choose a low carbon source for your electricity contract, rather than go with the default standard offer from your electricity supplier.
Choosing a low carbon option is most helpful if your business sells to large companies that need to report and reduce their own carbon emissions. But you generally only have one chance a year to do it – when you renew your electricity contract.
So read our 3-step, 2-minute guide to why and how you can go low carbon, and then how to promote your low-carbon credentials correctly to your customers.
STEP 1. WHY CHOOSE LOW CARBON
Do you know that 8 out of 10 of FTSE 100 companies ask their suppliers (potentially your business) about their carbon emissions as part of their procurement process?
It means this:
Your chance of winning their business is affected by your business’ carbon emissions. And of course, lower is better.
Now your business might not have been asked about its carbon emissions yet, but the question could come soon.
How can you tell?
Look at the sustainability plans of your largest customers. They’re normally found on the corporate sections of their websites.
If you see something around "reducing the environmental impact of our supply chain", you should start preparing to disclose your company’s actions to control its carbon emissions.
Here’s where your choice of electricity contract comes in.
Electricity is a major part of commercial, industrial and public sector organisations' carbon footprint. So the choice you make for your electricity supply can materially affect the carbon emissions you pass on to your business customers when they buy your products and services (“supply chain emissions”).
And that’s why you should choose to make it low carbon when you have the chance. Simple when you think about it.
Want to know more about why large companies care about carbon emissions? You might ask why these companies bother reporting and reducing their carbon emissions.
Here are three good commercial reasons:
1) To please their customers
Research shows some consumers are more likely to support companies they see doing things to reduce their environmental impact. Look at these statistics from a Carbon Trust survey of 500 UK adults aged between 18 and 25:
57% said they would stop buying a product if its manufacturer refused to commit to measuring and reducing its carbon footprint.
55% said they would be more loyal to a brand if they could see it was taking steps to reduce its carbon footprint.
2) To comply
Stock market listed companies are required by law to report their carbon emissions.
In 2013 the UK introduced Mandatory Carbon Reporting. Listed companies must report their carbon emissions alongside their financial accounts, using an established method like the GHG Protocol Corporate Standard.
In 2017 that becomes standard practice right across the EU. Then some 6000 or so companies (typically listed on an EU stock exchange and having more than 500 employees) will be required to report their non-financial information including carbon emissions in their annual management report.
It’s only natural that given this information has to be publically disclosed, companies with public targets to reduce their emissions will want to report the lowest number possible.
3) To enhance their company’s value
Large investors expect transparency on companies’ environmental performance as much as their financial performance. Such “responsible investors” consider environmental data in their assessment of the long term risks of investing in a particular company.
The idea being that if the company is aware of its impact on the environment, it is better placed to manage associated risks (like resource scarcity) and likely to have a sustainable business model over the long term.
Want to know more? Watch this 3 minute video from CDP.
That’s why many large companies have been reporting this information for years through organisations like CDP (formerly the Carbon Disclosure Project), to help large institutional investors understand the long term viability of their business and attract investment.
Want to know more about supply chain emissions?
Worldwide, more and more large businesses are asking suppliers to disclose their carbon emissions. Some are going further – working with their suppliers to help them actually reduce carbon emissions and waste.
Some are doing it on their own. Others are doing it as part of a group initiative. Here are a few examples.
A big group initiative is the CDP’s supply chain programme. It aims to give large investors information about how sustainable corporations’ supply chains are, and encourage corporations to use their influence to drive change among their suppliers.
66 multinational corporations – 15 headquartered in the UK – used this initiative in 2014. They asked nearly 3,400 suppliers to disclose information on how they are approaching climate and water risks and opportunities. And CDP believes it’s in the suppliers’ interests to take part:
“Suppliers should recognize that it is in their own interest to embrace more sustainable modes of operation. Not only do these offer a means to reduce costs by driving efficiency in resource use, but sustainability is likely to become a key differentiator in the marketplace.”
Reporting is the start, not the end in itself. The CDP Action Exchange – a component of the Supply Chain programme – supports reporting suppliers to actually reduce their carbon emissions and benefit from financial savings.
What about corporations running supply chain programmes on their own? Several UK companies like ASDA run their own initiatives through the sustainability platform, 2Degrees Network.
The premise is quite simple and collaborative:
a) The sponsoring company invite its suppliers into the programme.
b) The suppliers are encouraged to share ideas, best practice that they can implement to deliver greater energy, water and waste efficiencies.
c) The suppliers cut costs and carbon emissions from their processes, improving their margins and giving the sponsoring company more competitive, more environmentally friendly goods.
These programmes are delivering fantastic cost and carbon cutting results. What might surprise and interest you is that the sponsoring companies say their relationship with suppliers have strengthened too.
Now who wouldn’t want a stronger relationship with a big client?
Want to know more about choosing your electricity source?
When you sign an electricity contract for your business, you’re making a decision – consciously or not – that reflects on your company’s environmental credentials. That’s because, as well as a decision about a price, your choice of contract is a 'statement' in support of higher or lower carbon types of electricity generation, from which your electricity supplier will source your electricity.
And it means something for your company.
New carbon accounting guidelines mean that choosing an electricity supply backed by sources with high carbon emissions – like coal and gas – gives your company a higher carbon footprint for its electricity purchases than if you had chosen low-carbon sources.
Before we move on, I shall clarify a few points that we’re often asked about.
If you’re reporting your electricity-related carbon emissions using the GHG Protocol, you need to report two numbers. These reflect:
- the contractual choice you’ve made
- your connection to the UK grid.
The idea is it makes for fairer comparisons of companies across borders. The reasoning is explained here.
Same power: The choice you make doesn’t change the physical electricity you receive. In practice the power at sockets across the country is a mix of every generation source that goes into the grid.
STEP 2. HOW TO CHOOSE A LOW CARBON ELECTRICITY CONTRACT (THE SIMPLE CHANGE)
This is easy and doesn’t have to cost you anything extra. Just follow these steps when you discuss your next electricity contract:
a) Ask your electricity company about their low carbon options and what they cost.
EDF Energy offers 3 choices:
Standard: includes electricity from all sources, including coal and gas. As the UK’s largest generator of low-carbon electricity, our standard supply has lower carbon emissions than the other major suppliers.
Blue: a low-carbon option backed by nuclear generation for the same cost as Standard.
Renewable: a low-carbon option backed by renewable generation. The renewable option from us and other suppliers can cost more than the standard or Blue option.
The difference these electricity sources can make to your carbon emissions is clear:
b) Check three things with the salesperson if you’re thinking of choosing renewable:
Will you pay more? For instance, since a government change to certain renewable energy certificates in July, many suppliers have started charging more for renewable electricity.
Is it genuine? A renewable supply must be properly supported by applicable certificates (e.g. Renewable Energy Guarantees of Origin or Generator Declarations) that are created in the year you consume the power and ring-fenced for your use so they can’t be double-counted.
Is it assured? Assured controls and processes around this are recommended. EDF Energy's low carbon electricity options, as well as its overall Fuel Mix are independently assured by PwC. See the assurance reports here.
c) Choose the one you prefer and have the electricity company include it in your contract.
STEP 3. USING YOUR LOW CARBON SOURCE
Here’s a question from an actual pre-qualification questionnaire:
Q: “Tell us about how you demonstrate a progressive approach to sustainability and climate change.”
Had you chosen Blue for Business, you could answer with this:
A: As part of our carbon management approach, we choose low-carbon options whenever possible. For our electricity supply, we have chosen Blue from EDF Energy. This ensures that the electricity we use is matched by an equivalent amount from a recognised low-carbon source of generation.