Last month I met up with an ex-colleague and friend, Hannah Kershaw of QinetiQ, to discuss the current state of energy and carbon standards. Instead of writing a piece myself, Hannah (who taught me most of what I know about energy and carbon), kindly agreed to provide her insights on the changing carbon and energy standards landscape, and how she thinks the approach will need to evolve to avoid a climate crisis:
Like the dunes of the Sahara or glaciers of Greenland, the landscape of regulatory and voluntary energy and carbon reporting schemes continues to evolve apace for companies across the UK. Energy and Sustainability professionals up and down the country are currently experiencing one of the busiest compliance reporting years of their careers. 2019 marks the transition between old and new domestic regulatory schemes, and the second ESOS compliance deadline also falls this December (yes it really has been four years already, and no I also have no idea whether we will still need to comply after Brexit, but if my stockpile of olive oil and red wine is anything to go by, I’m of the school it’s better to be safe than sorry).
After a turbulent, (and dare I say emotional?) decade we say a final farewell to the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) this year. Once the flagship policy of the Department of Energy & Climate Change, CRC was borne of good intentions, but withered after a decade of political and economic disruption and high administrative burden on participants. A highly innovative policy at the time, CRC incentivised large businesses to invest in energy efficiency through emissions reporting, publication of a performance league table, and trading scheme for carbon allowances. However, the arrival of a new administration in 2010 combined with the aftermath of the global financial crash resulted in fundamental changes to the scheme; most notably from a revenue-neutral scheme (with the worst performers subsidising financial benefits accrued by the best performers) to a straightforward tax on all participants, thereby rendering it an exceptionally complicated way of taxing energy consumption. With the introduction in 2013 of mandatory Scope 1 and 2 carbon emissions into the Companies Act, and a growing uptake of customer and investor-driven voluntary carbon reporting schemes such as CDP, GRI and GRESB, I suspect there were few tears shed by Energy Managers in July as they submitted their final CRC reports. For non-publicly listed organisations who were captured under CRC the arrival of the new Streamlined Energy & Carbon Reporting requirements this year plugs the reporting gap left by CRC, and the loss of the carbon allowance tax from all CRC participants has been replaced by increased rates of Climate Change Levy paid via energy bills.
Practically speaking, if you are a UK PLC this is good news and you will benefit from a reduction in administration through not having to complete CRC reports. Instead you can focus on your total Scope 1 and 2 carbon emissions report within your annual accounts as required under the Companies Act. The introduction of SECR should add a negligible amount of additional administration to UK PLCs. I would take this opportunity to consider any voluntary reporting schemes you participate in and question the value of continued participation, particularly if they require substantial internal resource to administer. The more time your Energy and Sustainability resource have to spend collecting and manipulating data to suit the array of different carbon reporting schemes you are committed to, the less time they have to actually drive performance improvement; and we simply do not have the time to waste if we are serious about achieving net zero carbon in time to avert the climate crisis.
Given the volume, and regulatory underpinning, of carbon reporting there are a raft of technical guidelines, industry standards, and best practice methodologies available to support you in the compilation and assurance of your carbon reports. But what standards, methodologies and guidelines can I adopt when I get around to trying to DO something to deliver carbon reductions within pre-existing financial and organisational constraints?
Most mid to large organisations will manage their environmental risks and opportunities by operating an Environmental Management System aligned to a best practice standard such as ISO 14001. This is a good place to start as it will require you to identify all the environmental risks resulting from your activities which would include anything that releases harmful emissions.
The vast majority of an organisation’s greenhouse gas emissions arise from the use of energy resources. The breadth and depth of technical detail required in energy management, combined with the increasing regulatory requirement of organisations to manage and reduce their carbon footprint, culminated in the creation of specific Energy Management System standards such as ISO 50001. Defining and implementing a structured management system to drive continuous operational improvement is the holy grail of businesses, whether in improved quality, safety, or energy efficiency. However, when it comes to a Carbon Management System standard you may find a misalignment in coverage between your ISO 50001 and ISO 14001 management systems if your energy and environment teams exist independently of each other. The focus of ISO 50001 is exclusively on energy efficiency, not carbon reductions. Therefore, the ISO 50001 standard has no focus on the non-energy-related greenhouse gas emissions management, which may be captured under your ISO 14001 system, for example the use of fluorinated gases and other fugitive reportable gases. For maximum impact, close synergies between your environmental and energy management systems are critical to enable effective carbon management to be undertaken. The alternative option is to pursue something like the Carbon Trust Standard which offers specific carbon management independent assurance. However, if your energy and environmental functions exist separately but are both responsible for aspects of carbon management, it is important to clearly determine who will manage this within your organisation.
The need for organisations to have a clear and meaningful carbon reduction target, underpinned by an effective carbon management system, is the only way companies will ensure they have the direction and discipline to transition to a sustainable business model. There are tools and standards out there to support with this, but to be incorporated effectively the organisational structure must be aligned appropriately. Perhaps one day ISO 50001 could evolve into an holistic carbon management system standard? Organisations are always going to consume energy, even if they achieve the highest level of efficiency possible. Once those sources of energy become clean and result in no environmental impacts the benefits of an energy management system become primarily economic. This will always be of interest to organisations, but it ceases to drive any value from an environmental sustainability perspective, when there still may be work to be done on tackling the other sources of greenhouse gas emissions. If this were to occur, then what would be the sustainability justification for allocating resources to retain ISO 50001?
My view is that organisations should report once and report well. Reporting doesn’t in itself change anything, you’ve got to get the right balance of quality over quantity or you risk taking on extra administration for no value. Be crystal clear in the scope and boundaries of your report, ensure you obtain independent assurance or verification of your figures, and report in a format that is publicly available. That’s it. Then you can spend the rest of the year focusing resources on embedding an effective management system into the organisation to drive energy efficiency and carbon reductions, which is actually the point of all this anyway, right?
Hannah Kershaw has an MEng in Engineering, Economics and Management from the University of Oxford, and is the Head of Energy and Sustainability at QinetiQ, where she is responsible for corporate compliance & reporting for all aspects relating to energy and greenhouse gas emissions, and the development and governance of the UKAS certified ISO 50001 Energy Management System.