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For our final agenda of 2009 we set ourselves the task of reviewing the various financial models that exist when procuring either new renewable/efficient technology or outsourcing companies energy management requirements. Thankfully Paul Hayes of MITIE Asset Investment was on hand to provide an overview of the basic principles that need to be covered to get a project of the ground. The main focus being:

(i) Realistic pay backs are essential
(ii) Guarantee around output and the transfer of risk are key enablers

The landlord tenant relationship once again provide stimulus around who get the benefits of efficiency savings particularly around multi-let buildings, the key outcome that owner occupiers or single long-term building tenancy provide a route that was more likely to achieve an outcome. Two delegates at the table raised the point that the procurement team are diversifying into company financial teams in order and that in new build environment the benefits need to highlighted and communicated correctly in order to achieve the desired effect within the built environment. Some of the models discussed are detailed below:

(i) Guaranteed savings model: finance it on the balance although there are options on balance sheet treatment.
(ii) Shared savings model: finance sits with service company for a guaranteed output
(iii) Build – Own – Operate – Transfer (BOOT): usually operated via an SPV model


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This months’ topic for the Sustainable Supply Chain Table was “How do Supply Chains have to change for a low Carbon future?”

This initiated a lively debate on where do GHGs get emitted in the supply chain and who is responsible for them. It is not always clear and obvious where the big impacts are – for some industries and products the carbon is embedded in the materials, while in others it’s in product use. The new GHG Scope 3 and PAS 2050 standards will be a great help here but should the polluter pay or should the end customer take responsibility?

There was consensus that for most manufactured products, reducing materials usage and using more recycled content would make the biggest contribution to reducing carbon. For the logistical part of the supply chain, it was clear that a low carbon future means moving less, less far, less often – which could initiate a return to more local sourcing and shorter supply chains.

But more radical thinking may be needed for a low carbon future. For example, we looked at a typical glass bottle of beer and asked if current product design and supply chains would be sustainable. The answer was that many things would need to change – eliminating the glass bottle, larger pack sizes, local production. Ultimately perhaps we will be making beer at home by diluting a concentrated powder with tap water...

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The Carbon Management Strategies round table last Monday focused on sharing thoughts and ideas around innovation in the carbon market. The main aim was to discuss the main drivers to innovation, as well as the current barriers faced by organisations to drive this innovation. The participants included members of IT industry, carbon consultants and offset retailers.

The round table started with a brief introduction on how the voluntary carbon markets have helped to push the boundaries and drive innovation in sectors currently not covered by existing regulated carbon markets, such as forestry, avoided deforestation and domestic offset projects. One of the main discussion points was that organizations may hold back on their innovation efforts due to the regulatory uncertainty around carbon and emissions limits, both at a domestic and at an international level. Under such uncertain environment, companies may not have the incentives to do more than what they are required by regulation. However, a few examples were presented to show how companies are pushing the boundaries, such as Disney announcing the largest investment in conservation and reforestation offsetting scheme to date. Also, another key element needed to drive innovation was an effective communication within organisations as some opportunities may not require additional investment, but rather change in behaviour and lateral thinking.

The table concluded that a positive attitude to convert the existing restrictions into potential opportunities is essential to drive innovation in the carbon market and promote business in a low carbon economy.

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(i) New models for city analysts rewarding companies for sustainable performance
(ii) Problematic culture of short term quarterly performance analysis/share price reflects short term performance
(iii) Breaking Business as Usual financing flow to oil and gas exploration eg. Green Investment Bank/Green Bonds
(iv) Switching global subsidies from supporting fossil fuels to renewable energy
(v) The most important missing component of all – ie a meaningful global carbon price following Copenhagen

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This evening’s Green Monday roundtable discussion for Green Communications covered the topic of “Avoiding Greenwash”. In a very lively debate, we covered a number of areas including

(i) How to “unlock” the value of green communications in a risk averse environment – how to get the message out without fear of being “caught out”?
(ii) How to get behind the claims of suppliers and uncover the real story – how to verify the really sustainable solutions?
(iii) What is the future of green product communications to the consumer – the emergence of the carbon economy?

A participant gave a great case study example from her own business on the challenges of putting a truly sustainable supply chain into place. She has developed her own verification process to ensure suppliers really do come up to scratch. She really understands the value of brand integrity and through a great deal of hard work and diligence is able to communicate with confidence.

One delegate gave the perspective from a large corporation doing a great deal of excellent work internally, but trapped by caution and a desire to avoid greenwash. Lois is working to put in place the right level of 3rd party verification and endorsement to enable stronger communications, adding value & driving further actions.

The group as a whole discussed the future direction for green communications on consumer products. Currently we are faced with a diverse range of claims, labels and endorsements, all of which leave the average consumer wanting to “do the right thing”, but now knowing how or – importantly – getting nothing back in return (indeed often paying more for an inferior product). The direction is clearly towards the emergence of a true price for carbon – a vital step – and this forming part of the retail price of goods & services. This needs to be accompanied by a standard approach to articulate and communicate the details, and this in turn needs to follow the lead from current regulated emissions trading models (e.g. Eu-ETS) and rely on externally verified data as the source of true, comparable value.

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As more investors and fund managers seek to balance their portfolios for short, medium and long-term return, so increasingly CSR data and strategy – seen as a key long-term business indicator – is valued and measured. This first hypothesis was put to the table members – did they believe it to be true.

A very energetic discussion followed, in which the main thrusts were that investors really only still “felt the money” and were very short term in outlook – no real view as to long term sustainability.

The trend towards recognising the importance of sustainability in terms of Company performance was realised by the fact that a number of countries, with Norway in the lead, are setting their financial and regulatory rules around sustainability as a key business measure – but will others follow?

On Carbon accounting – we debated long and hard – what will the effect of a fixed, and relatively high, ££ value for carbon be – will this, if implemented, be the driver to make city investors, fund managers, look at the sustainability values of companies – we ended with no conclusion.

The real plea around the table was for standardisation and transparency around CSR reports – there are those who right them for a positive spin, and those who write to protect from a risk reduction scenario – these are then marketing communications rather than documents upon which financial assessments can be made.

A short journey around Goldman Sachs report from some years, attempting to tie company performance with “greenness” (since discredited); what scopes could and should look like for any verification system, alongside a debate as to who should “own” the emissions related to us personally using more IT !

The night ended with a feeling of a good discussion, but a frustration about lack of change in the City!

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REA set out how essential smart grids (including smart meters) will be to a successful UK renewables industry. Smart metering will enable investors to be paid through the forthcoming Tariff scheme for all the renewable energy generate, and what they export to the grid. That information will also flow to networks and allow smart grids to actively manage networks in anticipation of far greater flows of renewable power from multiple sources. More innovation on networks will provide great efficiency and less network losses, and also allow for Demand Side Management technologies for grid balancing as more intermittent technologies penetrate the networks. The group also hoped to see investments in storage.

However, the context to the smart grids agenda was that while there is much in the new DPCR5 to welcome, there has been very little innovation and investment in networks over the past decade. Furthermore the group compared the progress with the smart grids agenda and DPCR5 with the reality of how little renewable energy was actually being generated in the UK. The discussion turned to the forthcoming Tariff scheme with general concerns about the low levels of ambition for the scheme. The discussion also touched on concerns that little was being achieved by central government and the need to devolve the power to act. The lack of central government leadership was linked to public opinion on climate change - with a recent poll by The Telegraph cited. It was also noted that the gravity of the UK's energy security position was not well understood by the public.

In short the discussion turned to what needed to happen to deliver the innovative new generation that smart grids are seeking to support.

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The Sustainable ICT Roundtable started with a general discussion about the smart grid. What opportunities it had for businesses, where it was going in the next few years, and the technical and physical aspects of how it might work. None of the businesses represented by members at the table are actively involved in the smart grid, though java will probably be used for many of the devices on the grid.

The discussion then moved on to our tables agenda, discussing the motivations behind companies implementing Green IT initiatives. It was felt a lot of it was green wash and much of the rest was about cost and performance rather than organizations being engaged in the environmental agenda. The Carbon Reduction Commitment was mentioned as was the rising costs of energy. Also mentioned was the fact that many of the technologies encompassed by green IT, the smart grid, virtualization, thin clients, have actually been around for decades, but have only been given real emphasis by climate change and rising energy prices.

We discussed the necessity of government legislation putting a real cost to carbon to drive the environmental agenda. Price is still a primary motivator in purchasing decisions, and until environmental concerns are reflected in price in such a way as to modify behaviour, it was not thought our society’s currently inadequate response to environmental issues would change.

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