Will the Green Deal help my business be more energy efficient?

Greg Barker and Green Deal providers.  Credit: DECCgovuk

The government wants businesses to become much more energy efficient, and the Green Deal was meant to be one of the ways to encourage it.  Big firms may be able to finance their own improvements, but finance was seen as an obstacle for SMEs in particular.  This was to be the purpose of the Green Deal for business customers – to provide affordable financing for energy efficiency on a “pay-as-you-save” basis.  Yet the media is full of assertions that it will do no good.  Do we have a problem?  Is the Green Deal a big deal for your company?

Delay

DECC announced recently that the Green Deal will roll out for domestic properties in October as planned, but that it won’t be available to non-domestic properties until later.  Ostensibly this is because it is more complicated.  Whatever the reason, this does mean that only home-based businesses will qualify in October – as long as they apply under the umbrella of the domestic Green Deal.  Any firm that has outgrown the dining room or barn conversion will have to wait – and as yet we don’t know exactly how long.

Landlord – Tenant problem

The Green Deal improvements are paid for by a financing company, while the beneficiary pays for them over the life of the project through their electricity bill.  How will this work for business tenants?  Apparently this has not been thought through, even though there are plans in place for ensuring domestic tenants and landlords can take advantage of Green Deal offers.  Commercial tenancies may be sufficiently different from their domestic counterparts that significant alterations need to be made to the scheme to make it suitable for companies.

So now we can see some problems.  However, just because a policy is coming under fire from the media and commentators, that doesn’t mean it will be no good, nor does it mean that you shouldn’t be interested.

So does my company need the Green Deal?

Most companies can save substantial sums by revisiting their use of energy and other resources.  However, the largest companies – and some smaller ones – have already been gaining enormous profits from doing this, without the Green Deal.  Why might your company need it?

First, the Green Deal specialises in sorting out energy usage.  This will give your organisation focus, if that’s what you need.

Second, the Green Deal will have specially trained energy advisers who will give your firm a report on energy efficiency opportunities.  Many such people exist already, and some NGOs even offer this service for free to qualifying companies, but if your firm hasn’t located this sort of expertise, the Green Deal might simplify the process.

Third, and by far the most compelling, is that the Green Deal offers finance.  The “pay-as-you-save” approach to efficiency improvements has been tried elsewhere and can be very attractive to a firm short of cash.  The concept is simple: a finance firm pays for the efficiency investment.  Payments to the finance firm come from the beneficiary’s electricity bill.  The “Golden Rule” means that the extra payment to the finance company must be less than the savings made through efficiency, so the beneficiary still saves a bit of money (and much more once the finance firm is paid off), but doesn’t need to invest their own capital.

This may be attractive to those firms eager to invest, but without other access to capital at affordable rates.  For firms that are sitting on cash, or whose credit rating makes loans affordable, the Green Deal may not offer a better rate than they would have been given elsewhere.

What should my business priorities be as regards the Green Deal?

Here there is no question.  Your priority should be to invest in people, technologies, processes and knowhow that cost-effectively reduce your environmental footprint – your use of energy, water and other resources, and your emissions of greenhouse gasses and waste.  This is a tall order – it’s hard work and takes commitment from the top of the business and engagement of every stakeholder in the firm.  If the Green Deal has no place in your sustainable strategy because it doesn’t offer what you need, then forget the Green Deal and do what you need to do.

Competition on sustainability is not about installing energy efficient technology.  It’s about making money now, and doing it in a way that means you will still be making money in 40 years’ time – that is sustainability.  That might or might not involve solar panels and insulation, but it definitely involves thinking strategically about the way you do business in terms of resources in and out.  Get to know what is available to you from the Green Deal, but don’t let it lead your strategy.  Your firm has its own place: you should take the lead, and use the Green Deal if – and only if – it suits your strategy.