How deeply should you cut your energy consumption?

This week’s Economist argues that decarbonising developing economies matters much more than reducing emissions in the developed world.  Although emissions from production in developing countries is now greater than in the industrialised nations, there is in fact no excuse for complacency about energy use in the wealthier economies.  Just over a month ago, DECC released their provisional estimate for UK greenhouse gas emissions for 2010.  They showed the first year-on-year increase in two decades.  As major consumers of energy, businesses need to play their part in turning this around, both because it’s right and also because it makes business sense.

The ideal energy consumption for any company is zero – in a perfect world we would have no energy costs at all.  But putting aside idealism, how do we set an emissions target for our business that is both desirable and realistic?

One way for a firm to set a target is to look at the governments' targets in the countries in which it operates.  For example, the UK has an emissions target for 2020 of 34% below 1990 levels.  In 1990, emissions were much higher than today – as of 2010, emissions were down by about 25%.  That leaves another 9% to go – or to put it another way, about 11% of 2010 emissions need to go by 2020.  This has to happen even as the economy grows – in other words, emissions per unit of output need to fall even faster.  A company that can cut its emissions by 11% over the current decade while growing at the same pace as the economy can feel that it has done its bit to help meet these targets.

But is this a good target for your company?  It’s a fair share in UK terms, but what about global terms?  If we are trying to be equitable, and just use our fair share of global emissions, we need to aim higher.  A UN Environment Programme report estimates that the world needs to peak at 44GT of greenhouse gas emissions in 2020 to avoid exceeding 2 degrees C of global warming.  If we take into account the estimated populations of the UK and the world now and in 2020, we’d need to reduce our emissions by 34% from 2010 levels in order to be making only our share of emissions.  In other words, we need to cut emissions by about a third over the coming decade in order to be equitable.

Is it realistic to cut a firm’s emissions by 11-34% by 2020?  In a word... yes.  Others have managed it.  For example, Interface Inc, a maker of commercial carpeting, reduced absolute GHGs by 71% from 1996 to 2008, while increasing sales by two thirds.  They didn’t do this by moving into a less energy intensive line of business.  They accomplished this remarkable reduction principally by reducing waste.

This is not to say that massive reductions in emissions are easy.  They need belief and determination.  However, the payoff is substantial – in good profits, good morale, and good reputation.  In the words of Ray Anderson, CEO of Interface Inc, “sustainability... has proven to be the most powerful marketplace differentiator I have known in my long career”.