Reduction responsibility

21 May, 2010
As if energy costs themselves were not high enough, the largest businesses are now having to pay to monitor, and ultimately reduce, their carbon footprint. Paul Gander assesses the impact on Britain's baking industry
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The environment may have been a notable absentee from the General Election campaign, but make no mistake it has not gone away. Companies picking their way through the government's Carbon Reduction Commitment (CRC) know this only too well. This is yet another Government-sponsored initiative, along with the Climate Change Levy (CCL), attempting to monitor and reduce CO2 emissions and more specifically energy consumption. Since launch, the CRC has been given the slightly longer, but more explanatory, name of the CRC Energy Efficiency Scheme (CRC EES).

The Environment Agency (EA), which is responsible for the scheme, tries to be reassuring about its implications. Says head of climate change and sustainable development Tony Grayling: "Carbon reduction doesn't need to be complicated or expensive. There are simple and inexpensive steps every organisation can take to cut their energy consumption."

Since last year, the EA has been contacting operations where at least some electricity was supplied on half-hourly metering (HHM) at any time during 2008. Even where a company or plant has subsequently moved away from HHM, it will still need to submit an information disclosure.

That is no mean feat. Critically, much hinges on how an organisation's extent is defined, according to the energyteam consultancy. "This includes applying the Companies Act tests to ascertain how undertakings such as companies, partnerships and unincorporated associations must be grouped together," says head of social responsibility Stuart Diston-Hunter. Failure to complete the information disclosure stage can incur fines of 500 per meter, he adds.

The EA helpfully produced "more than a dozen guides" to the information disclosure part of the process, says energyteam. "But the guides are typically 40 to 50 pages long, and include a lot of detail and terminology," Diston-Hunter adds.

Finsbury Food Group, on the other hand, says its own advisers have like the EA downplayed the complexity of the CRC. Says group buyer David Finlay: "We've been led to believe it's fairly straightforward." The group is in the early stages of compiling information for the EA. But it does not predict that the details of group structure will be over-complicated. "Otherwise, it's a matter of totalling up energy usage for the period in question."

Finsbury says it is likely to be over the 6,000 MWh threshold for CRC registration and reporting. "But as we understand it, the trading in carbon credits will not need to happen, because we are already paying the Climate Change Levy," says Finlay. In fact, like others, Finsbury is eligible for an 80% discount on the levy.

A spokeswoman for the EA confirms: "The aim of the CRC is to capture organisations that are not already working on emis-sions reduction under the CCL or other heavy-duty regulation." She stresses that companies which are unsure about whether the CRC relates to them should consult the EA website (see box-out, right).

Like Finsbury, Allied Bakeries says it is already part of the Food and Drink Federation's voluntary CCL agreement. In a statement, it explains: "We are currently working with internal experts to assess our obligations under the CRC." Last year, Allied's Kingsmill became the first bread brand permitted to use the Carbon Reduction label on three of its products.

So what about those needing to participate fully in the CRC scheme? "They will need to identify their organisational structure, register, produce a footprint report for the year to 31 March 2011, together with annual reports and an evidence pack proving how data was sourced and calculations were made," says Diston-Hunter at energyteam.

Registration and administration costs will be "a few thousand pounds a year", he says. But that is clearly not the whole story. "Professional fees and internal administration costs mean that many participants should budget considerably more to ensure compliance," he adds. Carbon allowance costs are fixed at a minimum of 12/tonne of CO2 until 2013. Around 20% of participants will be audited to ensure that figures are valid, says energyteam.

Rewards for reduction

Finsbury Food group likens the CRC to the Producer Responsibility Obligations for packaging, whereby companies are required to pay for recovering and recycling the packaging they use. "The CRC is similar, but with the difference that if you can demonstrate year-on-year reductions in energy consumed, you're rewarded for it," says Finlay.

Those rewards work on two levels. Firstly, those demonstrating improved energy efficiency are eligible for bonus payments. Secondly, the annually-published league table is designed to be a prime benchmark for assessing sustainability. The EA's Grayling says: "The league table is a very public judgement on how seriously you take your environmental responsibilities. If organisations don't take up the challenge, there's a risk to their reputation and their pockets."

Taking up that challenge can take many different forms. Says Diston-Hunter: "There are probably several hundred initiatives that a bakery could put in place to reduce energy consumption and CO2 emissions." These range from behavioural changes in operating equipment to equipment modifications and alternative fuels. As he points out: "There is often no correlation between the size of the investment and the size of return."

Gas emissions

For those who do qualify, it's important to remember that reductions in emissions from gas count equally when it comes to submitting the carbon return, which decides the level of rebate or penalty a firm faces under the scheme. By gaining a much deeper appreciation of the base load and volatility of their gas consumption, bakeries are better equipped to select the best contract. This minimises the risk of consuming too much or too little gas and the resultant costs and penalties this can cause.

For example, Shell Gas Direct's Automated Meter Reading (AMR), fitted to an existing gas meter, communicates consumption data back via mobile technology for display on a secure website. This allows the customer to view and analyse the energy profile of their processes and, as a result, monitor efficiency.

"AMR is also accepted by the scheme as evidence of 'early action' proactive measures to reduce emissions ahead of the scheme's full adoption," says Shell's Mike Hogg. "This will be one of three components counting towards a company's league table position. Companies have until April 2011, the end of the CRC's first year, to maximise this early action rating by installing technologies such as AMR.

"The economic incentive to reduce emissions will increase as the cost of energy rises, which the current consensus predicts it will. Baked goods manufacturers should see the CRC as an important step-change in how they manage energy and, as such, engage positively and early with its requirements and aims."

Adopting energy-efficient practices is an excellent chance to not only mitigate the environmental impact of business but also build encouraging frameworks to better manage energy usage, he says. Bakeries must also seize the opportunity to understand their energy demand and protect their bottom line.

In its statement, Allied says: "When planning or undertaking capital products or purchasing new equipment in both manufacturing and supply chain, environmental factors, such as energy efficiency, play a key role in our decision-making processes."

Every company will have to make its own assessment, balancing energy costs and payments under the CRC or CCL schemes against capital and other investment costs with longer-term benefits. But how much difference this will all make to retailers and consumers remains unclear. Allied says: "There is no compelling evidence yet that consumers are making active choices between brands based on their carbon footprint." But it adds: "We believe our customers are looking to work with suppliers who take their environmental impact seriously."

One way or another, it seems, that seriousness is being scrutinised ever more closely.


Who is affected - and how?

Initial assessments for the CRC Energy Efficiency Scheme were carried out during 2008. Any business then using at least one half-hourly electricity meter (HHM) must register under the CRC with the Environment Agency (EA) by 30 September 2010. Organisations should already have been informed about this during 2009.
Of those companies, any that consumed at least 6,000 MW hours through all their HHMs during 2008 (equivalent to roughly 500,000 worth of power) and not already part of a formal emissions reduction scheme, will need to participate. This involves monitoring energy consumption and purchasing carbon allowances.
Those companies demonstrating the greatest reductions in energy consumption will receive "financial and reputational rewards", says the EA, including pride of place in an annual league table of CRC performance.
It says that its communications campaign will continue up to the end of the registration period, and will include a series of 'How to register' surgeries.
l The EA's CRC helpdesk can be contacted at crchelp@environment-agency.gov.uk. Or go to: www.environment-agency.gov.uk/crc


Bakers leading the agenda

The Carbon Trust is currently working with the Food and Drink Federation (FDF) and the bakery sector to investigate making step-change reductions in CO2 emissions from the baking process, by accelerating innovation in process control, the uptake of low carbon technologies and product strategies. Companies involved in the work include Allied Bakeries, Jacksons and Irwins.
Current work is focused on the baking process by building a detailed picture of process energy use. This is based on information from process operators, equipment manufacturers and sub-meter data from equipment in use at representative sites. A feedback session looking at the findings of the investigations will take place in early June.
"In other similar industry sectors, we have worked with to date, we have identified opportunities that could save an average of 28% annual CO2 emissions per sector," says a spokesperson for the FDF. "Once this first stage of work is complete, we will aim to build a business case for the baking sector to implement the carbon saving opportunities identified, by undertaking focused research or demonstration projects."
Companies involved in bakery, equipment suppliers, technology developers and other stakeholders are all invited to propose projects that could be adopted across the sector. Contact The Carbon Trust on IEEA@carbontrust.co.uk.


Four steps bakers should take to prepare for the CRC

l Proactively verify whether your company qualifies. Penalties for non-compliance can be severe, so it's worth being prepared for the timetable of registration and reporting
l Check whether correspondence and information about the CRC is going to the right people in your company
l Consider what information you need from your energy supplier and which format it should be presented in
l Use the CRC as an opportunity to secure support within your company for environmental improvements





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