Andrew Toher, head of customer insights at Enel X UK, explains how businesses can begin to understand their contribution to climate change, and set meaningful targets to reduce carbon emissions. 

While the UK has cut total greenhouse gas emissions (GHG) by 41 per cent since 1990 – mainly through the phasing out of coal – we still have some way to go to limit the worst effects of climate change.   

The calls for greater sustainability across our industrial landscape may appear ambitious, but they are also urgently needed. The most recent Intergovernmental Panel on Climate Change (IPCC) report indicates that recent changes in the climate are widespread, rapid and intensifying. However, it also suggests that the unprecedented changes that we are likely to live through are reversible – to an extent – providing we act now to significantly reduce our greenhouse gas emissions.  

Opportunities as well as challenges 

It is important to emphasise that as well as meeting environmental obligations, becoming more sustainable can present significant opportunities to all industry sectors. These can include meeting increasing consumer preference for low carbon products; costs saved through energy reduction programs; greater innovation to achieve competitive advantage; enhancement of brand reputation; better preparedness for future legislation and the building of more financially- and climate-resilient supply chains. 

Stakeholders now want to see that organisations are properly accounting for climate change. Consumers are increasingly opting for more environmentally friendly brands. Employees want to work for more responsible companies and the investor community is making plain its commitment to withdrawing shareholder backing if climate is not adequately addressed. Tackling climate should now be seen as an opportunity to keep stakeholders happy, secure business and safeguard long-term investment.  

Breaking down the sustainability task 

For any business, energy reduction targets that will have a meaningful impact are a significant commitment, not least in industries dependent on complex supply chains and those trying to maintain competitiveness in a crowded market. However, they are not insurmountable when undertaken as a journey, and one that can be broken down into achievable stages.  

Adopting a high-level, three-step approach can help guide most organisations through the complexities of coming up with a plan to improve sustainability:  

  1. Identify the relevant stakeholders and bring them on board
  2. Identify and measure both your direct and indirect carbon emissions
  3. Implement measures to reduce those emissions, and record your progress 

Understanding your contribution to climate and securing stakeholder buy-in  

Securing cross-organisation buy-in usually starts with making a business case for sustainability that you can present to stakeholders. And because sustainability can mean a lot of things to different people, defining the scope and priorities of your focus areas is the first task. 

Identifying those motives can, in itself, be a voyage of discovery. Holding facilitated workshops is an efficient way to unpick goals and priorities. Workshops also serve to align stakeholders’ needs and improve understanding of potential technologies and solutions. Typically, stakeholder alignment grows as the project transitions from high-level to more detailed ambitions. 

Before beginning your sustainability journey, gathering reliable data and putting in place systems for collection and monitoring will be vital. This is the only way to have a true understanding of your impact – both positive and negative. This can be a challenge in an industry where the majority of emissions often occur within the wider supply chain.  

Obtaining good data and calculating a footprint using internationally recognised methods will help you comply with both existing and future GHG reporting requirements. It will also give you confidence and credibility in your external reporting. 

The GHG protocol is the internationally recognised standard, and breaks carbon emissions down into three groups: 

Scope 1: Direct emissions from your own operations such as gas boilers or fleet vehicles.  

Scope 2: Indirect emissions – for example, from purchased electricity. 

Scope 3: All other indirect emissions – or those across the broader supply chain. 

Isolating emissions within your control – those scope 1 and 2 emissions – should be attainable. This should then be followed by prioritising particular hotspots and then engaging with suppliers to tackle your whole value chain (Scope 3). 

It is important to consider an internationally recognised carbon accounting standard, such as the CDP score, so that your carbon reduction claims are credible and can withstand scrutiny.  

To efficiently and accurately measure Scope 1 emissions, you will need enterprise-wide energy tracking systems in place. You can measure Scope 2 emissions from purchased energy, by having comprehensive utility bill management systems in place. For Scope 3 assessments you will need accurate disclosures from your supply chain, both upstream and downstream. 

Setting targets to reduce emissions 

Target setting best practice now expects science-based targets (SBTs), which are specifically aligned to limiting warming to the recommended levels of 1.5°C or well below 2°C. These targets will help provide clear goals for reducing emissions which are in line with the trajectories needed to adequately limit climate warming. 

SBTs are particularly challenging when your suppliers are far removed from your own operations in terms of either geography and climate ambition. But you can start by identifying where the majority of emissions are coming from and the areas where you have the greatest ability to influence change. It then requires engagement with both staff and suppliers to implement procurement criteria and collaborate to find solutions. Working with suppliers to improve their own credentials on emissions can be a mutually beneficial exercise in terms of reputation, innovation and climate resilience. 

Energy efficiency is the key 

Improving energy efficiency within your operations will play a significant part and this comes with the potential for substantial financial savings. With the continued rise in Climate Change Levy rates, such savings could also avoid growing taxation costs. Steps to reducing energy intensity can include incentivised energy efficiency measures for employees, replacing inefficient technology and installing better energy management systems. Added benefits will include easier compliance with current legislation such as the Energy Savings Opportunities Scheme (ESOS) and the Streamlined Energy and Carbon Reporting Regulations (SECR). 

Renewable energy also plays an important role, and with cost reductions over the past few years, renewables are now financially viable competitors to fossil fuels. Investing in onsite renewable energy or purchasing it via assured certificates also allows companies to confidently report that the energy used is zero carbon.  

Implement solutions and track progress 

With an integrated energy strategy and implementation roadmap in place, you need to put in measures to move those metrics and to record your progress.  

Executing a plan to address Scope 1 emissions could include onsite generation, optimising electrification of key processes and participating in wholesale energy markets. Addressing Scope 2 may require purchasing renewable energy though Power Purchase Agreements (PPAs) and managing offtake agreements. Actions such as strategic sourcing and risk management, emissions tracking and measurement, as well as energy efficiency, will be central to reducing emissions across Scope 1 and 2. 

Addressing Scope 3 emissions hinges on tracking and measurement. As a CDP Gold partner, Enel X has visibility into supply chain disclosures and works with its customers to facilitate analysis of their upstream and downstream partners.

Reaping rewards 

Voluntary reporting GHGs through a globally recognised framework demonstrates your commitment to sustainability. CDP scores are now visible through several investor platforms, and alongside other initiatives such as RE100 for businesses committing to use 100% renewable energy, your reports will help to drive change across your organisation as well as signalling your intent to outside stakeholders. 

For major energy users, taking steps to meet sustainability goals can open up a whole new set of revenue streams. There are a variety of ways you can monetise your business energy assets, while at the same time supporting sustainability – including the use of virtual power networks and by participating in demand response schemes to take pressure off the grid at peak times. Since 2015, Enel X customers have received over £500 million in additional revenue from demand response programmes. The opportunities to monetise flexibility will increase as more renewables are integrated with the grid. 

Leading by example 

The Enel Group of companies have been on their own sustainability journey for more than five years. Enel has fundamentally changed its business model and invested in renewables, networks and digitalisation. The company is embedding a core value into its purpose and strategy, which is to work for sustainable progress. Our aim is to become a leader in shared value and sustainability. 

Investors are very selective today, rewarding companies that are leaders in sustainability, including those that are going to guide the change because they will create value in the medium and long term, becoming future-proof players. The tripling of Enel’s market capitalisation in just six years illustrates the fundamental role that sustainable finance is playing in accelerating the energy transition. In addition, the Group is increasingly attracting the attention of socially responsible investors, whose stake in the company is steadily growing, representing 13.4 per cent of Enel’s share capital in 2021, which is more than double compared to 2014 levels. 

Reducing GHG emissions is a vital undertaking that all organisations will need to fulfil over the coming years. While the rewards for embracing sustainability are tangible – both for the planet and the success of your business – for many, it will represent a challenge and demands commitment and expertise. That’s why, increasingly, organisations are looking to work with an experienced partner like Enel X rather than make the journey on their own.  

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