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Reducing your carbon footprint - Achieve a competitive edge on the road to energy transition

Achieve a competitive edge in the energy transition

When sourcing renewable energy, corporates face a number of key challenges and need to secure the right combination of expertise to create long term value.

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Lowering your carbon footprint – An integrated approach to achieving a competitive edge in the energy transition

Introduction

Tech giants like Apple, Google and Netflix are doing it. Consumer goods companies like Heineken, Unilever and Wal-Mart are doing it. TelCo's like T-Mobile, AT&T and KPN are doing it. What? Actively lowering their carbon footprint by rolling out energy efficiency programs and/or (directly) procuring renewable energy instead of conventional energy (from the grid). Why? Is it purely driven by stakeholder pressure and consumer demand?

This article is the first of a series of articles aiming to provide you with clear insights into the motivation for such companies to spend significant time and money on reducing their carbon emissions. It will highlight the different strategic options available to achieve this reduction and offers a practical approach in achieving a competitive edge in the road to energy transition.

Why?

Companies each have their own distinct motivations for lowering their carbon footprint. The rationale can be broken down into three main elements:

Strengthen resilience

  • Retain investors' confidence: An increasing number of investors demand corporate actions around 'responsible investment' as part of their fiduciary duty;
  • Secure access to a decentralised and reliable energy source: Companies are investing in renewable energies to obtain access to a predictable and local supply to safeguard their energy independence

Improve cost management

  • Improve cost visibility: renewable energy sources like solar and wind offer steady and predictable long-term costs, reducing exposure to financial risks from fossil fuels price volatility as well as potential future carbon taxes or other sanctions.
  • Benefit from declining costs: The strong decline in the levelised cost of energy for renewables is expected to continue. 
  • Maximise tax and financial incentives benefits: Companies unlock access to incentive mechanisms by investing in renewable energy

Enhance branding

  • Build reputation beyond financials: Many corporations are committing to global initiatives and principles, and shifting to renewables helps these agendas.
  • Maintain a leading position among peers: Sourcing renewable energy enables the company to maintain a competitive advantage.
  • Respond to customer trends: Customers demand more environmentally-responsible actions from the companies they do business with.

How?

A set of opportunities with different investment characteristics is emerging, creating new services and business models within the (renewable)energy space for corporates to benefit from:

  • Energy efficiency projects: Projects leading to reduced carbon emissions by decreasing energy consumption or the emissions per unit of consumed energy
  • Certificates: Acquisition of bundled or unbundled energy (or carbon offset) certificates
  • Renewable energy procurement: Acquisition of energy through Corporate PPA (Power Purchase Agreement) from third party 
  • Renewable energy through self-generation: On-site or off-site renewable energy installation owned by the company

Achieving the optimal result for your company

When sourcing renewable energy, corporates face key challenges and need to manage different risk profiles as operations could span different geographies and markets. As such, they have to form views on the main considerations being technical, economic or social/environmental or related to governance.

As a result, renewable energy sourcing requires an integrated and phased approach to deliver optimised strategies, robust implementation roadmaps and governance helping to give your company that vital competitive edge.

Conclusion

Leading companies are taking an active role in the reduction of their carbon footprint for multiple reasons and through multiple options, often consisting of procuring renewable energy. In order to develop a new carbon strategy, an integrated approach should be taken, involving all the relevant corporate expertise and functions. This article is part of a series of articles, each focusing on one or more of the corporate 'lenses' showed earlier (such as finance, technology, markets, etc.), providing practical lessons learned from earlier experiences.

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