Chris Bowden, MD, Squeaky
15 minute read
I regularly speak to business owners who find the terminology around sustainability and green topics difficult to get to grips with.
And I can appreciate why…
The climate agenda has accelerated in recent years and buzzwords can be hard to keep up with.
The issue is that for some businesses, this limited understanding of green terminology is holding them back.
In fact, new research found that nearly a third of senior business decision-makers from a range of UK industries believe that a lack of clarity on what net zero means is a barrier to actually achieving net zero. The second biggest barrier only behind cost (!)
Let’s not let complex language, abbreviations and transparency stand in the way of making change happen.
This is the ultimate sustainability jargon buster for 2022.
What does clean energy really mean?
Clean energy is energy that is derived from natural, non-polluting, UK resources that are capable of being replenished in a short time scale, such as wind, solar, geothermal, wave, tidal and hydropower.
Why is clean energy so important?
Genuinely clean energy has a number of environmental and economic benefits. It is key to reducing air pollution and has limited environmental impact. Plus, a diverse supply of clean energy reduces the dependence on imported fossil fuels and therefore removes the environmental cost of relying on dirty energy.
It is more important now than ever for businesses to know that they are powering their companies with genuinely clean energy. Consumers, employees and investors are holding businesses to account on environmental, social and governance (ESG) issues. And as such, when a business claims to be clean, they want to know that they are indeed, genuinely, clean.
What is climate change?
A short answer to what is climate change; a long-term shift in global weather patterns or average temperatures.
The earth’s surface is warming and many of the warmest years on record have existed in the past 20 years. A rise in temperature can lead to extreme weather patterns such as floods, heatwaves, droughts and storms.
What causes climate change?
The main cause of climate change is the greenhouse gas effect. Burning fossil fuels adds vast amounts of greenhouse gases to those naturally occurring in the atmosphere. These gases act like the glass of a greenhouse, trapping the sun’s heat and preventing it from escaping.
Is climate change bad for the economy?
Climate change is not only bad for people and planet, but it is also one of the biggest threats to economic stability.
For example, increasing temperatures in parts of the globe are making some areas uninhabitable leading to civil unrest and mass migration. Whilst storms can devastate communities and businesses in an instant and major droughts can reduce crop yields significantly.
Many business leaders often fail to consider the existential risk of climate change on their business.
Let’s be frank, many companies simply won’t survive its impact.
The 2019 Climate Disclosure Project report by a UK environmental non-profit showed that the world’s largest 500 companies could potentially face $1trn worth of financial risks due to climate change, such as higher operating costs, asset write-offs and falls in demand. It is also very likely that many companies will simply become uninsurable.
Climate change is the biggest risk to businesses and they need to act, now.
What is a Corporate Power Purchase Agreement (CPPA)?
A CPPA is a long-term contract between an energy buyer and an energy generator. The two parties agree to buy and sell an amount of energy which is, or will be, generated by a renewable asset.
A CPPA is usually agreed over a period of 10-15 years, although we are starting to see shorter terms.
What is an example of a Corporate Power Purchase Agreement?
In October 2019, 20 of the country’s leading universities joined forces to strike a landmark renewable energy deal that would reduce both their bills and carbon footprints.
The ground-breaking aggregated corporate power purchase agreements (CPPAs) saw the universities buy £50m of renewable energy from a portfolio of wind farms. The deal fixed power prices at a competitive rate for the ten years following – and in doing so, minimised their exposure to market volatility.
This specific CPPA was arranged by us at Squeaky in partnership with The Energy Consortium. For a period of 10 years, Statkraft, Europe’s largest producer of renewable energy, will annually deliver the wind power from their British portfolio.
What are the benefits of a Corporate Power Purchase Agreement?
There are many benefits for businesses who opt for a CPPA.
A CPPA allows a corporate business or public sector buyer to diversify its energy supply sources across multiple technologies and protect against energy price volatitlity. Plus, organisations are able to lock in long term supply of renewable energy and be certain about the source of its power.
And there are also multiple benefits for the generator, too. A corporate buyer represents an attractive opportunity to diversity income streams away from traditional utility offtakers that very rarerly offer long term fixed price arrangements.
In truth, the cash injection from a corporate buyer could be a generator’s key to unlock finance for a renewable energy project, which would have been inaccessible if the project was reliant on a single utility (or risky merchant wholesale markets) for its long-term revenue stream.
This is a huge bonus in volatile energy markets where subsidy support for renewable energy is slowly being removed.
Is a Corporate Power Purchase Agreement risky?
There is no denying that a CPPA comes with a degree of risk.
It is important that any business undertaking one has a view of some of the more complex contracting and risk issues that can make it difficult to value a CPPA from any given project of portfolio.
Whilst there are various ways a company can approach a contract, the main thing to consider is the transfer of risk between the parties. There are two main ‘risk buckets’ to consider:
- Market risk.
- Credit and contractual risk.
Find out more about each of these ‘risk buckets’ in our step-by-step guide to CPPAs.
What does GHG stand for?
GHG is an abbreviation for greenhouse gases. GHGs are compound gases that trap heat or longwave radiation in the atmosphere. The release of greenhouse gases contributes to climate change.
What are the main GHGs?
The main greenhouse gases are water vapour, carbon dioxide, methane, ozone, nitrous oxide, and Chlorofluorocarbons.
What are the major sources of carbon dioxide?
Major sources of carbon dioxide are fossil fuel combustion, deforestation and cement production.
UK emissions are dominated by carbon dioxide, which is estimated to have accounted for about 79% of greenhouse gas emissions in the UK in 2020.
GO or GoO
What is a GoO?
A GoO stands for Guarantee of Origin. Essentially, it is the name for the scheme which proves electricity originates from a specific energy source.
All EU member states must have a GoO scheme. The UK government has ensured that Great Britain and Northern Ireland will continue to issue Renewable Energy Guarantee of Origins (REGOs) and accept Guarantees of Origin from EU member states since 1 January 2021.
What is greenwashing?
Greenwashing is the act of making an unsubstantiated or misleading claim about the environmental benefits of a product, service, technology or company practice. In short, greenwashing practices can make a company appear to be more environmentally friendly than it really is.
Why is greenwashing bad?
Over the last two years we have seen multiple c-suite executives making unrealistic and somewhat outlandish net zero pledges, instead of taking action. This creates a poisoned chalice for future leaders and is neither helpful, nor ethical.
For instance, we have witnessed a number of firms misunderstanding the difference between clean energy and all the other greenwashing variants. Some suppliers in the UK actually source energy from fossil fuels and then buy REGOS (or even worse European GoOs) and package this up as ‘renewable energy’ for their clients.
Imagine claiming that your company has committed to green energy (and publicising this to the media) only to find that you’re buying fossil fuel energy or undermining the UKs support schemes like the Feed in Tariff. That’s a disaster waiting to happen for many companies and we need to lift the curtain on this.
What is net zero?
Net zero is the balance between the amount of emitted greenhouse gases and the amount of greenhouse gases removed from the atmosphere. We hit net zero when the amount we add is no more than the amount taken away.
How can a business reach net zero?
The positive news is that the technology, creativing thinking and affordability now exists to reach net-zero.
Businesses can set themselves up to reach net zero, contribute to the bigger goal of limiting global waming and, ultimately, limit further impact of the climate disaster.
Here are seven actions businesses can take to reach net zero:
1. Offset carbon emissions
Reaching net zero requires momentous abatement of greenhouse gas emissions across all sectors of the economy. Certainly, offsetting alone will not tackle climate change and it cannot be treated as a silver bullet.
2. Power a business with genuinely clean energy
Energy is the foundation of any business, and if you are serious about reaching net-zero, it is that businesses responsibility to power its people with energy that has no adverse impact on the environment. This means reduced or no carbon emissions, and no high-level radioactive waste emissions.
3. Identify and overcome misconceptions
One of the biggest misconceptions out there is the belief that a mission or purpose that embeds ESG commitments costs more. Prioritising ESG doesn’t have to cost the earth - indeed robust actions and transparent behaviours can be adopted with little cost, and yet the value add can be exponential.
4. Create, capture and transmit data.
Advanced analytics supply businesses and organisations with insight into how efficient they are, ultimately helping to pinpoint opportunities to reduce environmental impact.
5. Use new technology
Artificial intelligence (AI) and Robotic Process Automation (RPA) developments are also making a significant contribution to the sustainability agenda, helping optimise operation efficiency and process accuracy.
6. Innovate thinking
Businesses need to be open to and commit to collaborating in green finance, invest in clean technology and use their powerful voices to back social movements that call for positive change. And it’s the c-suite who must lead this charge.
7. Role model green behaviours.
Companies who are serious about becoming more sustainable, inclusive, and socially responsible must consider ways to embed these objectives into the organisation and start initiating behavioural change right away.
What is a REGO?
A REGO is an abbreviation of a Renewable Energy Guarantee of Origin.
A REGO is a certificate which proves one megawatt hour (MWh) of electricity has been generated from a renewable source.
A REGO is ‘proof’ to the final customer that a given share of energy was produced from renewable sources. The main use of REGOs in the U.K. is for Fuel Mix Disclosure (FMD), which is the requirement of licensed electricity suppliers to disclose the mix of fuels used to generate the electricity supplied to potential and existing customers.
What is the problem with REGOs?
Critics of the system see REGOs as a loophole that allows suppliers to become seemingly ‘green’ overnight for a rock bottom price, without actually forming relationships directly with renewable generators.
Essentially, suppliers are able to buy fossil fuel, combine it with a REGO and claim that it is renewable. So, their customers will think that they are buying renewable energy, but it could well be ‘dirty’ energy.
It is important for businesses to know that power is separate from a REGO certificate.
Plus, the other problem is that some suppliers substitute European GoOs for UK REGOs. Although this is currently allowed under UK law (although it is worth nothing that the UK can’t sell REGOs into the EU) the impact is that it reduces the amount of money available for locally soucred clean energy. You may think you are buying renewable energy, but your company could actually be undermining the development of the clean energy sector.
What exactly is renewable energy?
According to UK and EU definitions, renewable energy refers to energy from renewable non-fossil sources, namely wind, solar (both solar thermal and solar photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas.
You may be surprised to see references to ‘dirty’ energy sources in the definition of renewable energy, including biomass which releases both solid carbon particulates and greenhouse gases like carbon dioxide.
Let us explain what’s happening here…
Thousands of consumers are confused about the sources that go into the ‘renewable’ energy they are buying. In fact, our own research has shown that only 34% of consumers knew that renewable energy, for many companies, actually includes biomass.
And it’s clear to see where this confusion comes from. When we audited big energy company websites to find out what sources were actually included in their products, we found a confusing variety of terms and an absence of definitive information.
With that in mind, we believe the industry needs to develop and enforce a clear definition of renewable energy. We recommend this is the defitinion of renenwable energy that is used:
Renewable Energy is energy that is derived from non-fossil sources: wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases, and can be imported from overseas.
Is renewable energy bad?
Renewable energy is not ‘bad’ for the environment. Compared to fossil fuels, renewable energy is much greener.
However, the issue, as we have started to explore above, is that many energy companies frequently promote their renewale tariffs under an eco-friendly banner, with terms like ‘renewable’, but the energy they have sourced actually comes from ‘dirty’ sources.
So when the term renewable is used by businesses, it doesn’t necessarily mean non-polluting, sustainable or carbon-neutral.
Examples of dirty energy sources include: • Biomass, which typically means burning imported wood pellets • Incinerating household or farm waste • Energy certificates imported from other parts of Europe, (which undermines the development of UK clean energy) • And perhaps the most common and worse example of all - suppliers buy REGOS and combine it with electricity generated from coal and gas
What is a simple definition of sustainability?
Put simply, sustainability means meeting our present needs without compromising the ability of future generations to meet theirs.
In a more practical sense, to be sustainable, we must find ways to meet the demands of all life, without causing harm to society or compromising the planet for those that will exist beyond us.
The concept of sustainability has three main pillars: economic, environmental, and social. These three pillars are often referred to informall as people, planet and profits.
What does sustainability mean in business?
In a business sense, sustainability is when a business frames decisions in terms of environments, social, and human impact for the long term, instead of focussing on short-term gains.
For example, sustainability should inspire a business to consider more than the immediate profit or loss as a result of its actions.
For a business to be truly sustainable it must consider the impact of its entire supply chain and hold every level of its operations – from suppliers through to retailers – accountable.
What is an example of sustainability in practice?
Many companies have named sustainability as a key priority and are turning strategy into practice to ensure they can honour the commitments they have made.
Examples of sustainability in practice include waste to energy recycling, cutting emissions, lowering energy usage and switching to a clean energy supplier and sourcing products from fair-trade organisations.
Sustainability practices may also include higher budgetary commitment to research and development (R&D). For example, engineering and technology company, Bosch, has dedicated half of its R&D budget to create and support technology that protects the environment. This includes allocation budget to universities and other research programmes which are focused on sustainability and protecting the planet.
For many companies, practicing sustainability will mean issuing sustainability goals. These may include commitments like; becoming carbon neutral by a certain year, or, achieving zero-waste packing in so many months.