Centrica : 26 May 2020 Will sustainability plans be a victim of COVID-19?

26 May 2020 Will sustainability plans be a victim of COVID-19?

By Jorge Pikunic
Managing Director, Distributed Energy & Power

In the nine months before the March lockdown, we saw the largest ever shift towards environmental sustainability in the private sector. The Science Based Target Initiative began in 2015, and during the nine months to the end of March 2020 over 400 companies signed up to the initiative, almost doubling the total number of companies in the initiative to over 850. The size of these companies, as well as the number of companies, is noteworthy as it represents a combined market cap in excess of $3 trillion. However, since many of these companies announced their targets, COVID-19 has had a previously unimaginable impact on the global economy. As organizations respond to an uncertain economic outlook and adapt to a 'new normal' they face a dilemma: continue to progress towards their sustainability targets or focus on cash conservation measures - or do they?

I see, and am involved in, many debates about how the sustainability agenda will develop post COVID-19. Will new ways of living and working, better air quality and lower lockdown emissions boost commitment to sustainability? Or will the imperative of economic recovery take priority over commitments to net zero? It is hard to predict, and there are good arguments for both sides. In my view, a key determinant will be how governments deploy their fiscal stimuli.

For companies struggling with the perceived dilemma of improving sustainability or conserving cash; my experience running Centrica Business Solutions is that sustainability measures can often help generate cash. Over the last week, I have shared the following examples with our customers:

• Reducing energy use: Some energy efficiency measures, such as energy monitoring, require little investment and can generate significant savings quickly. Others, like LED lighting, require some investment. However, financing is often available, allowing organizations to reap the financial benefits from day one.
• Generating income from flexibility: There is a growing requirement for flexibility in the electricity system as the volume of renewables grows. Companies can earn significant income from flexing their demand and/or offering existing on-site generation into flexibility markets. This requires little upfront investment.
• Installing on-site generation: The falling cost of renewables, particularly solar, means that energy from renewable sources is often cheaper than centralized generation. Through financing, companies can lock-in lower unit rates for onsite power, and for longer, than traditional power procurement.

The journey to net zero can be daunting and embarking on it during a period of such uncertainty is especially challenging. However, there are two important points to remember:

1. It's a marathon not a sprint - the journey to net zero can take years. The key to making the journey smoother is to start early and ensure that you plan your pathway. Sequencing measures is very important. For example, if a site would benefit from energy efficiency and solar power generation, the optimal sequence is to implement first the energy efficiency measures and then solar power generation - it's the same if one is planning to lose weight and buy new clothes; there is an optimal sequence!
2. You are not alone - Organizations do not have to undertake the journey alone, they can receive help through expertise and flexible financing options. This means that the journey is simpler: reducing upfront costs, complexity and risk. There are options, ranging from simple power purchase agreements to energy-as-a-service models, to provide hassle-free access to the benefits of sustainable technologies, without initial investment or ongoing operational responsibilities.

It may be tempting to procrastinate on the road to net zero in these uncertain times. However, companies that push their sustainability agenda to one side may become less cost competitive in the short term. In the medium to longer term, they will almost certainly become laggards on the path to net zero. In my opinion, the question is not whether companies can afford to pursue the sustainability agenda, but whether they can afford not to pursue it.

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