CRC Energy Efficiency Scheme: are you ready and do you need to be?

HR professionals are used to ensuring compliance and best practice around employment law, but are they aware of their organisation’s carbon reduction commitments?

With less than 10% of the estimated 20,000 firms that will have to participate in the scheme having signed up, many organisations are facing fines if they miss next month’s deadline. Helen Gilbert finds answers to some common questions.

What is the CRC Energy Efficiency Scheme?

The CRC Energy Efficiency Scheme (formerly the Carbon Reduction Commitment) launched in April 2010 and is a new mandatory energy-saving and carbon-emissions-reduction scheme for the UK.

It aims to ensure organisations contribute to the UK’s emissions reductions of at least 34% on 1990 levels by 2020 through improved energy efficiency.

The Environment Agency, which is running the scheme, claims around 5,000 companies will have to register fully and about 20,000 firms will be required to participate in some way.

At the time of writing, 1398 organisations had signed up. However, the 30 September deadline is fast approaching and eligible organisations that fail to register may be fined a fixed penalty of £5,000, and an additional £500 for each subsequent working day to a maximum of 80 working days, together with a publication of non-compliance.

Firms will appear in a league table with their position determined by how well they perform.

How does the CRC Energy Efficiency Scheme work?

All public and private sector organisations that had at least one half-hourly meter (a meter that records energy every 30 minutes) during 2008 must register or make an information disclosure.

If an organisation consumed at least six gigawatt-hours of qualifying electricity through all of its meters during 2008 – equivalent to an annual electricity bill of around £500,000 – then it will need to participate in the scheme by monitoring energy consumption and purchasing allowances equivalent to their emissions each year.

If an organisation consumed less than this amount, it would need to make an information disclosure and will not have to monitor and report its annual energy use or purchase allowance.

How will this benefit employers?

According to the Environment Agency, employers who are successful in reducing energy consumption will save money on energy bills and will need to buy fewer allowances.

The highest-ranking organisations in the league table will receive the greatest financial reward as all of the revenue raised from selling allowances is “recycled” back to participants six months after the sale of allowances. The league table position affects how much of the revenue each organisation receives via a system of bonuses and penalties.

How will this affect HR?

Henry Le Fleming, a carbon policy specialist at PriceWaterhouseCoopers (PwC) told Personnel Today that organisations that have not previously been involved in carbon trading might find the process challenging. “The big thing is the league table – published every year – that will list your performance against the metrics and non-compliance. There’s impact there on reputation. It’s important you make sure you have the processes in place to manage the risk, systems and governance. It will come back to HR.”

He continues: “Companies not in trading schemes have a challenge. What kind of staff are they going to use, who are they doing to train to do the reporting of carbon in these schemes? It’s a challenge getting the right people involved. Organisations that haven’t been in carbon trading need to develop skills to comply with that. Sometimes they come to us, or they may have other providers they are using around energy efficiency. Then there’s in-house – it depends how big the organisation is and what the bill is going to be.”

Given the levels of electricity used, the CRC Energy Efficiency Scheme relates mainly to larger organisations, although some smaller companies with high energy consumption in, for example, the manufacturing sector may be affected. While many large organisations will have dedicated departments outside of HR to ensure compliance with the scheme, the publication of league tables could have an impact on HR issues like employer branding and corporate social responsibility as well as policies designed to reduce energy consumption.

Anomalies within the CRC Energy Efficiency Scheme

PwC supports the Government’s drive towards a low carbon economy but points out that employers should be aware of anomalies within the CRC scheme, particularly in the area of league tables, which could ultimately have an impact on the reputation of an employer.

According to Le Fleming, the big problem is around buildings. The CRC scheme only includes energy that the organisation buys directly for buildings of which they are the sole supplier. If you pay your rent through a service charge, you are not paying for your electricity directly and the carbon is deemed part of your landlord’s footprint.

Le Fleming explains: “When we move to our new office More London – the most environmentally high-performing building in the UK – we will move out of temporary accommodation across London where the landlord controls the energy, into the new building where we control the supply, thereby increasing our footprint under the scheme.

“PwC’s operations and sustainability and climate change teams have worked together to assess the impact of the scheme during its initial five years of operation. We conclude that we will perform well in years 2011, 2013, 2014 and 2015, but the move into More London will impact our performance in year 2012 – making us mid-table at best.

He continues: “Performance in the league table is about energy consumption not overall carbon footprint, which for example, might have included emissions related to travel or waste management. Despite reducing our total carbon and environmental footprint over the past few years, we know that moving into More London will actually cause our CRC emissions to rise, as we will have to account for emissions previously managed by our landlord.

“Our ranking will recover after 2012 thanks to investment in energy reduction in other buildings, but we have to be aware of the financial and reputational anomalies of the CRC league tables. It shows just how hard it is for companies to get this right even when they are doing the right thing overall.”

Guidance for employers from the Environment Agency (PDF)

Case study: London Fire Brigade

The London Fire Brigade registered for the scheme on May 24 2010. Energy manager Ian Shaw, who works in the property department, was responsible for setting it up. He explains: “The organisation buys certificates to cover the CO2 emission from its buildings. An annual league table shows how participants have reduced their emission compared to previous year’s performance. Those at the top of the league table get a bonus and those at the bottom get a penalty.

“We have had a long running energy-efficiency programme and have achieved the Carbon Trust Standard. In preparation for CRC we have also installed automatic meter reading to all or our gas and electricity meters.

“Once we had all of our data in a suitable format that we knew was correct and robust then registration was not too difficult. The work we have done already means that we should be well placed to do well in the league table and that the work on the supplier/meter information means we are more aware of where and how we use our energy.

“London Fire Brigade’s green projects have led to savings of £260,000 in 2009-10 and over £1m since the brigade started focusing on the need to be greener. Despite the organisation growing overall, carbon emissions from our buildings are down by over 18 % on 1990s levels.”

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