As companies examine and review their supply chains to make them more adaptable to confront the tumultuous storm of economic change, they are being forced to consider the environmental and ethical credentials of their supply chains.

But in reality, companies are still struggling to forge truly sustainable supply chains. This is perhaps one of the biggest challenges companies face as they attempt to embed true sustainability into the very foundations of their organisations. Many companies source products from across the world, operate in different countries, with very different cultures, governments and financial circumstances. It’s a very hard thing to control. But it’s not impossible.

In a report published this year by the Carbon Disclosure Project (CDP), blue chip companies were warned that while many have taken steps to change their operating models to improve their environmental performance, there is still a worrying gulf between the operations adopted by their own operations and those embraced by their supply chain.

The survey of 49 CDP members included major names such as L’Oreal, Philips and Walmart and more than 1,800 suppliers. 43 per cent of the blue chip companies had taken steps to reduce their emissions, compared to 28 per cent of their suppliers. While less than a quarter of companies had helped suppliers to recognise and capitalise on the financial returns of low-carbon investments.

Furthermore more than half of the suppliers said they expected to see their costs soar because of climate change while a third said their operations were hampered by extreme weather events in the past year.

“Companies are evolving the way they operate to better capitalise on the opportunities presented by carbon efficient supply chains,” said Frances Way, programme director for CDP. “Such a large shift in companies’ procurement models is encouraging but since these trends are only now emerging, we are yet to see a transformational impact on supplier’s emissions.”

But it is not just about carbon management and creating a low carbon supply chain. Companies must address every sustainability issue in their supply chain, from waste management and recycling to water efficiency.

 Nike is embracing the challenge and announced this month, that it plans to make some radical changes to how manages its supply chain. As part of its latest sustainability report, the retailer said it intends to launch a new manufacturing index in 2012 that will place the sustainable practices of its factories on an “equal footing” with the traditional supply chain standards of delivery, cost and quality.

This index will include environmental and labour-sustainability data and will be used to evaluate the performance of its suppliers. If suppliers want to do business with Nike going forward, their operating models will need to demonstrate a commitment to wider sustainability.

 The implications of such a move could have global ramifications for the supply infrastructure.  Fundamentally, it means suppliers that are greener and more socially responsible will have the competitive edge over suppliers that are not.

At the same time, those companies that can fully verify and trace the sustainability credentials of their supply chain will also be poised to win competitive advantage. But these credentials must look at the wider spectrum of interconnected risks including labour practices and more ethical issues.

The importance of managing social impact is gathering pace. As are the benefits. Take Cafédirect for example. Its work helping cocoa farmers to create a sustainable supply chain has led to a 500% increase in their income from the crop. The company managed to achieve a better balance between the economic, social and environmental pillars of sustainability.

Its work with farmers in São Tomé in Africa is a fantastic case study. The company worked incredibly closely with smallholders to introduce a new range of high quality, ethically-sourced cocoa to the UK market. It helped farmers to form a co-operative, learn how to dry and ferment their own cocoa, achieve Fairtrade certification and most importantly, sell directly to buyers.

But they went further than this. The company ensured growers achieved the right certification and standards to get direct access to international markets. It encouraged its farmers to become shareholders in Cafédirect and be represented on the board, while they also actively helped to build links with other buyers. Even more commendably, Cafédirect invests 50% of its profits back into the businesses it trades with, but leaves the co-operatives to decide for themselves how that money is spent. It’s a remarkable story.

“Engaging with your supply chain and making the right decisions are not straight forward,” says David Beer, Director of IndustryRe Sustainability. “We live in an interconnected world and our actions, including the actions and decision taken along the supply chain, can and will impact your business. Ensuring the goods you purchase meet the required sustainability standards requires both a transformative and collaborative approach to supply chain management. It’s certainly a huge challenge but a challenge that offers the promise of future growth and prosperity if companies get it right,” he added.

Consumer goods giant Unilever said that in 2011 alone climate change cost it €200m, mainly because of drought and flooding. For that reason it has revealed plans designed to address the impact that climate change is having on its operations and to promote these actions to investors.

Not all businesses are taking such proactive steps. Those that are global tend to be exposed to the extreme weather of more developing countries, where the impacts of climate change are likely to be felt hardest. According to Maplecroft’s Climate Change Vulnerability Index, countries like Bangladesh, India, China and Brazil are among the most at risk from the effects of climate change. Organisations with operations or assets in these countries will be more vulnerable.

Like Unilever, climate change is something that British Sky Broadcasting (BSkyB) is taking very seriously. It has major concerns around its supply chain and specifically the reliable sourcing of precious metals, which it needs for its set-top boxes and other electronic devices. Most of these “rare earth” materials come from regions that are at greatest risk from severe weather as a result of climate change.

It’s difficult to find alternative sources of supply that aren’t in natural disaster prone areas. Last year’s Tohoku earthquake and tsunami, for example, seriously disrupted the sourcing of electronic components from Japan—since a significant portion of this specialist industry is based in Japan. When suppliers moved their production to Thailand, the country was hit by the worst flooding it had seen in over 50 years—driving up the costs of electronic components further.

In order to adapt BSkyB tries to source materials from as many different places as possible, including China and Romania. Even better, the company is taking a commendable approach to reusing and recycling materials (especially precious metals) that are returned to Sky (via its engineers or freepost). It hopes to create its own dependable “closed loop supply chain”.

Just like other large organisations, BSkyB also feels the effects of climate change closer to home. Unpredictable weather—like the cold winters that the UK has experienced in recent years—cause staff absenteeism because people find it hard to get to work.

More generally, with a growing demand from consumers for energy efficient products, companies need to be more competitive in the goods and services that they offer. That means becoming more energy efficient in their own operations.

Fiona Ball, Head of Environment at BSkyB, says: “We regard sustainability as more than a marginal exercise. It’s central to our overall business strategy, making our operations more robust and efficient, and building deeper relationships with our customers and business partners. This leads to not just a profitable and successful company today, but one which creates sustainable value over the long term.”

“We know climate change is occurring and the real world ramifications of that change are already being felt,” said Eileen Claussen, president of the Pew Center on Global Climate Change. “In addition to policies that reduce greenhouse gas emissions, we also need strategies to adapt to those climate change impacts that are unavoidable. The private sector faces a range of risks and it is important that they begin now to assess their options and strategies for adapting.”

Another company that recognises its exposure to extreme weather as a result of climate change is BT, one of the world’s biggest providers of communications solutions. With operations in 170 countries these physical risks can cause higher operational costs or reputation damage caused by network disruption, damaged equipment, customer complaints and employee injuries or absenteeism.

Making matters worse, during periods of extreme weather, use of BT’s communications services tends to increase. BT’s network of 999 emergency call centres, which typically experience weekday volumes of around 65,000 calls, saw an 18-30% leap in calls during the heavy snowfall in January 2010, for example.

In response to these problems BT takes a comprehensive approach to monitor, manage and adapt. This strategy is company-wide and championed at the highest levels of the organisation.

Eric Anderson, Senior Sustainability Manager, for the BT Group, says: “Our drive for a better future by being a responsible and sustainable business leader is embedded into our company strategy to build a better business.”

Another company that is making efforts to mitigate the impact of climate change on its operations is the New Orleans based energy company, Entergy. After suffering a $2 billion loss from Hurricanes Katrina and Rita back in 2005, they started to take steps to adapt to a changing climate, such as moving business critical assets away from natural catastrophe prone areas.

“We’re still trying to take the next steps,” says Brent Dorsey, Entergy’s Director of Corporate Environmental Programmes. “But it’s like alcoholism—admitting there’s a problem is the first step.”

Last year was the costliest on record for natural disasters. At about $380bn (€290bn), global economic losses were nearly two-thirds higher than the previous record in 2005 of $220bn, according to Munich Re, a large reinsurance company.

Given this heightened risk profile organisations may want to learn from some of the sustainability leaders cited above as they plan and prepare for an uncertain future.

In its current fragile state the global economy is very susceptible to oil and gas price-related shocks, according to the World Economic Forum’s Global Risks 2012 report. Extreme water supply problems and political uncertainty in the Middle East and Africa, a key oil producing region, are leading to increases in global oil prices.This growing volatility combined with a tough economic climate is contributing to making energy more of a top-level concern.

In fact, the 2011 npower Business Energy Index (nBEI) – an annual report tracking business opinion on energy use – revealed that major energy users rank energy as the top business risk they face. Crucially, it was placed higher than health and safety, credit and security in terms of risk.

Rising oil and gas prices introduce a number of problems for companies. There are the reputation risks imposed by new carbon regulations, such as the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) in the UK or the EU Emissions Trading Scheme, which introduces a pollution cost into the price of energy.

Higher prices per barrel also have knock on effects for other commodities like food. As the price of various commodities rises some governments are making moves to nationalise key assets. This poses a significant challenge to foreign investors. The resurgence of resource nationalism is particularly evident in Latin America.

Rising oil prices have also wreaked havoc in the airline industry and caused the collapse recently of Spain’s Spanair and India’s Kingfisher. Airlines are in a particularly difficult position because the development of alternative fuels is still only at the research and development phase.

All of this is increasing the imperative on companies to minimise their exposure to oil and gas price shocks.

A good response to this problem is for companies to assess which parts of their business are the most energy intensive and then to manage or reduce their exposures. It’s harder than it sounds, but not impossible.

To do it organisations need to map their exposures right down through the supply chain. Large oil or gas users in particular need to assess new ways to manage their energy more intelligently. For example, smart meters capture crucial data on energy use, which can then be analysed to make decisions on efficiency.

Every plan to manage energy use relies on good quality data. Only with accurate data that shows where and how energy is being used, can the necessary measures be put in place to reduce consumption. More than a fifth (22%) of businesses said they have not reduced their organisation’s energy consumption at all in the past 12 months, according to the energy index cited above. Clearly there is significant room for improvement.

Companies should also investigate the benefits of self-generation. For major energy users in particular, there is the chance to generate significant revenues by selling back to the grid during times of high demand.

The nBEI revealed that 39% of major energy users and 61% of small to medium-sized enterprises do not have any self-generation capability. This means not only are they missing out on back-up generation capabilities and reputational benefits, but potential revenue streams.

Furthermore, by reducing its dependence on oil and gas supplies, a company can decrease its exposure to the reputational and financial risks associated with this type of fossil fuel.

Meanwhile, weaning yourself off non-renewable energy, like oil, could be a significant reputational and strategic advantage. You could seize the initiative over your competitors who will be hampered by the increased costs, for example.

A robust business continuity plan can help a company prepare for fuel supply disruptions, such as those caused by the Arab Spring recently, but looking ahead it seems that companies will just have to come to terms with higher oil and gas prices. With demand on the rise, particularly in the emerging markets, it’s hard to see prices going in any other direction than upwards.

Companies need to be aware of these trends so they can take them into account in their business strategy and make efforts to reduce their dependence on finite energy resources, such as oil and gas.

Renewable energy would create 400,000 jobs and save the country £60bn in oil and gas imports, according to a new report released this week by the Renewable Energy Association, (REA).

If the UK meets its mandatory target of producing 15% of its energy from renewable sources by 2020, it would generate annual savings across the sector rising from £12.5bn currently to £50bn by the end of the decade. Similarly, employment across the sector would rise from around 110,000 people currently to 400,000 jobs by 2020.

The report is published to mark the high-profile summit taking place in London that will see energy ministers from 23 countries gather to discuss measures to accelerate the development of the low carbon economy. For the UK government, it’s an opportunity to consolidate and showcase the UK’s position as one of the world’s leading renewable energy markets.

But how well are we doing in reality? The same report says that the UK is actually set to miss its renewable energy targets by a wide margin. Only 3% of the UK’s energy currently comes from renewable sources, such as sun and wind, compared with a European average of 12%. If we carry on down this route, imported gas is likely to represent an increasing proportion of the UK’s energy bills and will carry billions of pounds in expense.

As an industry, renewables, which includes wind, solar power and biomass, generate a turnover of about £12.5bn a year, with exports worth about £1.6bn last year. So why isn’t it gathering more pace?

Incessant bickering in Westminster is certainly to blame in part. Whether it’s the drastic cuts to solar subsidies, the alarming letter to the prime minister from 101 Tory MPs calling for similar cuts to wind power or the government’s reckless “dash for gas” which could see a host of gas-fired power stations built across the country, an unwelcome cloud has fallen on the UK’s green agenda.

And amidst the melee, we still haven’t categorically conquered one of the seemingly insurmountable stumbling blocks for dependable, widespread and practical renewable energy. How do we store excess electricity and how do we manage the fluctuating and unpredictable nature of energy generation from clean sources? This should be a priority for the government.

Widespread use of renewable energy is dependent on the development of effective and affordable means to store excess electricity. Some methods already in existence include the use of huge batteries, covering electricity to liquid air. But the amount of energy these batteries can store doesn’t justify the huge size of the units, some as large as a football field. In 2004, a 1,300 metric ton battery was installed in Alaska to protect against blackouts but it could only provide sufficient electricity for seven minutes for the 12,000 residents. To match the power just one coal plant generates, we would need hundreds of units. It’s just not practical.

Other batteries have been developed, but some lose energy during initial storage and release. Lithium ion batteries work better, but are hugely costly, and potentially explosive, when the oxygen it needs to work is mixed with moisture absorbed from the air.

But money is being invested into finding more practicable technological solutions and things are moving in an encouraging direction.  Indeed, the Engineering and Physical Sciences Research Council are investing £3.7 million in a renewable energy storage project at Warwick University.

While Sheffield-based firm, ITM Power, has won a grant from the Technology Strategy Board to investigate a new method. The company will be looking at the feasibility of using hydrogen gas, generated from electrolysis, fed from excess renewables, into the UK gas networks. The firm will work in partnership on the project – due to launch in July 2012 and take 12 months – with the Scottish Hydrogen Fuel Cell Association and Kiwa Gastec at CRE (Gastec) and will seek to make a generation model and simulate the potential hydrogen production at a single wind farm.

In fact, the landscape is bursting with innovation. There is a new, potentially exciting, type of power plant that cools excess energy and stores it in the form of liquid air, or cryogen. Here in the UK, this technology is being tested at Highview, a 300-kilowatt, 2.5 megawatt-hour pilot plant built at a Scottish & Southern power station outside London that’s feeding stored energy into the grid. The project, which has raised £11 million ($17.4 million) of private investment to date, wants to build a 10-megawatt, 40 to 50 megawatt-hour facility, says their CEO, Gareth Brett. At that scale, Highview is targeting total costs of about £600 per kilowatt, or about £300 per kilowatt-hour of energy stored. That price is lower than most, if not all, of the battery-based grid storage technologies now being deployed for grid-scale storage today.

In fact, it’s cost-competitive with the two most cost-effective energy storage technologies today: compressed air and pumped hydro. But where compressed air requires underground caverns, and pumped hydro requires dams and reservoirs, Highview’s system can scale up at 1 megawatt-hour of energy for every 10 tons of liquid air.

So why hasn’t anyone else come up with liquid air as an energy storage medium? Brett says that it’s a matter of separate industries not finding one another.

“If you take our system, the front end of it comes from the industrial gas business,” he said. “Apart from having huge electric bills, they’re not really thinking about selling energy. The other end of our system comes from power station technology … the utility business doesn’t generally think about cryogenic gases.” It’s hugely promising.

Frankly, the government need to quash petty squabbles and simply get behind the development of technology that will fuel our green economy. As we dive into the much anticipated double-dip recession this week, we’ve seen that austerity and quick-win solutions to mend our faltering economy won’t work. What we do need is massive investment in growth industries. And I can’t think of a better one than the renewable sector. If we want to meet that 2020 target, we need to get back on track.

The green sector is in agreement that Carbon Capture Storage (CCS) – the technology used to capture carbon dioxide and safely store it – can contribute to reducing emissions, particularly from those countries that are very coal-reliant, such as China, the US and Poland.

And yes, CCS also has a role to play in realising the UK Government’s legally binding commitment to reduce CO2 emissions by 80% by 2050, compared with 1990 levels. Economically and environmentally, it seems to makes sense, based on the government figures, for the UK to roll-out widespread CCS technology as soon as possible. Which is why, no doubt, the government announced this month that it will allocate £1bn of public money to try and push the development of CCS forward again. With the potential to create 100,000 new jobs, the government are so sold-on the industry they have even revived a government-sponsored £1bn competition to design the first workable demonstration project.

Ed Davey, energy and climate change secretary said the offer the industry was “one of the best anywhere in the world” and would give the UK a road-map to develop the techniques needed. He said: “What we are looking to achieve is a new world-leading CCS industry, rather than just simply projects in isolation – an industry that can compete with other low-carbon sources to ensure security and diversity of our electricity supply and make our energy intensive industries cleaner.”

He went on to predict that the CCS industry could be worth £6.5bn a year to the UK economy by the end of the 2020s, by which time there could the equivalent of 12 to 20 large power plants using the technology.

His rhetoric is nothing but ambitious. Especially given that the last £1bn competition foundered when the Scottish-Power-led group that planned to build a CSS system in Longannet power station in Scotland could not agree funding terms with the government.

So why is this attempt to re-launch carbon capture schemes in the UK different to the former failed attempts? And what does this mean for the rest of the UK’s green landscape?

CCS was originally a technology that was designed to decarbonise coal. When the previous competition launched in 2007, it was developed around capturing emissions from coal stations but was out of sync with the UK’s emerging gas industry, discontinued coal sector and a bulk of emerging, sharply innovative, alternative technologies.

Things have only progressed a little. Last time the competition was open exclusively to coal-fired power plants proposing “post-combustion” systems that trapped the CO2 underground after the fuel was burnt. With this new venture, the competition is also open to gas-fired plants, vast industrial manufacturers such as steel companies, and to “pre-combustion” technologies. This is referred to as gasification, and works by heating, not combusting, coal to produce hydrogen and CO2.

But even with these commendable tweaks, the government is still looking at this issue with blinkers and glossing over the complex web of risks surrounding CCS. The economic dynamics are particularly concerning. Up to 40% of a power station’s energy could end up being used to run the CCS scrubbing and transport systems, and estimates for retro-fitting Britain’s aged power stations could be as high as £1bn each. It’s a financial gamble.

And, just like nuclear power, the carbon will be stored underground. How do we do this safely? Once it’s captured, it needs to be liquefied, transported and buried, either in suitable geological formations, deep underground saline aquifers or disused oil fields. Admittedly the latter carries a big incentive: CO2 pumped into an oil field can be used to force out the remaining pockets of oil that would have proved otherwise difficult to extract. It’s not a really long-term bonus but it will help maximise dwindling oil reserves.

So what will be the long-term consequences be? What happens if the technology doesn’t prove economically viable or effective? The government will be left shouldering the financial burden and environmental legacy of a technology that from the outset could be argued as too short-sighted and restrictive. It could slow down the shift to renewable energy and other new technologies by holding out on an unrealistic promise. And even worse, if it fails, we may still miss our carbon targets and sacrifice our chance to stop climate change.

It’s not that we don’t need CCS. But it should be included as one solution in a wider spectrum of technologies. “Let’s not just reduce the CO2 emissions going up into the atmosphere. Let’s draw them down.” These are the sentiments of Robert Brown, a professor of engineering at Iowa State University and a leader of the university’s Initiative for Carbon Negative Economy and its Bioeconomy Institute. The schemes are developing ways to remove CO2 from the atmosphere by growing plants or algae, making them into fuels and burying their carbon residues in soil. The concept of generating capital and removing CO2 from the air is beginning to capture the interest of big investors.

In 2007, Virgin launched their Earth Challenge, a competition offering a $25 million prize to whoever can demonstrate a commercially viable design which results in the permanent removal of greenhouse gases out of the Earth’s atmosphere. They now have 11 finalists, representing five competing technologies, which include Air Capture, Biochar, Bio-energy with Carbon Capture and Storage (BECCS), Enhanced Weathering on land and Ecosystem Sequestration (Land Management).

Take biochar for example – the process of using organic matter to bury CO2 in the ground. Some believe it may be the way to lower our emission of GHGs and boost the productivity of the world’s farms. A scientist from Cornell University, Johannes Lehmann, treated farm fields in Colombia back in 2003 with biochar and found the fields yielded up to 140% more corn per acre compared to biochar-free fields. The buried biochar also appears to be remarkably stable and Lehmann’s calculations suggest that transforming the crop waste from 120 million hectares of U.S farmland alone could sequester 10% of the nation’s annual carbon emissions. That’s a decent chunk.

“Investing and synchronising different technologies must be the key to long-term progress,” says David Beer, Director of IndustryRE Sustainability. “There is a buzz of exciting innovation in the field. The government must be cautious about ploughing all it’s investment into just one tranche. It may be turning its backs on some more efficient and more economically viable options. We need a combined and long-term solution.”

Last month the government announced plans to streamline building planning policy in the hope of bump-starting the UK’s idling economy. For environmentalists, any revised planning changes spell a depressing outlook for the UK’s currently protected swathes of green space. But the government promises that any building work will fall under the definition of, sustainable development. “These reforms will help build the homes the next generation needs, it will let businesses expand and create jobs, and it will conserve what we hold dear in our matchless countryside and the fabric of our history,” says Greg Clark, Planning Minister. And in his budget this year, the Chancellor, George Osborne, labelled the reforms as the “biggest reduction of business red tape ever undertaken”.

Unquestionably businesses need red tape reduction. But at what cost? The Government hopes that the National Planning Policy Framework (NPPF) will serve to reassure conservationists. Tackling what sustainable development actually constitutes, the framework refers to the five guiding principles of sustainable development, as defined by the UN and the UK Government. These include living within the planet’s environmental limits, ensuring a strong healthy and just society, achieving a sustainable economy, promoting good governance and using sound science. Sounds promising.

Other green guidance included prioritising brownfield sites for development ahead of greenfield sites, with specific protection for playing fields and a bar on “garden grabbing” for development.

Essentially the new, slimline version – down from 1000 pages to 50 – will disentangle planning from an overly multifarious system and instead, simply pass the power into the hands of local authorities, who will come up with local plans.

Providing local authorities fully understand sustainable building issues there is massive potential for businesses and investors, backing sustainable development, to profit from this reform. “Development that is sustainable should go ahead, without delay – a presumption in favour of sustainable development that is the basis for every plan and every decision”, says Greg Clark.

If sustainability is truly put at the heart of infrastructure development, it will unquestionably provide a significant stimulus for economic growth and bring us closer to achieving targets for reducing carbon emissions. These proposed reforms do highlight that the government recognises the fundamental role that the built environment has to play in our transition to a greener future. But it is not just about new buildings. Refurbishing existing buildings will also be a major growth industry.

In Europe, buildings burn up to 40% of all the energy consumed. It is thought that 1.1 million new jobs could be created in the building industry by 2050 simply from green renovation. The European Commission recognises that energy efficiency in buildings is the best way to reduce energy use. Improving the energy performance of buildings is a low-cost and short-term solution to reducing emissions. Furthermore, according to analysis by the European Commission, emissions from the built environment could be reduced by around 90% by 2050, a larger-than-average, long-term contribution to overall targets and the largest contribution from a single sector.

So we know it’s good for the environment but what about the economy? Analysts say worldwide revenues from buildings that use green technologies to produce as much energy as they use could soar to under $1.3 trillion by 2035, with Europe’s commercial and residential construction markets accounting for 90% of that amount. In a report published by Pike Research earlier this year, the concept of zero-energy buildings has “emerged as a gold standard in the constructions industry” and will be boosted by regulations coming into force from 2016.

The UK is definitely leading the way. All new homes in England will be built to zero carbon standards by 2016 and non-domestic buildings following in 2019. Sustainable development has for some time now been gathering pace. The UK Green Building Council has grown from 40 organisations in 2007 to include 400 today. And in government proposals published in February, property owners may have to fit energy efficiency measures when carrying out other renovations on their buildings.

Businesses are rightly concerned about the costs of these sorts of renovations or requirements. But the Pike Research report predicts huge reductions in the cost of technologies required to make zero energy buildings a reality, such as energy efficient lighting and HVAC systems, improved insulation and solar panels. So much so, falling costs combined with improved standard could see the market “explode in 2020”. “Despite the slow uptake of zero energy building to date, the industry is poised to undergo a significant transformation over the next decade,” the report concludes. “The exact language of these new building codes is still being established, but it is clear they will drive significant investment in zero energy building technologies.”

It is not planning policy alone that is stifling economic growth. In all areas of industry, investment is pivotal to growth. The burgeoning green building sector can genuinely have a transformational impact in both carbon reduction and economic health. It just needs investors. But if this government’s planning reform does stimulate sustainable development while respecting the environment and our open spaces, it would be a welcome move and play a role in convincing investors to take a gamble on what promises to be a revolutionary part of our green future, our buildings.

This week the Government announced that it has missed a four year deadline to ensure that large businesses report their carbon emissions, according to a recent news release from the Aldersgate
Group.

This is all the more disappointing if you consider that the consultation finished over eight months ago and had more or less widespread support from industry, NGOs and the general public. Under the Climate Change Act of 2008, the government is legally bound to put forward regulations for mandatory carbon reporting by 6th April 2012 or explain to Parliament why no such regulations have been made. March 27th was the final deadline before the Easter recess. And the government’s announcement to delay the decision effectively means that it “has met the name but not the intention of these requirements”, according to Aldersgate.

The report to Parliament, entitled Company Reporting of Greenhouse Gas Emissions, states: “No decision to make regulations has been reached… Ministers require some additional time to consider this evidence to come to a decision. This evidence gathering process has taken longer
than anticipated and the analysis of the results is ongoing as the costs and benefits are fully considered so Ministers make an informed decision.”

At the moment, some businesses who drive action on sustainability, report their carbon emissions, but this is done on a voluntary basis. For a long time these businesses, at the forefront of sustainability, have been waiting for a level playing field on carbon reporting. According to the advocates, mandatory carbon reporting would help companies identify cost savings through greater resource efficiency and more effectively address material climate risks and opportunities.

It would also create a level playing field, allowing investors and consumers to make meaningful comparisons between companies, and therefore drive further emission reductions. The administration costs associated with carbon reporting are understood to be minimal. In fact, it can help companies identify significant bottom line savings. Former Environment Minister, Elliot Morley MP, said: ‘It is absolutely essential that we know how much CO2 companies are pumping into the atmosphere if we are to have any chance at all of combating the disastrous consequences of climatic change’.

“Carbon reporting is an essential step to meeting our carbon budgets and to driving efficiency and growth from UK business,” argued the Aldersgate Group. “Independent analysis demonstrates that it would have considerable economic benefits and it is supported by a large
number of businesses and the CBI. Both the Conservatives and Liberal Democrats pushed for mandatory carbon reporting in Opposition and it is vital that they hold their resolve.”

“Voluntary systems have run out of road and the UK risks losing its lead in carbon reporting, accounting and reduction,” added Peter Young, Chairman of the Aldersgate Group. “This failure to act now undermines business’ call for much greater transparency and consistency from Government.”

“We have a deep sense of frustration that the deadline has not been met,” added Raymond Dhirani, finance policy officer at WWF UK. “Anindependent impact assessment has shown that introducing mandatory carbon reporting will be a benefit to UK business in the long run, and the Government’s own consultation two thirds of organisations responding supported its introduction.”

In July 2011, a report commissioned by Aldersgate Group, The Co-operative Group, Christian Aid and WWF found that the benefits of mandatory carbon reporting for large businesses are much greater – and the costs lower – than the Government had suggested. The report found
that Defra’s impact assessment of mandatory greenhouse gas reporting overestimated the total costs for large companies by up to £4,600m (over 420%), and underestimated the benefits by £980m (at least 230%).

“Environmentally sustainable must always be fiscally sustainable,” warned the chancellor, George Osborne, in what was regarded as a disappointing Budget for the green sector. It was disappointing because it was confusing and contradictory. Before the budget, BT, Tesco, Siemens and even Shell, all wrote to the Chancellor, calling for a better understanding of the green economy. But this budget fails to add any clarity to a landscape that is growing increasingly complex.

Every green lining to Osborne’s Budget appears to be shrouded by a cloud of bad news. Essentially, sustainability is good. But the economy comes first. There was little recognition that a green economy is a stable economy. Not in the short-term anyway.

He praised renewables but then backed the oil industry promising to “extract the greatest possible amount of oil and gas from our reserves in the North sea”, immediately angering environmentalists.

John Sauven, executive director of Greenpeace, said: “The chancellor performed a carbon-belching U-turn by supporting airport expansion in the south-east, before handing tax breaks to an oil industry that’s already making billions in profits and a cash bung to the very same oil industry to drill in our fragile seas.”

This sobering rhetoric was echoed by a steady stream of green groups who feel Osborne has abandoned a clean future for the UK. And it does seem a little carbon-friendly. Not only are oil companies to be given a £3bn tax break but he effusively praised the gas industry, saying “gas is cheap”, and that it would be the UK’s biggest source of electricity generation in coming years. But what seems particularly strange is that he openly recognised the risks posed by rising oil prices, but mentioned nothing of the volatility of gas prices. It’s a deeply inconsistent and misleading message for those businesses trying to get to grips with climate change and resource-related risk.

So what about businesses, what does the budget mean for them and their sustainability journeys? Is it all bad news? Not altogether.

Osborne’s plans to reform the Carbon Reduction Commitment (CRC), the £1bn tax on businesses’ energy use, will be widely welcomed. “It is cumbersome, bureaucratic and imposes unnecessary costs on business,” said Osborne. In fact, if it isn’t effectively simplified, Osborne said they would scrap it altogether and replace it with a new environmental tax.

When it came to transport, changes to vehicle excise duty and company tax rates should continue to drive the shift towards greener motoring. Businesses investing in green cars will find it’s a cheaper way to travel. And controversial new relaxed planning reforms will allow businesses to invest in sustainable building development. Osborne labelled the reforms as “the biggest reduction of business red tape ever undertaken”. The chancellor also said there were now 24 Enterprise Zones going ahead across England, including the new Royal Docks zone in London, all offering businesses enhanced capital allowances.

But it is the chancellor’s backing of renewable energy that will really be a boost for green business. “I also want to see investment in our world-leading energy sector including renewables,” he said, adding that “renewable energy will play a crucial part in Britain’s energy mix.”

Since the coalition came in, Osborne has been non-committal when it comes to clean energy. This budget clearly marks a shift. It will give businesses the certainty they need to progress investments in the renewable sector. In fact, this has already happened. After the budget was announced, Spanish wind turbine manufacturer, Gamesa, revealed major plans to invest up to €150m in developing a new offshore wind hub at Edinburgh’s Port of Leith, in a move that Prime Minister David Cameron hailed as “fantastic news” for Scotland and the UK’s emerging offshore wind industry. It’s thought the investment will create around 800 new jobs. It’s anticipated that Siemens and Vestas will also commit to major new manufacturing plants, now there is the certainty of government endorsement.

In the face of critics, Climate Minister, Greg Barker, has defended the budget and heralded it as a “crystal clear commitment” to the green economy. He said the central message for green businesses from the Budget, was that they were now part of the economic mainstream. “This is the Budget where the green economy joined the economic mainstream,” he said. “It is part of our plan for sustainable growth and rebalancing our economy,” he added.

This could be true. But when viewed in isolation, the Budget isn’t overly convincing. The coming months will be key. Can the government deliver a genuinely more efficient carbon tax system? Where will the Green Investment bank invest the promised £775m over the next 12 months? In the interim, businesses need to continue to weather green uncertainties, make green efficiencies, drive forward green innovations and demonstrate to the government just how cost-effective, fully embedded sustainability can actually be.

Be under no illusion, Fairtrade is booming. With consumer budgets becoming increasingly squeezed, many thought the green consumer market would grow stagnant, as in other areas of retail spending.  But it’s bucked the trend. Sales for ethically sourced Fairtrade products grew in the UK by 12% in 2011, to £1.3bn. This growth compares with about a 5% rise for overall groceries last year – a fitting way to celebrate Fairtrade Fortnight, currently underway in the UK.

“Fairtrade is an example of responsible capitalism in action,” said Harriet Lamb, executive director of the Fairtrade Foundation. “We believe that responsible businesses are those who don’t just tackle the company bonuses at the top but take steps to ensure a fairer deal for the workers and farmers at the bottom of the supply chain too.”

Recognising the convincing commercial benefits of investing in ethically-sourced products, food manufacturers and supermarkets are increasingly signing up to Fairtrade and similar organisations. Mars has added an additional $1.4m a year to the cost of making Maltesers by switching to ethically sourced cocoa.

Major supermarkets are now selling Fairtrade goods at the same price as the ordinary equivalents. Some have changed whole ranges to Fairtrade. For example, All the Co-Operative’s brand tea, coffee and sugar are Fairtrade, while Sainsbury’s and Waitrose only offer Fairtrade bananas. In fact, 42% of all bagged sugar sold in the UK, is Fairtrade. The UK is the largest market for fairly traded products.

It’s not just Fairtrade expanding. Last year, the Co-operative Group reported that sales of ethical goods rose by 9% in 2010 to a £46.8bn, while the government claimed sales for green goods and services grew 4.3% to £117bn in the same year. The green market has a fan-base.

The Fairtrade movement has not been free of criticism. Thinktank, The Institute of Economic Affairs, has scrutinised the extent to which Fairtrade actually helps poorer countries. Many Fairtrade products are only commodity goods, such as such sugar, cocoa, coffee and bananas. But the high-profit margins are made in processing, which is carried out in developed countries, not the countries where the food is grown. Real value and profit is beyond reach of the farmers at the source of the supply chain.

This is something for companies to consider. M & S have stepped forward with a compelling solution, by launching a Fairtrade tea, which is sourced, processed and packaged in Kenya. M & S and the Department of International Development (DFID) together have helped a group of Kenyan tea producers finance their own processing factories. Some say the tea producers will make five times the profit they would have received on just the Fairtrade premium.

But aside from the usual smattering of sceptical voices, what this surge in Fairtrade sales fundamentally tells us is that consumer shopping habits are increasingly disciplined by ethical and environmental values. We’ve known this for some time. And it shows little sign of slowing. The green economy marches forward. If ever a compelling case was needed for ESG investment, this is it.

But it also attests to the true value of consumer engagement. Get it right, and companies can profit from the additional 3bn middle class consumers expected by 2030 in emerging and developing countries. The challenges and the opportunities are intensifying. It is a misconception that consumers are only driven by price. 72% of European consumers now say they would be happy to pay a premium for sustainable products while in emerging markets, 80% of consumers say they have more confidence in ethically and socially responsible brands.

To succeed, businesses must be as innovative as possible when it comes to shaping consumer behaviour. Fundamentally, it comes down to designing better products that consumers will buy. But listening to and understanding what consumers need and want is also crucial. While, monitoring how they spend their money and interacting with them online in the burgeoning world of social media is totally indispensable too.

In fact, staying on top of technology is the real trick. By 2013, two billion mobile users will have bought products on their handhelds. “Technology will drive ever greater transparency throughout supply chains, empowering customers and asking for greater levels of engagement between sustainable business models and consumers,” says Marc Bolland, CEO of Marks & Spencer.

While David Wild, CEO of bike and car parts retailer Halfords, recently compared the current revolution in modern retailing to the introduction of sound to cinema. For him, technology, consumer shopping behaviour and value expectations are changing so fundamentally, businesses must adapt or be left behind. Consumers are better informed and more demanding. “Retailing is not going to return to how it used to be, this is a new reality,” he says. “The good news is that there is potential to turn this challenge into an opportunity,” he adds.

The UK government has announced that East Anglia and parts of the South East are already officially in drought, with other large areas of the UK expected to face water shortages this spring and summer after the driest two years for 90 years.

To put this in context, in much of Southern England and the Midlands, 20-45% of all rainfall is already abstracted, making it one of the most water-stressed areas in Europe. Even when we have normal amounts of rain, the high population density in England and Wales means there is less water available per person than in some Mediterranean countries that receive much less rain.

And with 300,000 extra visitors expected this summer for the London Olympics, water resources are going to be even more squeezed.  So much so, contingency plans are being drawn up to protect water supplies for the London Olympics in the event of a severe shortage.

Experts are predicting the drought this summer will rival 1976, when the whole country was subject to water rationing as temperatures soared. Back then water restrictions on industry in the Midlands forced some companies to shorten their working week.

With a ‘super-drought’ forecast for this summer, what can companies do to protect their business? Of course, save as much water as you can now. Turn off taps, put off cleaning windows and cars, fix leaks, encourage your staff to make efficiencies, use grey water and fit water minimising controls such as low-flush toilets and push-taps. But also, plan ahead for a drought. Consider the different elements of your day-to-day functionality that would be impacted by water shortages.

Perhaps it was the Europe-wide heat wave and water shortages of 2003, which should be regarded as the biggest lesson to today’s businesses. With the highest temperatures since 1540, at the time it was a 1 in 500 year event. But if heat-trapping emissions continue to rise at the current rate, the temperatures seen in 2003 will be normal by 2020 and below average by 2040.

A worrying forecast given that in 2003, agricultural production across Europe fell by 10% and the resulting financial impact was estimated at 13 billion Euros. And for France, which depends on water-cooled nuclear power stations for 80% of its electricity, the water shortages were hugely problematic for businesses. During the hot summer of 2003, many nuclear reactors in France operated at reduced capacity or were forced to shut down. To make up supply, Électricité de France (EDF), had to buy electricity on the open market at 10 times the usual summer rates and lost 300 million Euros. This had a knock-on effect for the UK because normally, during peak times, we rely on France for extra energy capacity to make up the difference in our shortfall supply. If France is unable to produce enough capacity for their own domestic market, let alone exporting extra energy,UK contingency plans need rethinking.

“Any business concerned about water shortage should not look at the risk in isolation,” said David Beer, Director of IndustryRE Sustainability. “Drought can have a deadly knock-on effect to other resources, such as energy, and can present a sustainability challenge that is complex, pressing and has the potential to cause acute disruption for businesses here in the UK and across the world,” he added.

Businesses must not overlook the fact that water is essential to energy generation. 40% of industrial water-use in the USA is for power-station cooling¸ according to the National Research Council 2010.

In a heat wave, the energy infrastructure inevitably takes a hit from increased demand, because of things like air-conditioning. And when power companies can’t keep up, it can lead to black-outs. Last summer in New York, temperatures soared to 104, the hottest on record and 10,000 homes lost power. Prior to the black-out,US power company, Con Ed, recorded a peak of 13, 182 megawatts.

Businesses looking to build resilience to similar weather conditions in the UK should think about investing in a generator or alternative sources of power if the grid goes down. But of course, this will change your carbon profile and needs to be taken into account too.

It’s not just conventional forms of energy that rely on water. For example, hydroelectricity requires 4,500 gallons to produce a single megawatt hour of electricity while geothermal energy uses 1,400 gallons per MW/h. In contrast, photovoltaic solar cells, which convert energy from the sun into electricity, use minimal amounts of energy – a good option to keep businesses powering on during a drought.

Ultimately, businesses that are not adequately prepared are risking financial cost and reputational damage. Delivering business-as-usual is crucial to all-important customer satisfaction. Being proactive can save money. The World Bank and the US Geological Survey estimated that economic losses worldwide from natural disasters in the 1990s could have been reduced by $280bn if $40bn had been invested in preventative measures.

Major drinks manufacturer, PepsiCo, is taking the threat of water shortages and the impact on its supply chain and business very seriously. The company have started to make big investments in pinpointing problem areas and cutting water use. They’ve also introduced new technology and crucially, have adopted a localised approach to water efficiency.

PepsiCo is on track to meet it’s global goal of reducing water use by 20% between 2006 and 2015 and is now developing a new strategy that will see different goals at different sites, depending on the water availability levels in that area. Other measures include irrigation system upgrades, municipal groundwater mitigation, waste water reuse and rain water harvesting.

Global water use doubled between 1951 and 2002, and is expected to continue to soar as populations increase. Nearly three billion people now live in river basins with “severe” water scarcity during at least part of the year. Understanding the interconnected role that water plays in the daily running of your business is critical. Only then can you analyse the true implications of a drought and start to make adequate preparations for the increasingly water-stressed months to come.