Sustainability in the public sector: Accounting & Business

Posted on September 21, 2010 · Posted in Accounting & Business

Public bodies are under enormous and growing pressure to reduce their carbon emissions and to operate in an environmentally sustainably manner.  But with the gigantic fiscal deficit bearing down across the public sector, tensions are developing between the two sets of priorities.

 

One initiative that marries improved environmental performance and greater focus on costs is the Carbon Reduction Commitment.  The CRC is the obligatory emissions trading scheme that requires non-intensive energy users, including public bodies, to cut their carbon emissions as part of a national target to cut carbon emissions by 80% of 1990 levels by 2050.  Public bodies consuming 6,000MWh or more of electricity a year are affected, as are those with an annual electricity bill of £500,000 or greater. 

 

KPMG – whose sustainability advisory practice was recently boosted by the recruitment of Yvo De Boer, executive secretary to the United Nations Framework Convention on Climate Change – is advising central government departments and many other public bodies on how to address their CRC obligations.   Jon Gorrie, a director of KPMG’s public sector sustainability team, says that for organisations to take action under the CRC they need to begin with making accurate calculations of their energy use and carbon emissions.

 

“People have trundled along believing they have measured their carbon,” says Gorrie.  “The CRC requires greater accuracy than most have had until now.”  With that information, public bodies can move more solidly onto carbon management and carbon reduction planning.

 

Yet despite the financial penalties that go along with poor performance under the CRC, it has become difficult to take action to cut carbon emissions in the current financial circumstances with investment budgets cut to the bone.  “Once you have done the simple things like turning down the heating and switching off the lights, you have to invest,” says Gorrie.  “Some of those investments have a short pay-back time, but many don’t.  It will be very hard to get the investment.” 

 

In practice, this means that the focus is on actions that produce fast results, in particular waste reduction.  “There is a massive amount to do to reduce waste,” says Gorrie.  “It’s boring, but there’s a massive amount to be achieved.  The more glamorous stuff will come along later.  There’s at least four or five years for doing the basic stuff better.  Finance will drive almost everything.  So the question is how do we use the finance to drive efficiency gains.”

 

The wider efficiency agenda may help deliver some improvements – not least the Total Place programme to improve cross-public sector joint working and savings.  In particular, greater sharing of buildings could both cut costs and emissions.  “It’s emphasising the cost reduction of sustainability,” suggests Gorrie.  “At one NHS trust we are working with, it’s very much linked with benchmarking all the support functions and putting a total emphasis on greater efficiency, particularly on asset management.”  Increased opportunities for flexible working can lead to fewer buildings and reductions in both energy use and costs, for example.

 

Another driver for local authorities, primary care trusts and police authorities comes from the Audit Commission.  The Commission has begun assessing not only public bodies’ ‘use of resources’, but also their ‘use of natural resources’ as part of the Comprehensive Area Assessments.   Charlotte Drain, a manager in Deloitte’s sustainability services team, says that the Audit Commission’s adoption of the use of natural resources assessment has pushed public bodies affected to put more effort into measuring their sustainability impact. “How can they get their house in order for external review by auditors,” she explains.  “The reports from the first year were very positive.  When local authorities begin focussing on the UoR assessment they find they are already doing a lot..”

 

But she accepts that finance is central to how public bodies approach sustainability.  “The priorities tend to focus on cost saving: how can you drive organisational efficiencies and how can you get some of those organisational efficiencies from environmental improvements,” she explains.  “There are significant financial benefits from focusing on environmental sustainability, for example energy efficiency.”

 

Stephen Sweet, another manager in Deloitte’s sustainability services team, agrees. “We are seeing that the CRC energy efficiency scheme is a big driver,” he says.  “That is really pushing them on non-transport energy use.  It creates a real drive to understand accurately what energy they use, including in schools.  There is a financial cost associated with that scheme from April 2011.  That is getting finance directors engaged: it hasn’t before reached that sort of level.”

 

The role of schools in cutting energy use and improving sustainability performance is stressed by Alice Owen, lead commissioner for local and regional issues at the Sustainable Development Commission, both because the education sector is one of the largest carbon emitters and because it can have a role in explaining to pupils the need for sustainable lifestyles.  Some newly built schools have greatly reduced energy use, while bringing energy conservation into the curriculum, she says.

 

But Owen warns that while many local authorities are doing many good things, not enough councils do enough things well.  It is also necessary to view sustainability as a priority that is not restricted to opportunities to save costs, she argues.  “Councils’ strategies are only effective if they are also dealing with fuel poverty, transport efficiency and possibly economic development as well,” she insists.  “Sustainability is about efficiency rather than cost reduction.  Cost reduction is necessary, but it is not sufficient.”

 

 

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Bristol City Council

 

Bristol is often mentioned when discussing which is the UK’s ‘greenest’ city and was shortlisted in 2009 for designation as European Green Capital.  Despite an already good reputation for environmental action, in February the council’s cabinet agreed in principle further, radical, action, intended to achieve a 40% cut in the city’s carbon dioxide emissions by 2020 and reducing its reliance on oil.  Proposed action includes insulation of 3,000 homes, the construction of two large wind turbines at Avonmouth, new biomass boilers at council premises and making grants to small firms to make them more energy efficient.  The council has also commissioned a study of the implications for the city of the impact of declining oil production.  Previous council-led initiatives assisted in significant environmental improvements over the last five years: 10% less energy consumed in the city’s homes; 20% less in its businesses; 20% less waste produced per person; a doubling of recycling; and a 40% increase in city centre cycling.  The total impact has been an overall reduction of 10% of carbon emissions in Bristol since 2005.

 

 

London Borough of Islington

 

Sustainability is a corporate priority for Islington: improving sustainable performance has been married with achieving significant cost savings.  Through rigorous internal monitoring of energy use there has been a reduction in energy use, saving 1,050 tonnes of carbon a year.  The vehicle fleet is classified as ‘green’, comprising a mix of electric, hybrid and diesel vehicles.  Investment in split-bodied recycling trucks has reduced the number of journeys, saving £150,000 a year on that one service.  An energy switch-off campaign saved 4% of consumed electricity and 9% of gas.  Savings of £676,000 have been achieved through the energy efficiency programme.