Outsourcing and carbon reduction - it's not simple

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The green agenda has increased in significance at an incredibly rapid rate over the past few years. New legislation, with its hefty carbon reduction targets, means that all businesses must incorporate green strategies into their overall business plan.

The Climate Change Act 2008 begins by imposing a statutory duty on the Secretary of State to “ensure that the net UK carbon account for the year 2050 is at least 80% lower than the 1990 baseline”. Right now, this target seems more than ambitious; in fact, judging by the lack of progress, the target seems unreachable.

However, the UK government is trying its best to offer ‘incentives’ to big businesses to reduce their carbon footprint. The Carbon Reduction Commitment (CRC), currently being finalised by the Department for Energy and Climate Change and due to come into force in April next year, aims to target around 20,000 large public and private sector organisations for carbon reduction.

Of course, like any other piece of green related legislation, CRC has both rewards and penalties associated with it. Those businesses which meet the outlined criteria, deliver the requested reports on time and are seen to reduce their carbon footprint get rewarded while those that don’t get hefty fines imposed.

At first glance this seems a fair enough, if a little dated approach. However, there are aspects of the CRC initiative that some organisations are starting to question.

The NOA has its own Green Steering Committee that looks to address the green challenges facing the outsourcing community. Of course, most of the discussion is focused around the upcoming CRC initiative and how it will affect the outsourcing industry (a white paper of the initial discussion can be found here) and the committee has highlighted particular aspects of the CRC initiative that may have a significant impact on the major players in the outsourcing world.

It seems that datacentre suppliers could face hefty penalties, despite having a positive effect on carbon reduction. The way carbon emissions will be measured under CRC is simply not broad enough.

If an end user outsources their poor efficiency, energy consuming datacentre to a supplier they are effectively shedding their carbon impact. In turn the supplier will either do away with the end user’s datacentre entirely, switching to their own high tech, greener and more energy efficient alternative or, depending on the contract, will kit out the end users datacentre with new technology.

Either way, the supplier is taking a high carbon footprint process and making it a much greener one.

Under the CRC initiative, the supplier could be penalised. There would undoubtedly be an increase in the energy consumption and carbon footprint the supplier has, simply because they have taken on another datacentre.

This would be detrimental to the supplier when it came to reporting emissions and energy consumption. In turn, the end user is able to claim a reduction in carbon emissions and get rewarded. The CRC regulation does not take into account that, without the supplier, the overall carbon impact would be much worse.

This current unfair form of measuring reduces any incentive associated with suppliers offering greener technology. Client demand will act as the only catalyst for a supplier to switch to green technology.

However, that supplier will then pay for that investment as well as any carbon trading or offsetting that needs to take place in order to make up for the increase in carbon emissions.

The outsourcing industry is no stranger to the green agenda. Many large organisations within the industry have already implemented green policies. However, it is estimated that approximately 70 percent of businesses don’t know where to start when it comes to meeting the CRC regulation.

All in the industry are in need of clear guidance and policies that highlight exactly what needs to be done and what impact this will have on business. Measurement needs to be fair and stretch beyond the current limitations.

Ultimately the business community as a whole is in dire need of a thorough review of what makes an organisation green. This is a call to action for all businesses and with groups such as the NOA Green Steering Committee raising these pertinent issues, the policy makers will have to sit up and listen.

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