Business Reason No. 2 for Immediate CRC Action: The CRC League Table

Posted on 07. Apr, 2010 by Ross in Corporate Policy, United Kingdom

Yesterday we discussed reducing your carbon credit burden as a reason for your company to take immediate action under the CRC Energy Efficiency scheme. Today we focus on the reason for action which will give PR departments sleepless nights over future years: the CRC league table.

Reason 2: Get To The Top Of The Table

No company wants to be portrayed as a dangerous polluter. Such connotations can lead to lower share pricing, lost sales and damaged credibility, and can be a public relations nightmare to smooth over. Conversely, giving your company a healthy green glow can lead to a strong boost in the affections of consumers, clients and policy-makers.

Each year, the CRC Energy Efficiency scheme will publish a giant league table on the carbon-cutting performance of participating companies. Media outlets will dissect the list into sector-specific league tables, leaving little shelter for your company to hide from the enquiring gaze of journalists, bloggers and the public.

It’s not just PR that’s at stake from the league table either: the amount of money recycled to your company will depend on your placement. If your company sits towards the top of the table then you’ll receive a bonus percentage on top of your recycling repayment (eventually as much as +50%), whereas if your company performs poorly then you could regain as little as half of your carbon credit money back.

Three metrics will determine your placement in the CRC league table: early action, absolute emissions and growth. Whilst the first couple of years’ league tables will be dominated by companies which secured a high early action bonus, it is the absolute emission metric - the percentage change in your company’s carbon emissions versus a five-year rolling average - which will eventually make up 75% of the points for the league table.

Don’t get sidetracked by gaming the CRC league system and worry about making gains early: let the Law of Diminishing Returns work in your favour for once! As you reduce your corporate carbon footprint, the amount that you have to reduce by each year to obtain the same relative reduces.

What’s more, because the percentage is calculated against a five-year rolling average which doesn’t exist before the start of the scheme, the early performance percentages are magnified by the greater weighting on the initial years whilst the rolling average grows.

Year	Required % cut to maintain 25% reduction target vs original emissions
	Early Action (no prior data)	Late Action (5-year uniform data)
1	25	25
2	9.38	3.75
3	5.47	4.31
4	3.76	4.96
5	2.82	5.7

For example, cutting your company’s carbon footprint by 25% every year against an accumulating five-year rolling average allows you to cut your emissions by only 46% over the first five years, with the fifth year of cuts requiring only a 2.8% cut against your original carbon footprint. If reductions were calculated year-on-year, the same 25% cuts every year for five years would require an absolute reduction of 76%! Leaving it until the five-year average has accumulated makes it easier to achieve the same cuts for the second year, but then it becomes harder across the following three years.

That means that energy efficiency gains made right now will help your company climb the CRC league table not just now but far into the future too. Efficiency gains now will also help you achieve a better growth metric too through the same mechanism. Efficiency projects aimed at reducing your fixed energy costs, such as energy efficiency lighting retrofits, are most effective towards this metric during a recession, whilst process/manufacturing-related projects will scale well with the growth metric as your company emerges from recession.

Still not convinced that your company needs to act now? Two more reasons await this week at Energy-Saving News, and the super-secret bonus reason which no-one else is taking about will be revealed next week too, so keep on reading!