What SMEs can learn about efficiencies from larger companies

While large companies have traditionally had advantages in delivering energy efficiency, more is now expected of smaller enterprises. 

SMEs looking to reduce their energy bills should start by looking at their operational efficiencies, such as electricity.

Although the will to be more energy efficient is spread evenly across the business landscape, it is large companies that have traditionally had the specialist teams available to deliver energy cutting programmes.
 
This is good news for SMEs looking to reduce energy use to cut bills and be greener, because the spending from teams dedicated to driving efficiencies at enterprises has created a new vibrant industry. Today, when a SME looks to replicate the successes of enterprises and pioneering small companies, the number of suppliers has never been greater and the cost of equipment has never been more competitive.
 
The Carbon Trust publishes a Green Business Directory to help companies pick reputable partners and suppliers with a proven track record. It has been working for years with businesses of all sizes and has noticed that SMEs are increasingly interested in efficiency programmes, and not just because they want to reduce bills and be more environmentally friendly. Large companies are now vetting their supply chain for ECO credentials, so undergoing an efficiency programme is a huge positive tick for a SME.
 
Small companies need not feel daunted, though, according to Myles McCarthy, director of implementation at The Carbon Trust. By taking efficiency one step at a time, they can go through the same four stage process businesses of all sizes must go through.
 
"The first step is simply about operational efficiencies and you can reduce energy use by five to 10%," he says.
 
"You simply need to analyse where you're using electricity and heating and see where the obvious waste is, such as not turning off computers, leaving lights on and heating the office overnight or at the weekend when there's nobody there.
 
"Steps two and three are longer term and need you to look at your building infrastructure and then machinery. So you would establish these measures if there are more efficient boilers or air conditioning and consider more efficient lighting, such as LED bulbs. If you run machinery, you'd look to establish if it can be replaced by more efficient, modern upgrades."
 
After saving five to 10% with step one, steps two to three will often bring savings of 20% to 30%, in McCarthy's experience.
 
Only once energy use has been reduced in the first three stages is it worth considering renewables, he adds.
 
"The fourth step in an efficiency drive is to consider renewables but you should only do this once you've reduced your energy use," he says.
 
"Otherwise you won't get the full benefit and you'll end up just wasting energy that is created in a cleaner way. So once you've got low energy light bulbs installed, computers are switched off overnight, areas are only lit and heated when there's someone there and your office or factory equipment is efficient, then you can look at renewables, perhaps solar PV panels for electricity and biomass for heat."

This is certainly the experience of Gordon MacDonald, energy and sustainability manager at the NHS Highland Board in Scotland. He has driven through a series of energy efficiency programmes which have resulted in a 40% reduction in carbon emissions between 2009 and 2014.
 
This has moved from lighting improvement to installing biomass heating systems in hospitals and medical centres which burn wood pellets. Just as solar PV panels earn a company a feed-in tariff for all the electricity they produce, even if they use it themselves, biomass boilers earn a Renewable Heat Incentive (RHI) payment for all heat produced.
 
"We cut our energy use first through looking at where we were using heat and electricity and one of the quickest wins I'd advise anyone to look at is LED lighting," he says.
"It depends on the size of the installation but payback on the investment is normally very quick. Ours paid back within just two years. For renewables I think you really need to look at the figures and make sure there's payback on the initial investment within seven years, that's probably the best target to be going for.
 
"We've moved from oil to wood pellets at one 24-hour medical centre and gone from paying £24,000 per year to earning £1,000 per year."
 
When a SME reaches the point of moving on from operational efficiencies to purchasing new equipment, MacDonald urges owners not to baulk at the initial outlay, because it is one of the few guaranteed wins in business, so long as you pick a trustworthy partner. In the case of renewables, installation may cost tens of thousands of pounds, but a company is guaranteed feed in tariff or RHI payments that will ensure it pays for itself well before the equipment needs replacing.
 
Metered solutions
Technology that has been widely used to help enterprises reduce energy use initially, is now filtering down to SMEs and none is more important than a smart meter, according to Andrew Kneeshaw, energy saving consultant at E.ON partner, Gateway Energy Solutions.
 
"Bigger businesses have benefitted from the early introduction of smart metering technologies and they can often afford to have specialists look closely at energy saving investments," he says.
"SMEs are not so fortunate but we are helping them to catch up. Smart metering is starting to filter down to smaller businesses, as is technology like E.ON's Business EnergyManager - a wireless electricity monitor which helps businesses see where they are using the most amount of electricity.
 
"The monitor is free to E.ON small business customers and can provide better information for owners and managers. At Gateway, we are also providing better information online about efficient technologies giving simple targeted high return solutions. There's still lots to do but the potential is huge and the returns can be very attractive."
 
Another option is to think outside the box and work more flexibly. That is what O2 did in 2012, in a test case that it believes proves embracing flexible working can boost the bottom line as well as reduce energy use. The company embraces flexible working anyway but for one day actively encourages its 2,500 staff members to work from home.
 
"We saw a boost in productivity, our colleagues reported achieving a better work-life balance and we were able to make gains in our sustainability and energy efficiency programmes," says Ben Dowd, business director at O2.

"While our pilot was designed to show that flexible working can work on a very large scale, it's not something you have to be big to do. The technology exists for businesses of any size to be smarter working companies. The biggest challenge we faced wasn't technological, it was cultural."
 
In addition to the building and how the people within it work, a SME could also consider looking at the vehicles it uses. By leasing vehicles so a fleet is replacing regularly, Tony Murtagh, head of SME direct at Lex Autolease estimates that the latest hybrid vehicles can reduce running costs by up to 14p a mile and reduce carbon emissions by 40%.