The CRC league table - An incomplete picture

Does the first CRC league table provide any useful information? Paul Suff takes a look

Almost 62 million tonnes of CO2 were emitted in the first reporting year by the 2,103 organisations included in the Carbon Reduction Commitment Energy Efficiency (CRC) scheme’s first performance league table.

Reported CRC emissions for the period between 1 April 2010, when the scheme started, and the end of March 2011, represent nearly 13% of the UK’s total CO2 discharges in 2010. The total is higher than the 57.5 million tonnes forecast by the Environment Agency.

Three organisations – BT, the Ministry of Defence and Tesco – were responsible for just over 7% of total CRC emissions. From April 2012, when participants have to begin purchasing allowances at the set price £12 a tonne to cover their annual CRC emissions, organisations such as Tesco will face a considerable annual levy on their energy use. KPMG suggests that the Treasury, which in October 2010 axed the revenue-recycling element of the scheme, will gain approximately £734 million from the cost of CRC allowances, an average of £349,000 per CRC participant.

Those are the main headlines, but the first performance league table (PLT) is probably more memorable for what is missing than for what it discloses. The publicly available league table is designed as a reputational driver to improve energy efficiency, reduce emissions and cut costs, but the first version ranks organisations only on how they have performed against the early action metric (EAM) – that is, the proportion of automatic meter readers (AMRs) voluntarily installed and participation in the Carbon Trust Standard or an equivalent scheme (see panel, p.23).

By that yardstick, 22 organisations tie for first place, while 803, or nearly 40%, including many that are investing in improving their performance, are rooted to the bottom, having scored zero against the EAM.

A limited snapshot

The absence of additional information on how organisations are actually tackling greenhouse-gas (GHG) emissions and energy efficiency means that the inaugural PLT provides only a snapshot of where CRC participants are in relation to the EAM.

It is not a comprehensive picture of emissions from the large, non-energy-intensive private and public sector organisations in the UK not already covered by the EU emissions trading scheme or domestic climate change agreements and can give a misleading impression of their performance in reducing energy use and cutting emissions.

“The PLT takes no account of relative levels of efficiency (the most efficient organisations will find progress more difficult), sourcing of renewable/low-carbon energy, transport or refrigeration. As such, it shouldn’t be regarded as an overall measurement of carbon management practices,” comments Rowland Hill, corporate social responsibility/sustainability manager at Marks & Spencer (M&S).

CRC emissions are only those associated with the energy use covered by the scheme – so from all electricity and gas consumption as well as from their use of other fuels, such as diesel, LPG and coal, although not from transport. As such, the PLT provides only a partial picture of participants’ overall emissions, and gives a figure generally much lower than that of other publicly disclosed data.

“Most retailers already report full GHG-compliant emissions in sustainability reports and as you’d expect the CRC figure is lower due to the key omissions of refrigeration and transport,” says Hill. The PLT reveals that M&S, for example, emitted 410,369 million tonnes of CO2 during the first CRC footprint year, whereas in its 2011 How we do business report, the company says it emitted 603,000 tonnes of CO2 equivalent emissions over much the same period as the CRC reporting year.

And because the CRC measures only energy-related emissions, participants’ performance in the PLT often does not correspond with other common benchmarks, such as the Carbon Disclosure Project (CDP). Generally the UK sector leaders in the 2011 CDP do not perform as well against the CRC criteria. Only BAT performs equally in both the CDP and PLT (1st). By contrast, the leading UK telecommunications company in the CDP, Cable & Wireless, ranks 1,098th in the PLT, whereas BT is 44th. Similarly, BG Group heads the CDP energy sector, but ranks 1,153rd in the PLT.

Government departments were challenged by David Cameron to reduce their CO2 by at least 10% in 12 months when he became prime minister in May 2010. In July, the government reported the outcome, with the Department for Education (DfE) outperforming the others, followed by DECC, the Foreign and Commonwealth Office (FCO), Communities and Local Government (CLG) and the Home Office (HO). However, their PLT rankings are: DfE = 381st; DECC = 1st; FCO = 1,142nd; CLG = 1,098th; and HO = 1,301st.

So although the government reports that the HO, for example, reportedly cut its CO2 emissions by 17.6% between May 2010 and May 2012, its failure to achieve the Carbon Trust Standard or an equivalent or install any AMRs meant it was placed in the bottom section of the PLT.

A poor benchmark

The sheer scale of some organisations can act as a barrier to being ranked as a top performer in the PLT. “It’s easier for organisations with only one or two sites to perform better, because they have fewer sites at which to install meters and achieve emissions standards,” says David Symons, environment and energy director at WSP. “That’s why you are seeing organisations like Manchester United [1st] performing really well.”

Organisations with a large number of reasonably big sites can also appear to perform better than similar organisations with different-sized facilities. The retail sector is a good illustration of this. Many of the UK’s largest and most well-known high-street stores are in the top 10% of performers, with Asda (37th as Broadstreet Great Wilson Europe in the table) leading, followed by the Co-operative Group (44th), Morrisons (56th), the John Lewis Partnership (75th), M&S (82nd), Tesco (93rd), Sainsbury’s (164th) and Alliance Boots (202nd).

All have the Carbon Trust Standard to some extent (certification might not cover the whole organisation), so differentiation in the first PLT is largely based on the proportion of locations with AMRs. The PLT reveals that AMRs are in 94% of Asda sites compared with 54% of those operated by Alliance Boots.

“The AMR metric clearly favours those with large locations that would justify the cost of installing AMR. For example, Asda, which, compared with other retailers, has an estate of generally larger stores. Similarly, John Lewis operates out of 290 fairly large stores, whereas M&S has 670 stores ranging from 1,500 sq ft to 150,000 sq ft,” says Hill at M&S.

Tesco also tends to operate a much larger proportion of smaller shops (Tesco Metro and Express, for example) than competitors such as Asda. Many of these outlets, which at the start of 2010 numbered more than 2,000, are below the threshold for half-hourly (HH) meters. Its EAM score for automatic readers is 75%.

Meter reading

Physical constraints have stopped some organisations achieving 100% in the AMR EAM. Although happy to be one of the top 20 NHS trusts in the PLT, Guy’s and St Thomas’ NHS Foundation Trust, which is placed 174th, was prevented from scoring higher than 50% in the AMR category because of the constraints of its estate.

“The age [part of St Thomas’ dates from the 15th century], size and complexity make AMR equipment too costly and complicated to install. We have installed it where possible,” says sustainability manager Alexandra Hammond.

The NHS trust did, however, achieve the Carbon Trust Standard in August 2009. Interestingly, 36% of its 49,170 tonnes of CRC emissions are produced by on-site combined heat and power (CHP) plants that provide half the trust’s annual electricity requirements, while the waste heat generated, in the form of steam and hot water, is reused for each hospital’s heating and hot-water supplies. The CHP plants also cut annual emissions by approximately 11,300 tonnes.

Other CRC participants have encountered problems installing AMRs, which has brought down their EAM score. One IT company contacted by the environmentalist installed a gas AMR (gas logger) at its head office – most of its other premises were on mandatory HH meters – as part of its preparation for the CRC.

Although the decision to invest in the logger was taken well ahead of the start of the scheme, installation delays and its eventual failure to work properly with the existing meter meant the firm scored zero in the AMR element of the EAM. And having already taken the decision not to go for the Carbon Trust Standard, preferring to invest the £8,000 or so it would have cost to achieve the standard on energy-saving equipment instead, the company has scored nil in the first PLT.

Mark Gough, global environment and health and safety manager at publishing company Reed Elsevier (the parent company of LexisNexis), has also encountered problems with metering. Reed Elsevier is ranked 305th in the table with an EAM score of 57.50, having initially expected to score 100.

The company achieved the Carbon Trust Standard in 2010. However, it scored only 15% on the AMR portion of the EAM, largely because its gas supplier continues to estimate consumption rather than use the data from the newly installed gas AMRs – something the EA demands if the gas AMRs are to count in the EAM.

“We installed the gas AMRs, partly because of the CRC. But apparently the data is not considered as robust as from electricity readers and our supplier refuses to accept the figures and the agency won’t accept estimated use even though we have gas AMRs,” explains Gough. He describes the EA metering guidance as really confusing and says its advice line was not much help.

Other participants have not achieved the full AMR score because most of their energy consumption is through mandatory meters, and it is not always cost-effective to install voluntary AMR for the remainder.

“Ninety-six per cent of our consumption is on mandatory meters,” says Miles Watkins, director of sustainable construction at construction and building materials supplier Aggregate Industries (354th and listed as Holcim). “Although all our energy is now covered [too late to get the maximum EAM benefit], we put all our energy efficiency efforts into the high-consumption areas rather than the smaller supplies.”

Mistakes happen

The EA makes it clear that everything published in the PLT is based on information provided by participants, and says that the table may be amended further following its auditing of the data, successful relevant appeals and verification requests.

A slight mistake in the data submission gave an incorrect picture of performance at Kingfisher, which owns B&Q and Screwfix. It ranks 1,300th in the table, just above the 800 plus organisations in last place. The company’s EAM score in the table is 0.02% even though B&Q has had the Carbon Trust Standard since 2008 and was recently been recertified.

According to Kingfisher, a data submission error has resulted in the firm being placed lower than it should be in the league table. “The Environment Agency calculates that Kingfisher’s position should be higher (525th). Using the correct data, our [EAM] score should read 47% and not 0.02% as published,” a spokesperson told the environmentalist.

Going forward

Subsequent PLTs should provide a slightly better benchmark of actual performance in reducing energy use and emissions, as the EAM starts to drop out of the equation, disappearing completely at the start of phase II in April 2013.

Next year 45% of a participant’s score in the table will be based on the absolute emissions metric (see below). A further 15% will be linked to a “growth” metric – emissions for each unit of turnover for businesses and emissions for each unit of revenue expenditure for public sector organisations.

However, some businesses remain critical of the growth metric, believing its focus solely on turnover will penalise companies that grow through acquisition and physical growth, potentially giving another misleading impression of performance.

“You could buy a company that was not in the CRC and have to include their emissions. You can’t alter your baseline retrospectively, so you have to pay the CRC penalty,” says Watkins at Aggregate Industries. He also identifies another potential future problem.

“The difficulty many companies will face is that baseline emissions are relatively low because we’re in a recession. When economic growth returns, companies are likely to be expanding faster than their ability to find energy savings, especially as most will already have implemented the ‘easy’ measures, the ‘low-hanging fruit’, to improve efficiency.”

Over at M&S, Hill says: “The next PLT will be different but will still be a very limited view of carbon management.”

How the league table works

The Carbon Reduction Commitment Energy Efficiency (CRC) scheme performance league table (PLT) will be published in October each year after all the reports have been received and compared. The comparative assessment for phase I (2010–2013) is based on three metrics:

• absolute – the relative change in participants’ emissions over the year against baseline (2010–11);
• early action – energy-saving measures put in place before the start of the scheme; and
• growth – to take account of growing organisations, which may increase their absolute emissions – for each unit of turnover for businesses and for each unit of revenue expenditure for public sector organisations.

Different weightings apply for each metric and these change over time (see table below). The early action metric, which only applies in phase I, rewards organisations for installing voluntary automatic meter readers and/or achieving the Carbon Trust Standard or an equivalent certification.

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