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How the retail sector can transform in response to the energy-cost crisis

Author: SaveMoneyCutCarbon

Published: 20 Sep 2022

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The retail sector has been hard hit by the rapid rise in energy costs over the past year, with potentially catastrophic effects for businesses across the country, but there are sustainable solutions to the crisis.

Shops and other outlets can transform their operation to counter the steep surge in gas and electricity prices, reinforcing effective planning that ensures long-term survival.

The shockwaves of doubled energy costs hit businesses of every size and there's no price cap on commercial supply contracts. This has led to huge variations in the tariffs quoted and, since August 2021, suppliers have increased out-of-contract rates by an average of 100% to reflect extraordinarily high levels of wholesale energy prices.

The effective response is to adopt energy-saving technology that should take the strain off utility costs and embed sustainable practices in the business.

Top three savers

Energy saving – LED lighting can cut energy use by up to 85% and the retail sector can also gain excellent results from smart controls that optimise use of lighting and electricity consumed, as well as efficiently managing heating, ventilation and air conditioning with intelligent controls.

Water – Water-saving solutions that reduce usage by up to 85%, including low-flow and sensor taps, tap aerators, restrictors, low-flush cisterns with sensor control, and urinal control deliver big savings and quick return on investment.

Solar – Retailers can reduce dependence on suppliers and cut bills with solar panels. Ever-rising utility prices mean that it makes sense to invest in renewable, sustainable energy sources. Solar power can also fuel electric vehicles of both company and customers.

Five ESG tips for retail

Retailers have to develop sustainable Environmental, Social and Governance (ESG) strategies that have positive effects on the environment and society, and to optimise shareholder value while focusing on threats and opportunities.

Net zero strategies adopted by national government and international organisations mean that companies are keenly aware of the need to shrink climate footprint and cut carbon emissions by addressing all parts of the value chain. 

  1. View ESG as a transformation project that produces radical, responsible differences. This means building a “bottom-to-top” inclusive strategy.
  2. Build an energy-efficient infrastructure, with ethical supply chains, to save money and cut carbon.
  3. Improve waste management, with better planning for disposable packaging and single-use plastics.
  4. Gather data: identify the most effective ways to measure. Define and embed key performance indicators (KPIs) and sector benchmarks. Ensure customer privacy and data security.
  5. Develop and promote ethical business and labour practices, embed diversity, tackle economic inequality and root out discrimination.

Ukraine and other price pushers

The war in Ukraine is having a big impact on energy bills because Europe is reliant on Russian gas. In 2021, Europe sourced more than 40% of gas imports from Russia and conflict with Ukraine could seriously disrupt this supply and push up prices. Wholesale gas prices have risen by as much as 33% and some suppliers have temporarily pulled out of the market.

It’s true that the UK is not so heavily reliant on Russian gas but, as it imports nearly 50% of its energy from Europe, supply price hikes there will push up prices here.

The other main drivers for the price spikes are gas shortages across Europe, high Asian demand for liquefied natural gas (LNG) curtailing shipments to Europe, delays and complications to the Nord Stream 2 pipeline (direct from Russia to Europe) and post-lockdown surge in demand.

Looking ahead, mid-term pressures on energy prices include the Fifth Carbon Budget (2028-2032), which specifies a very demanding 57% reduction in emissions from 1990 levels. As the energy sector is responsible for around 21% of the UK’s total emissions, the response from the sector in the coming years will have a great impact on commercial energy bills.

Case study

SaveMoneyCutCarbon has worked with Morley Stores, a group of department stores in Greater London to provide energy and water savings solutions that reduce its soaring energy bills, cut costs of water consumption and lower overall carbon emissions.

The group will save thousands of pounds on energy and water costs every year with rapid return on initial investment and ongoing savings over many years, with the long working life of the LED light fittings and quality water-efficiency solutions. Payback is swift with best case of around 1 year.

Swapping to LED energy efficient lighting

  • Average annual energy savings: 63%
  • ROI: quickest payback 1 year
  • Average CO2 reductions p.a.: 63%

Installing water-saving solutions

Average ROI:

  • Tap aerators/restrictors: 7 months
  • Urinals: 8 months
  • Toilets: 3.5 years

Switching to eco hand dryers

  • Average annual energy savings: 82%
  • Average ROI: 1.6 years
  • Average CO2 reductions p.a.: 82%

SaveMoneyCutCarbon is an ICAEW Member Rewards partner, providing the complete end-to-end service for businesses looking for building decarbonisation services. If you’re in the retail sector and don’t know where to start, then book a free 30-minute call with one of our IEMA qualified ESG experts to find out how we can help.

*The views expressed are the author's and not ICAEW's.

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