What’s in the commitment for consultancies?

The market in advising firms on the Carbon Reduction Commitment is primed for growth, says David Carr

With the launch of the Carbon Reduction Commitment (CRC) less than a year away, there is a growing need for guidance and preparation advice. Several consultancies are well-advanced in honing their offerings to clients.

James Patterson, senior manager in Environ’s carbon and energy group, said: “It’s still early days and many organisations haven’t woken up to the CRC yet.”

The step change demanded by the CRC is that bodies focus on carbon management and energy efficiency at a company or group-wide level. Consultancies could play a key role in the process.

And this applies to more than the established green consultancies. Because of the CRC’s impact on a company’s balance sheet, it is a salient issue for finance directors and to accountancy-based management consultancies. “It’s a business issue rather than an environmental one and we can explain it in the language of the board,” said a KPMG spokesman.

Where environmental consultancies focus on the technical aspects, KPMG and their ilk see a market in providing advice on the strategic and financial aspects. “We’re not looking to compete with the technical consultants, but rather offer the breadth of service a multidisciplinary consultancy can provide,” he said.

Public sector organisations have increasingly become major clients for such services, he said, adding to what was initially a predominantly private-sector market.

Charles Allison, a partner for energy and climate change at environmental consultancy ERM, sees a burgeoning market for CRC-related advice concentrated on medium-sized organisations not previously caught in the carbon compliance net.

There is also an opportunity to sell advice to lawyers, accountants, property managers and energy suppliers providing services to the thousands of  bodies covered by the CRC. These suppliers need to understand how their clients are affected by the CRC so they can adjust their service provision and business strategies.

Mr Allison said there is “a full spectrum of need,” ranging from legal advice on ensuring compliance, advice on data gathering and registration, gaining a high league table position, and putting a compliance structure and long-term CRC strategy in place.

He sees little mileage in advising on the financial aspects and says the purchase of emission permits will account for only a few percentage points of an organisation’s total energy costs.

But KPMG’s spokesman said the CRC’s financial impact could be much larger over the longer term, rising to 30-60% of an organisation’s utility bills within ten years and significantly affecting cash flow. “In the current environment, a few million pounds cash flow impact could mean breaches in banking covenants if not prepared for,” he said.

Environ’s Mr Patterson said the consultancy’s CRC-specific offerings will cover areas such as assessing a company or group’s liabilities under the CRC. It will help clients to monitor and report energy use, calculate their CRC carbon footprints and size up exclusions from the CRC – including those resulting from the EU ETS and Climate Change Agreements. Further advice is offered on trading in carbon allowances, including use of the secondary market.

Enviros also plans to advise on cutting carbon emissions and saving energy – which is the CRC’s primary function, after all.

Caroline Doble, consulting group director for climate change and renewables at consultancy Enviros, said the CRC is “a fantastic chance to kick-start carbon management because it raises the issues up to the boardroom”.

The new regime requires firms to take financial, reputational and compliance implications on board. Con­sultancies expect firms in property, retail, hotels, airports, financial services and light manufacturing to be the key customers. Many need advice on assessing whether they will have to comply.

The Carbon Reduction Commitment

A special report, sponsored by RPS(energy and environmental consultants)