The world is warming up; the evidence is unequivocal. The predominant belief is that the cause is man-made and if we don’t act now we could cause irreversible damage. The publication and reception last year of The Stern Review on the Economics of Climate Change highlights how climate change has reached mainstream and political thought, as does the UK government’s recent creation of a Department of Energy and Climate Change (DECC) and the announcement of even tougher targets to cut emissions.

Energy efficiency is a new area for everyone, particularly from a business point of view. A typical organisation spends an average of one to two per cent of its overheads on energy costs, unless it involves an energy-intensive industrial process and most companies have other focuses than reducing such a small percentage of their profits.

Professor Martin Fry, chair of the Energy Services and Technology Association, says: ‘For a long time, it hasn’t been a priority and governments and official bodies have left it to organisations to consider. But in the last seven or eight years, climate change pressures have increased significantly and even if it’s only a tiny percentage of your costs, you’ve got to do something about it.’

Before looking at legislation that will directly affect organisations, let’s look at the bigger picture. The whole world is working together to put a stop to climate change and international agreements go a long way to dictate the legislation that comes into force in individual countries.

The United Nations Framework Convention on Climate Change was agreed in 1992, closely followed by the Kyoto Protocol in 1997, when it was recognised that even more drastic measures were needed if we are to halt the damage we are doing to the environment. The Kyoto Protocol sets out aims for countries to reduce carbon emissions and is the drive behind the EU’s new measures. The EU is considered one body under the agreement, but each country has a separate target to meet that combines into a burden-sharing agreement. For example, the UK has to reduce its emissions by 12.5 per cent by 2012, based on a 1990 baseline, while the EU as a whole has a target of eight per cent.

The EU is currently basing most of its activity on emissions trading, which began in 2005. This is a process by which organisations are allocated credits for carbon emissions, dictated by member governments to ensure that the number of total credits is less than business-as-usual levels. The scheme creates a market for carbon, in that if you buy 1,000 credits and use 1,200 you have to pay more, but if you only use 800 then you can ‘sell’ them back. The idea behind it is to make it cheaper for companies to perform well.

The UK has its own emissions trading scheme, recently announced by the Department for Environment, Food and Rural Affairs (Defra) as the Carbon Reduction Commitment (CRC). This is a legally binding energy-saving scheme which comes into effect in 2010 and covers large organisations with electricity use of greater than 6,000 megawatt hours between 1 January 2008 and 31 December 2008.

‘Companies such as big supermarket chains or sports stadiums will be targeted,’ says Jonathan Farr at Defra. ‘The scheme is in its early stages and it will target the biggest companies it can; larger companies have a greater ability to change.’

The CRC is part of the Climate Change Bill, which is soon to be launched, and outlines the UK’s target to reduce emissions by 26 per cent by 2020 and 80 per cent by 2050. This will have a significant effect on UK business in general, as it is a long-term legally binding framework. It includes the creation of a Committee on Climate Change, an independent body to advise the government on the climate change programme, such as the level of carbon budgets and the reduction effort needed by trading schemes. It could also have the scope to order organisations and public bodies to carry out adaptation assessments, therefore having a direct affect on businesses.

Lobbying bodies such as Greenpeace are pushing for further measures. Executive director John Sauven commented on the creation of the DECC: ‘For years the government has dithered on climate change, offering us rhetoric but little way into real action. Bringing energy and the climate together at last reflects the urgency of the threat we face from climate change.’

Some legislation is already in place. The Climate Change Levy, an energy tax targeted at UK businesses, came into force in 2001. The tax adds around 15 per cent to a typical energy bill and is in theory balanced by a 0.3 per cent reduction in national insurance payments. This wasn’t welcomed by everyone, with the Federation of Small Businesses describing the levy as ‘nothing more then a tax that does not change behaviour.’

Other current legislation includes theDisplay Energy Certificate, launched on 1 October, which requires the public display of a certificate in buildings with an area greater than 1,000 square metres. Energy Performance Certificates are also mandatory for any building that is bought, sold or rented. Both certificates will allow users to see how well a building can operate.

As Martin Fry says: ‘The screw is turning and organisations have to face up to that. They have a choice which is either to become energy efficient and meet targets, which is going to cost them some money, or don’t meet targets and pay the fine, which will also cost money. It’s been worked out so it’s cheaper and in everyone’s interests to save energy, so this is all beginning to have an effect.’

Apart from saving the environment, these measures look set to save everyone money. Businesses could also benefit by marketing around carbon efficiency. Everyone will have to start buying energy efficient products, which opens the way for cunning entrepreneurs. Companies that demonstrate carbon efficiency will appear more favourable to the public, creating a knock-on effect in the supply chain.

However, becoming energy efficient isn’t straightforward for many people. Changing the way we use electricity, gas and other resources is a force of habit and something that can’t or even won’t be altered easily, as Vassia Paloumbi, environmental consultant, is aware.

‘People are very confused about the whole area. They need to understand how legislation applies to them, how to save costs and how technology can help. Many companies are recognising the need to do something, particularly in the last few months with rising fuel costs. They realise that prices will continue to rise and there will be more legislation.’

The best way to cope with current and future legislation is to stay ahead of the game. Before you have a mandatory target that you have to meet, pre-empt it. There are many small things you can do to cut down energy usage, but the key action, without which nothing can happen, is to get buy-in from staff and management.

‘You have to make sure people know why you are doing it. If staff think that all they are doing is saving money for the boss, why would they bother?’

Small steps can be taken that are simple and often free, such as switching off lights and computer screens when not in use. Energy efficient lights are initially more expensive than normal ones, but the cost savings are much higher in the long run. Think about issues such as opening a window when the heating is on. As Vassia says: ‘You wouldn’t open the stationery cupboard and let everyone help themselves, so why do the same with energy?’

Work on a new standard for energy management systems and energy audits is underway with a target publication date of autumn 2009. EN 16001 will use the plan-do-check-act approach and be systems- not outcome-based. The aim is to cut an organisation’s energy usage and it should also help to cut costs.

Ian Richardson, committee manager at BSI, comments: ‘This is one of the few standards that has duality to it. It’s not just about trying to get Benefits, but also the knock-on effects of that, meaning reduced costs.’

EN 16001 will help organisations come to terms with its legal obligations in terms of energy, as well as the companies own objectives and policies. It’s based on the framework of ISO 14001 for environmental management, in terms of clause structure, and expands on the brief mention of energy in its predecessor.

One question that surrounds the standard is whether it will be suitable for use in small- and medium-sized enterprises (SMEs). If not, this could be a major flaw, as SMEs make up the majority of the UK’s economy and collectively swallow a lot of energy. It aims to be applicable to all types and sizes of organisations, but some are not convinced.

‘I don’t think that anything using such a framework will help SMEs,’ says Vassia. ‘It’s not flexible enough and although it may help bigger organisations, SMEs won’t have enough money or resources to drive the initiative or hire a consultant.’

Ian Richardson disagrees. ‘It may be harder, but not impossible. Bigger organisations generally have more resources in terms of people and budget, but it could be something SMEs do on a smaller scale.’

At a recent BSI energy emissions conference Martin Fry mentioned that a scaled-down version of EN 16001 for SMEs has been considered, but not all countries agreed there was a need for it. This is an issue that could greatly affect the scope of the standard and it remains to be seen whether it will also affect its success. But interest in the standard has been high so far and over 300 people downloaded the draft when it became available.

Other standards are already available, such as the Carbon Trust Standard launched earlier this year. By achieving this standard an organisation demonstrates that it has reduced its carbon footprint and is committed to making further reductions. When CRC is launched, companies that hold the Carbon Trust Standard will automatically have this counted in their favour. A second is PAS 2050, soon to be launched by Defra and the Carbon Trust, giving guidance on how to measure the emissions from a given product or service.

Around the world other standards are also cropping up. In Australia, the International Auditing and Assurance Standards Board (IAASB) is developing an international standard on assurance engagements for reporting on carbon emissions.

‘It’s a really hot topic in Australia,’ says Michael Nugent, IAASB technical manager. ‘An act has come into force this year that requires the reporting of emissions by companies and in 2010 we will also introducing an emissions trading scheme. I’ve just been to Canada where they’re also discussing new measures. There’s bound to be more legislation in the future.’

So we can expect further legislation and a tightening of requirements as countries around the world strive to meet national and international targets. There may well be an expansion of energy management markets, particularly as companies start to exploit and market around the necessity to be carbon efficient. The message that energy efficiency is good for your business is starting to be heard and more help is becoming available in the form of standards to point companies in the right direction. However, only time will tell whether all these efforts will bring the desired result and prevent further climate change.