Energy efficiency can be a key cost reduction

News about energy bills always hits the headlines over winter, as many consumers struggle to cope with rising gas and electricity bills.

But consumers are not the only ones struggling – many small businesses find this time of year very difficult for the same reason. In fact, almost a third of small businesses highlight the cost of energy as a barrier to the growth and success of their business. Finding energy efficiency is the single best way to reduce these costs over the long-term and small businesses need all the support and information they can get to help to make savings wherever possible.

Improving energy efficiency

Energy efficiency is something many small businesses are adopting. FSB research suggests that 90 per cent of businesses want to be energy efficient and 58 per cent have already made changes to improve their energy efficiency. The most widely reported energy efficiency measures already introduced are the installation of more efficient lights, lamps and bulbs; the introduction of switch off/turn down policies; and improved insulation.

This is positive news because the effect can be significant. The Department of Energy and Climate Change (DECC) estimates that the average SME could reduce its energy bill by 18-25 per cent by installing energy efficiency measures with an average payback of less than 1.5 years. The benefits don’t just stop with the financial remuneration either.

The great thing about energy efficiency is that once a business makes savings, they go straight on their bottom line and remain there. Other benefits which come hand in hand with energy efficiency improvements include increased productivity, a more comfortable working environment, financial savings which can be used to fund growth and the reputational benefits of improving the organisation’s green credentials.

However, there are still major barriers that need to be overcome. Operating from leased or rented premises is the most significant of these, with over half of businesses citing this as a major obstacle preventing them embracing energy efficiency. One option to explore is negotiations with landlords, potentially splitting the cost of introducing energy efficient solutions.  Other barriers identified include a lack of concern around energy costs and a lack of capital for energy efficiency investment.

Cost is obviously a vital driver for small businesses but many of the companies I speak to are also genuinely concerned about their carbon footprint and trying to do their bit to protect the environment. Another factor to consider is that in a world where young people entering the world of work are looking for a different kind of employer-employee relationship, a business that shows it thinks with its heart as well as its head can be a in a stronger position to attract the best talent.

Businesses wishing to save money by being more energy efficient should consider the following simple steps:

• Set heating timers to the right date and time, especially when the clocks change
• Take different working times on weekends and bank holidays into account when setting heating timers
• Set the heating in the office to a recommended 19 degrees centigrade
• Seal up draughts and unused doors
• Regularly check and maintain any air conditioning units and air filters
• Make sure all lights are turned off when not needed, including in unoccupied areas
• Ask staff to turn their computer monitors off if they are away from their desks for more than 10 minutes and that both PCs and monitors are turned off at the plug at the end of the day
• Make sure all electrical equipment in kitchens are switched off at the plug at the end of the day

The wider energy market

Of course, a lack of energy efficiency isn’t the only cause of high energy gas and electricity costs for businesses. Energy represents a substantial cost for the majority of small businesses and yet the current market is failing them. Many SME’s have either not looked into how to reduce their energy costs, or are simply not experienced enough in identifying areas where they can save money on their bills. In fact, 70 per cent of these businesses experience difficulty comparing energy tariffs and 43 per cent say they have never switched supplier.

The Competition and Markets Authority (CMA), which is preparing to conclude its investigation into the energy market, says SMEs in the UK pay around £500 million more a year than if competition was functioning effectively. It has voiced concern that 45 per cent of SMEs have been placed on a default tariff, one that has not been actively negotiated, which can be more than twice as expensive as a negotiated tariff.

While substantial savings can be made through the implementation of energy efficiency measures, the other route to saving money is ensuring businesses secure the best tariff available. Many smaller businesses, however, either don’t believe they can make substantial savings, or haven’t trusted the market and the system enough to engage in the process.

This is why we have just launched our new FSB Energy service to help members reduce their gas and electricity bills. Members using the service could cut approximately a quarter (23 per cent) off their annual energy bill, which is equivalent to nearly £1,000 for the average FSB member.

Small business owners want clear, easy to use advice on competitive rates for utilities and this service will go some way to meeting this need. There are many powerful reasons for small businesses to take a serious look at their energy bills and energy efficiency. Numerous obstacles have historically made this a more difficult task for time-pressed business owners than it should be, but hopefully they now have the resources they need and the advice they can trust to enable them to make savings with the minimum of fuss.

To find out more about FSB Energy, visit www.fsb.org.uk/benefits