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Energy audits to hit all businesses

The government’s decision to implement energy audits on all non-SMEs before 5 December 2015 will cause a headache for every company relying on road transport – regardless of their size. Nick Radcliffe, MD of FreightArranger, explains why this is a golden opportunity for rail freight firms.

The government has introduced new measures to keep energy use and emissions down. And whilst on the face of it the new audits only apply to non-SMEs, which is anyone with a headcount of more than 250 people, turnover greater than €50m, or a balance sheet greater than €43m, experience shows that this will trickle down and affect businesses of all sizes.

The new measures will challenge organisations to get greener across all aspects of their operations, but transport is known to be particularly wasteful – so this is where many will place their focus. The good news for the rail industry, as I see it, is that because there are minimal savings left to be made on road vehicles, alternatives will need to be sought.

Here are some facts: the Department of Energy & Climate Change says the new audits, which will be repeated every four years, must cover transport, buildings and industrial operations and be carried out in accordance with the EU Energy Efficiency Directive.

Energy efficiency

The transport sector is listed as the second largest contributor to total UK carbon emissions, emitting some 120 million tonnes per year, or a quarter of the UK total, and will be a target for businesses looking to reduce their output.

I do believe that much has been done to make road vehicles more fuel efficient through improved aerodynamics, improved engine efficiency and less resistant tyres. However, basic economic theory tells us that although further improvements can be made, each additional step will yield a smaller benefit.

Rail freight, however, helps considerably in reducing fuel consumption: metal wheels running on metal rails are near-frictionless. The result is to reduce fuel consumption per tonne mile by some 67%. Heavier commodities such as coal and aggregates achieve even higher savings.

Use of rail freight is a mode which is growing, but is still relatively unexplored, with fewer than 10% of freight tonne miles in UK being by rail.

The new energy audits are intended to influence behaviour change by businesses and will be structured in a way that advice is given on energy consumption reduction. Such a scheme is already in place for UK companies quoted on the stock exchange and includes mandatory reporting in the annual directors report.

All sizes of company will be affected by this decision. Although the audit and reporting burden falls only on large companies, they outsource many aspects of their activities to others and so there will be a definite knock-on effect.

Major opportunity for rail

This is a major shift and an ideal opportunity for rail companies.

There may be a perception that rail freight is only for larger firms with large amounts in transit; that is a myth we are trying to dispel at FreightArranger. Our web-based system pairs up companies and rail operators, finding available space so that the former need only book part of a train for a journey, and the latter can ensure their space is as full as possible.

Now, with intermodal freight, consignments as small as a single 20-foot container can be taken.

Many of the larger companies we deal with are retailers and manufacturers who are dependent on purchasing services like transport along with products and components from an array of suppliers. So, for large companies to achieve energy saving, they have to push the initiative through the supply chain into medium-sized and small companies too.

Of course, reducing energy consumption also means reducing costs, so participating companies can expect to obtain a long running cost benefit, and one that it is likely to increase in value in the future.

This is the time for rail companies to make some noise. There are decision-makers in boardrooms up and down the country looking to make energy savings and rail companies have the answer to that question.

About the author

Radcliffe is a logistics industry insider and has studied the economics and environmental impacts whilst developing FreightArranger, a revolutionary new system which is making logistics more efficient by making the most of both road and rail by organising transport via a web-based system.

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