For some years now, larger companies have been churning out annual reports describing their corporate responsibility (CR) or sustainability record. While these reports have become more sophisticated, they try in many ways to please everyone and often please very few.
At the same time, there is a growing band of smaller companies which have embraced regular reporting as a means of driving process improvement. These companies will take different approaches to environmental management and working conditions, but they share a desire to improve their relationship with the environment, suppliers, local communities and employees. This work is partly driven by legislation, but is also a means of responding to questions from customers and saving money, for example through reduced waste disposal, energy and recruitment costs.
Why make progress or problems with sustainability public? Firstly, the report can be a mechanism for setting targets and driving the resulting process improvements – you cannot beat a public statement of intent to concentrate minds! The report can sit easily alongside an existing data and management system and should offer a full and frank picture, even where progress is not being made. Secondly, the company may well be getting enquiries from potential customers, investors and employees about its sustainability record. Thirdly, greater transparency is a facet of improved management, which in turn enhances the value of the company brand.
The rise of digital communication means that even small businesses can produce concise, engaging and up to date summaries of environmental and sustainability performance. While a printed summary will always be necessary, online reports can be much more flexible, visual and up to date. In addition, the work of those within the business can be brought to life, specific projects can be illustrated and targets updated.
The report need not emulate the thick tomes produced by larger companies. It should describe the nature of the business, associated policies and how the company is tackling its key ‘impacts’ such as waste, water, responsible sourcing, employee development or community involvement. The report may also be structured in line with external voluntary guidelines.
In the era of business transparency and scrutiny, those companies that are prepared to expose their management of environmental, ethical, social and community issues will undoubtedly enhance their bottom-line and their value.
Monday 29 March 2010
Tuesday 23 March 2010
Common Sense Really
In the current economic climate, it might seem somewhat irrelevant to be talking about corporate social responsibility or CSR. But, while corporate heads have been turned towards market turmoil, the resulting mangling of corporate governance and death of long standing companies, makes it a fitting time to re-visit the concept of CSR and its relevance to a profit making enterprise.
Firstly, the acronym. It’s all wrong. While businesses can be social enterprises, most are not. So let us rescue the concept and call it ‘common sense really’, ‘enlightened self interest’ or indeed, good old fashioned ‘corporate governance’. Let us also accept that a company that is financially successful over a long period is, by dint of this success, a company that is corporately responsible in relation to people and the environment. See Adam Smith for details.
It seems sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. There is also a strong reputational aspect to this and, particularly for public companies, there is a relationship to share price.
Having taken a stab at a definition, it’s worth mulling over the question of who drives the CSR agenda. Like all good concepts there is no simple answer. Orthodoxy says that CSR should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the CSR industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, CSR also comes with its own mountain of written material, created by companies, academics, commentators or CSR professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about CSR need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
We have gone this far and not even mentioned carbon and climate change. Is the latter the same as CSR? Of course not, even given the strong focus on the carbon impacts of commercial enterprise. Briefly, abundant evidence exists that climate change will shape the business environment, which in turn will shape CSR. End of story.
So where does that leave us? CSR – it’s a piece of cake, or should it be POC, for an innovative, well run company with long term growth ambitions. Those of us for whom this simple goal is not as easy as falling off a log (or FoaL) also need a little bit of a steer. Above all, companies must not lose sight of the fact that they are there to create value for their shareholders, employees and customers, retaining a focus on profit, performance and governance.
While this is all well and good, how do investors best take a view on CSR when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even listed corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with environmental, social and governance risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to CSR related issues. Put simply, investors need to be more engaged and clued up, while investees need to recognise the importance of ESG risks as both management and communications challenges.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. Those that do not will die. It’s common sense really.
Firstly, the acronym. It’s all wrong. While businesses can be social enterprises, most are not. So let us rescue the concept and call it ‘common sense really’, ‘enlightened self interest’ or indeed, good old fashioned ‘corporate governance’. Let us also accept that a company that is financially successful over a long period is, by dint of this success, a company that is corporately responsible in relation to people and the environment. See Adam Smith for details.
It seems sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. There is also a strong reputational aspect to this and, particularly for public companies, there is a relationship to share price.
Having taken a stab at a definition, it’s worth mulling over the question of who drives the CSR agenda. Like all good concepts there is no simple answer. Orthodoxy says that CSR should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the CSR industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, CSR also comes with its own mountain of written material, created by companies, academics, commentators or CSR professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about CSR need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
We have gone this far and not even mentioned carbon and climate change. Is the latter the same as CSR? Of course not, even given the strong focus on the carbon impacts of commercial enterprise. Briefly, abundant evidence exists that climate change will shape the business environment, which in turn will shape CSR. End of story.
So where does that leave us? CSR – it’s a piece of cake, or should it be POC, for an innovative, well run company with long term growth ambitions. Those of us for whom this simple goal is not as easy as falling off a log (or FoaL) also need a little bit of a steer. Above all, companies must not lose sight of the fact that they are there to create value for their shareholders, employees and customers, retaining a focus on profit, performance and governance.
While this is all well and good, how do investors best take a view on CSR when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even listed corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with environmental, social and governance risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to CSR related issues. Put simply, investors need to be more engaged and clued up, while investees need to recognise the importance of ESG risks as both management and communications challenges.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. Those that do not will die. It’s common sense really.
Naked Ambition
Market turmoil and consolidation has led to further questions about the ability of Scottish-based companies to grow to global prominence. Being the acquirer not the acquired.
There is much debate over the ambition of Scottish companies and how this is tempered by banks, investors and professional advisers. While accepting that only a tiny percentage of start-ups will go on to achieve significant growth [20% or less], those companies with a drive to expand, may have their wings clipped unnecessarily by those that fund and advise. Take the fundraising experience of a small but ambitious Scottish consumer products company. It was already heading for 50% turnover from international sales and was therefore surprised to hear some investors ask ‘why are you bothering to export’. This despite the company’s stated ambition to be the market leader globally. While familiar with the oft quoted mantra of ‘sort out your home territory first before embarking on any international adventures’, this particular company was already the UK market leader while freely acknowledging that it could do more on its doorstep. Crucially however, its customer base was present in every country in the world and the company had already targeted those territories with the most promise [and in fact was already exporting to 20 such countries across North America, Europe, Asia and Australasia]. The distinct impression given was one in which venturing outside Scotland and the UK was too risky and scary. As it was the company raised its finance on the premise of continued export growth. Indeed, if the Directors had acquiesced and retrenched their export activity, the company would now be dead, given the state of the UK economy. While accepting that exporting is difficult and expensive, the lesson here is that it should not form a barrier to growth and expansion.
As well as scale, there are debates over the nature and type of growth. Having an international outlook is one thing, but defining where the boundaries of growth lie is also something to consider. This brings in the nature of an exit for the founders of the company. Discussions about the nature of company growth and exit, normally boil down to either a strategy of ‘build it up then sell to another company’ or ‘build it up and go for an initial public offering’. There can be a reticence to go for the latter option and even if this path is chosen, it may be because other sources of funding have dried up. Do investors and advisors steer companies away from an IPO because their influence and control is diluted? Is an IPO portrayed as being too difficult? Thankfully, such arguments have clearly not deterred some notably successful Scottish companies from taking this route to growth and vastly expanding their investor base.
Whether a company remains private or opts for the public markets, we still return to the question of ambition for the company and those involved. Clearly at some point in the future, the company may well go bust or be bought by someone else, however, in the meantime how big should and could the company get. If the basic offering is a suitable platform for growth there is absolutely no reason why a founder of Scottish start-up could not create a multinational behemoth that devours other companies and operates globally and swims within the public markets. This may mean raising huge amounts of money through private or public placements, but so be it, if the god of ambition is to be assuaged. It has been done by drinks, transport, engineering, financial and energy companies, although with a few notable exceptions, the Scottish technology sector has lagged.
Regardless of the sector, business is of course inherently risky and founders will face a multitude of challenges, particularly in the very stages of turning an idea into a commercial reality. Leaving aside grant funding, the private investment route is now even more important for Scottish start-ups, given that the banks are pulling back from those who are not cash positive. So when faced with revised risk models and investor scepticism, company founders can do worse than start from a position of naked global ambition, which will at least provide a standard around which those involved can rally.
So, how best to proceed for the putative Scottish multinational. Ignore turmoil in the banks – their corporate governance was shot to pieces so they have taken their ball back, for the moment. Question investors and advisors capabilities, particularly those who baulk at an export strategy and portray a quick trade sale as the only option. Close ears to a perceived lack of confidence – remember the Empire of the Scots! It would be a shame if new and ambitious Scottish companies allowed themselves to be cowed by the baggage of others. Go on you thrusting entrepreneurs, be ambitious, be avaricious, be multinational – think behemoth!
There is much debate over the ambition of Scottish companies and how this is tempered by banks, investors and professional advisers. While accepting that only a tiny percentage of start-ups will go on to achieve significant growth [20% or less], those companies with a drive to expand, may have their wings clipped unnecessarily by those that fund and advise. Take the fundraising experience of a small but ambitious Scottish consumer products company. It was already heading for 50% turnover from international sales and was therefore surprised to hear some investors ask ‘why are you bothering to export’. This despite the company’s stated ambition to be the market leader globally. While familiar with the oft quoted mantra of ‘sort out your home territory first before embarking on any international adventures’, this particular company was already the UK market leader while freely acknowledging that it could do more on its doorstep. Crucially however, its customer base was present in every country in the world and the company had already targeted those territories with the most promise [and in fact was already exporting to 20 such countries across North America, Europe, Asia and Australasia]. The distinct impression given was one in which venturing outside Scotland and the UK was too risky and scary. As it was the company raised its finance on the premise of continued export growth. Indeed, if the Directors had acquiesced and retrenched their export activity, the company would now be dead, given the state of the UK economy. While accepting that exporting is difficult and expensive, the lesson here is that it should not form a barrier to growth and expansion.
As well as scale, there are debates over the nature and type of growth. Having an international outlook is one thing, but defining where the boundaries of growth lie is also something to consider. This brings in the nature of an exit for the founders of the company. Discussions about the nature of company growth and exit, normally boil down to either a strategy of ‘build it up then sell to another company’ or ‘build it up and go for an initial public offering’. There can be a reticence to go for the latter option and even if this path is chosen, it may be because other sources of funding have dried up. Do investors and advisors steer companies away from an IPO because their influence and control is diluted? Is an IPO portrayed as being too difficult? Thankfully, such arguments have clearly not deterred some notably successful Scottish companies from taking this route to growth and vastly expanding their investor base.
Whether a company remains private or opts for the public markets, we still return to the question of ambition for the company and those involved. Clearly at some point in the future, the company may well go bust or be bought by someone else, however, in the meantime how big should and could the company get. If the basic offering is a suitable platform for growth there is absolutely no reason why a founder of Scottish start-up could not create a multinational behemoth that devours other companies and operates globally and swims within the public markets. This may mean raising huge amounts of money through private or public placements, but so be it, if the god of ambition is to be assuaged. It has been done by drinks, transport, engineering, financial and energy companies, although with a few notable exceptions, the Scottish technology sector has lagged.
Regardless of the sector, business is of course inherently risky and founders will face a multitude of challenges, particularly in the very stages of turning an idea into a commercial reality. Leaving aside grant funding, the private investment route is now even more important for Scottish start-ups, given that the banks are pulling back from those who are not cash positive. So when faced with revised risk models and investor scepticism, company founders can do worse than start from a position of naked global ambition, which will at least provide a standard around which those involved can rally.
So, how best to proceed for the putative Scottish multinational. Ignore turmoil in the banks – their corporate governance was shot to pieces so they have taken their ball back, for the moment. Question investors and advisors capabilities, particularly those who baulk at an export strategy and portray a quick trade sale as the only option. Close ears to a perceived lack of confidence – remember the Empire of the Scots! It would be a shame if new and ambitious Scottish companies allowed themselves to be cowed by the baggage of others. Go on you thrusting entrepreneurs, be ambitious, be avaricious, be multinational – think behemoth!
Friday 5 March 2010
Essential Strategy for Growth
In the current economic climate, it might seem somewhat irrelevant to be talking about environmental, social and governance (ESG) issues. But, while corporate heads have been turned towards market turmoil, the resulting mangling of corporate governance and death of long standing companies, makes it a fitting time to take a fresh look at what makes a company, large or small, fit for long term purpose and investment.
The links, or not, between a sound approach to ESG risk and commercial success have been argued over for some time. However, the current market environment raises some interesting questions around both sides of the argument. On the one hand, let us consider Northern Rock or RBS. Both are long standing companies, the former with its roots in the mid-19th Century industrialising north of England, the latter founded in Edinburgh in 1727. Both were taken in a certain direction within the past five years by purposeful chief executives. Both washed up on the shores of the wholesale money markets. Conclusion – failure of corporate governance in questioning the strategy of ambitious and forceful CEOs.
On the other hand, both had good records in relation to environmental management and community engagement. Northern Rock operated its foundation, that was a key player in social support within its north-east England heartland. RBS played the ball on climate change and had signed up to the Equator Principles, produced an annual sustainability report and ticked many of these boxes. Conclusion – there remains a disjuncture between measures of environmental and community engagement and actual company performance.
It does however seem sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. Both Northern Rock and RBS adopted overly ambitious growth strategies, allied to a short term viewpoint that was not adequately questioned by the board and investors. As long as the share price grew – who really questioned the longer-term consequences?
Returning to ESG risk, it’s worth mulling over the question of who drives this agenda. Orthodoxy says that a sound approach to these issues should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the ESG industry. Here perhaps, and this is admittedly a cynical view, the agenda can be less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, ESG performance also comes with its own mountain of written material, created by companies, academics, commentators or ESG professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about ESG risk need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
So where does that leave us? Can and should boards, regulators and investors take ESG risk more seriously? While our economic system dictates that companies must retain a focus on financial performance, given recent events, there is no doubt that ESG issues must take more prominence in corporate risk profiling.
The question then arises as to how investors best take a view on ESG risk when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available and can be very useful, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with ESG risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to these issues. Put simply, investors need to be more engaged and clued up, while investees need to take ESG risk more seriously and recognise its importance as both a management and communications challenge.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. They will demonstrate an Effective Strategy for Growth.
The links, or not, between a sound approach to ESG risk and commercial success have been argued over for some time. However, the current market environment raises some interesting questions around both sides of the argument. On the one hand, let us consider Northern Rock or RBS. Both are long standing companies, the former with its roots in the mid-19th Century industrialising north of England, the latter founded in Edinburgh in 1727. Both were taken in a certain direction within the past five years by purposeful chief executives. Both washed up on the shores of the wholesale money markets. Conclusion – failure of corporate governance in questioning the strategy of ambitious and forceful CEOs.
On the other hand, both had good records in relation to environmental management and community engagement. Northern Rock operated its foundation, that was a key player in social support within its north-east England heartland. RBS played the ball on climate change and had signed up to the Equator Principles, produced an annual sustainability report and ticked many of these boxes. Conclusion – there remains a disjuncture between measures of environmental and community engagement and actual company performance.
It does however seem sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. Both Northern Rock and RBS adopted overly ambitious growth strategies, allied to a short term viewpoint that was not adequately questioned by the board and investors. As long as the share price grew – who really questioned the longer-term consequences?
Returning to ESG risk, it’s worth mulling over the question of who drives this agenda. Orthodoxy says that a sound approach to these issues should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the ESG industry. Here perhaps, and this is admittedly a cynical view, the agenda can be less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, ESG performance also comes with its own mountain of written material, created by companies, academics, commentators or ESG professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about ESG risk need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
So where does that leave us? Can and should boards, regulators and investors take ESG risk more seriously? While our economic system dictates that companies must retain a focus on financial performance, given recent events, there is no doubt that ESG issues must take more prominence in corporate risk profiling.
The question then arises as to how investors best take a view on ESG risk when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available and can be very useful, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with ESG risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to these issues. Put simply, investors need to be more engaged and clued up, while investees need to take ESG risk more seriously and recognise its importance as both a management and communications challenge.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. They will demonstrate an Effective Strategy for Growth.
Renewable Scotland
Can renewable energy lead Scotland out of recession? Can Scotland reap significant benefit from the move to a low carbon economy? These are questions posed on a daily basis by those working within, or interacting with, the renewable energy industry. Those firmly in the renewables camp support the view and point to the job creation, infrastructure and environmental dividend. Others caution against over-optimistic forecasts and throw in caveats about investment, planning system change, grid access, the need for nuclear, clean coal and carbon capture and storage and the importance of energy efficiency, heat supply and demand.
Running through this debate, there is the mantra in Scotland that ‘we missed the boat on wind, but we cannot afford to miss the boat on marine energy’.
In relation to Scotland, the following observations may be useful:
Glass half empty syndrome can obscure the great progress made in the last few years and the fact that the global economy is inevitably moving in favour of clean energy. Let us cheer for the fact that Scotland is home to leading utilities with significant renewable energy portfolios; Scotland has seen massive growth in the number of onshore wind projects; a Scottish company created the world’s first commercial wave power device; Scotland is home to the European Marine Energy Centre and bags of emerging technologies; Scotland may also play host to an equivalent research focus for offshore wind-power; Scotland is home to a vibrant collection of micro-generation and energy efficiency companies and technologists; Scotland thus far has demonstrated a political will to counter climate change and encourage renewables; the revised planning framework is relatively benign; the Saltire Prize has created a bit of a stir internationally and Scotland does have a track record of squeezing out entrepreneurs and innovators.
Some within the investment and media communities are not fully accepting that they are dealing with a ‘sector’. While massive strides have been made in recent years, there remains a feeling that ‘renewables’ is still never going to be as big as oil and gas, therefore cannot be viewed as the main and most crucial solution to increased energy demand along with reduced environmental impact. The sector therefore needs to work hard to convince others that it is crucial, viable and a significant economic force.
The renewables ‘sector’ is not unique because of its environmental positives. As a business sector, like others, there are big players, medium players and small players. Those at the big end will try and buy growth and those starting out will try and become bigger, killing off their competitors and eventually growing through acquisition before, probably, being eaten by one of the very big companies. It is the natural way of things. Renewables companies do not have a divine right to exist because they nominally reduce carbon in the atmosphere. Renewables operations only exist within the big utilities because the ROI stacks up.
While government investment is important, as is a fit for purpose grid network, renewable energy companies in Scotland need to fight for investment, attention and influence like everyone else, in every other sector. They need to be out there, actively assessing the market conditions, shaping their offering, constantly innovating, changing the business models (in line with a changing investment environment), taking more responsibility for their own communication and supporting their trade bodies. Thinking beyond the home market should also be part of any such company’s strategy discussions.
Part of any market assessment, must include a view on the framework that will emerge from the intergovernmental meetings in Copenhagen in December. A framework for truly international carbon pricing and exchange will fundamentally impact upon the economics of renewable and environmental technologies.
The role for small-scale renewable energy generation, allied to local use/efficiency systems is not given the attention it deserves. If civic society applied itself to this approach, it could potentially be the main solution to the problem - meeting higher energy demand while reducing carbon output. This perhaps jars with the ‘big’ centralised renewable energy producers and technologies, but they shouldn’t shy away from energy efficiency and localised generation – the economics will move in its favour.
Lets also not forget a related sector, that of ‘environmental’ technologies and services, in other words those companies that reduce and recycle waste, conserve and clean water, monitor and reduce air pollution and clean up contaminated land, to name but a few. Lump these together with renewables and you have a sizeable, growing and yes, important, economic machine.
Ultimately, Scotland does have an economic opportunity with larger scale renewables [be they on or offshore], smart grid technology, energy efficiency innovation, smaller scale, de-centralised energy creation, environmental technologies and services. The opportunity will be realised despite government decisions and/or powerlessness, despite investment challenges and despite competing interests. Yes of course, significant government funding, streamlining of the planning system and greater grid availability and flexibility can and will make a significant difference. However such action will not hide poor business models, poor technologies and loose control and it remains incumbent upon management teams to rise above, slide under, plot their way round and talk their way through the obstacles. There will be others that do not manage to reach stable commercial growth and will be swallowed early or die off. In a market economy, albeit one more restrained, it will be the native cunning of renewable energy and environmental entrepreneurs and corporate beasts that will dictate if the carbon dividend is realised in Scotland.
Running through this debate, there is the mantra in Scotland that ‘we missed the boat on wind, but we cannot afford to miss the boat on marine energy’.
In relation to Scotland, the following observations may be useful:
Glass half empty syndrome can obscure the great progress made in the last few years and the fact that the global economy is inevitably moving in favour of clean energy. Let us cheer for the fact that Scotland is home to leading utilities with significant renewable energy portfolios; Scotland has seen massive growth in the number of onshore wind projects; a Scottish company created the world’s first commercial wave power device; Scotland is home to the European Marine Energy Centre and bags of emerging technologies; Scotland may also play host to an equivalent research focus for offshore wind-power; Scotland is home to a vibrant collection of micro-generation and energy efficiency companies and technologists; Scotland thus far has demonstrated a political will to counter climate change and encourage renewables; the revised planning framework is relatively benign; the Saltire Prize has created a bit of a stir internationally and Scotland does have a track record of squeezing out entrepreneurs and innovators.
Some within the investment and media communities are not fully accepting that they are dealing with a ‘sector’. While massive strides have been made in recent years, there remains a feeling that ‘renewables’ is still never going to be as big as oil and gas, therefore cannot be viewed as the main and most crucial solution to increased energy demand along with reduced environmental impact. The sector therefore needs to work hard to convince others that it is crucial, viable and a significant economic force.
The renewables ‘sector’ is not unique because of its environmental positives. As a business sector, like others, there are big players, medium players and small players. Those at the big end will try and buy growth and those starting out will try and become bigger, killing off their competitors and eventually growing through acquisition before, probably, being eaten by one of the very big companies. It is the natural way of things. Renewables companies do not have a divine right to exist because they nominally reduce carbon in the atmosphere. Renewables operations only exist within the big utilities because the ROI stacks up.
While government investment is important, as is a fit for purpose grid network, renewable energy companies in Scotland need to fight for investment, attention and influence like everyone else, in every other sector. They need to be out there, actively assessing the market conditions, shaping their offering, constantly innovating, changing the business models (in line with a changing investment environment), taking more responsibility for their own communication and supporting their trade bodies. Thinking beyond the home market should also be part of any such company’s strategy discussions.
Part of any market assessment, must include a view on the framework that will emerge from the intergovernmental meetings in Copenhagen in December. A framework for truly international carbon pricing and exchange will fundamentally impact upon the economics of renewable and environmental technologies.
The role for small-scale renewable energy generation, allied to local use/efficiency systems is not given the attention it deserves. If civic society applied itself to this approach, it could potentially be the main solution to the problem - meeting higher energy demand while reducing carbon output. This perhaps jars with the ‘big’ centralised renewable energy producers and technologies, but they shouldn’t shy away from energy efficiency and localised generation – the economics will move in its favour.
Lets also not forget a related sector, that of ‘environmental’ technologies and services, in other words those companies that reduce and recycle waste, conserve and clean water, monitor and reduce air pollution and clean up contaminated land, to name but a few. Lump these together with renewables and you have a sizeable, growing and yes, important, economic machine.
Ultimately, Scotland does have an economic opportunity with larger scale renewables [be they on or offshore], smart grid technology, energy efficiency innovation, smaller scale, de-centralised energy creation, environmental technologies and services. The opportunity will be realised despite government decisions and/or powerlessness, despite investment challenges and despite competing interests. Yes of course, significant government funding, streamlining of the planning system and greater grid availability and flexibility can and will make a significant difference. However such action will not hide poor business models, poor technologies and loose control and it remains incumbent upon management teams to rise above, slide under, plot their way round and talk their way through the obstacles. There will be others that do not manage to reach stable commercial growth and will be swallowed early or die off. In a market economy, albeit one more restrained, it will be the native cunning of renewable energy and environmental entrepreneurs and corporate beasts that will dictate if the carbon dividend is realised in Scotland.
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