Logic goes that carbon reductions should be a no-brainer for suppliers because they are accompanied by cost savings from improved energy efficiency.
Increasingly in the China market, pilot projects such as Natural Resources Defense Council (NRDC)’s Clean by Design as well as our own experiences as a carbon management services company (which to-date have been in the textile & apparel, toys and electronics sectors), are affirming this point. Cost effective carbon reductions are available almost everywhere. And as NRDC has pointed out in its recent dye mill work, sizeable water savings are also often possible in parallel with the energy work.
Were factory managers economists, no doubt this ‘low hanging fruit’ would have been plucked (before being sold at an optimum price to a perfectly informed consumer). However they’re not – the presence of economically rational options does not necessarily mean that these options will be taken up.
It’s worth drilling into this a little.
In a factory’s case, one key issue is time and whether or not energy efficiency is worth it. Factory bosses are often incredibly busy people and therefore the Factory Boss Marginal Unit of Time – let’s say the FaBMUT value (Chinese Yuan/hour) – of new initiatives needs to be high if new stuff is to get done.
Let’s look again at energy efficiency. First of all its often a new issue and not well understood by the factory team. Secondly the benefits do not accrue immediately but will payback often over several months. Thirdly the factory may need to outsource and manage a 3rd party expert to realise any significant value. Fourthly there may be considerable uncertainty that the whole process will actually work, because the neighbouring factory recently hired a dodgy energy auditor who sold them a bunch of strangely coloured LEDs and cleared off.
All of this is bad for FaBMUT. Particularly compared to more conventional ways of saving money like looking for labour cost savings, improving production efficiency or squeezing suppliers.
This is where the brands become so critical. If the issue shifts from just being about saving money, to retaining and attracting customers, then FaBMUT suddenly skyrockets. And if the brands offer incentives for energy efficiency – or a proxy such as lower carbon emissions that they can account for more easily – then FaBMUT blasts through the roof.
What we see in the market are the beginnings of a FaBMUT shift. It’s brand driven. It’s not easy. But keep going guys because the environmental win, as well as the commercial opportunity, will be huge.
The author, Liam Salter is Board member of CDM Gold Standard, and CEO of RESET Carbon Limited, one of Asia’s first dedicated carbon services providers, headquartered in Hong Kong.
Visit RESET Carbon at www.resetcarbon.com