In 2022, the Australian Government legislated Australia’s greenhouse gas emission reduction targets, achieving net zero by 2050. To align with Australia’s transition to net zero and pursue efforts to limit temperature increase even further to 1.5°C, many Australian businesses (including 61% of the ASX200) have made net zero commitments and have developed net zero strategies to meet their targets.
With the forthcoming introduction of mandatory climate disclosures and having implemented easier abatement opportunities (eg. rooftop solar and low-cost energy efficiency measures) businesses are now confronting challenges in delivering on the next phase of their net zero strategies and quantifying progress.
A proven approach for addressing these concerns is through the adoption of a robust Energy Management System (EnMS). A well-executed EnMS is a systematic framework for tracking energy performance, implementing decarbonisation opportunities, and facilitating change management across all areas of a business to action net zero strategies. An EnMS is a good first step on a least cost pathway to net zero.
Businesses are falling short of their net zero ambitions
Whilst businesses have made tangible progress on their targets, fully implementing decarbonisation strategies requires changes to business systems and management practices. This requires better planning, changes to roles and responsibilities, improved reporting structures, and frameworks to identify, prioritise and implement decarbonisation initiatives.
We are seeing companies in certain market segments walk backwards on their 2025 and 2030 targets, highlighting that credible net zero strategies can’t merely rely on technology that will emerge in later in the decade. A robust net zero strategy requires consistent investment of effort and resources; further it can’t be delegated to the sustainability team to implement. A successfully implemented net zero strategy needs to be integrated across all areas of the business.
Without a structured approach to implementing a net zero strategy, businesses risk failing to effectively prioritise efforts, overinvest, incur additional costs, lose momentum, and ultimately fail to achieve net zero commitments.
Through recent work, Energetics is seeing critical barriers to realising energy efficiency and net zero commitments including:
- Challenges around effective allocation of capital to ensure investments lead to actual reduction in emissions.
- Organisations overinvesting in data platforms and metering and still not being able to extract accurate information and useful insights - often not interrogating the data at all.
- Whilst most net zero plans include energy efficiency activities businesses have no systems in place to reliably track and report on their contribution to emissions reduction.
- Businesses don’t know how to segment emissions reduction to track the actual impact of these initiatives alongside grid decarbonisation.
- Lower cost housekeeping activities, such as maintenance improvements and equipment optimisation, are being overlooked in net zero planning.
- Whilst procurement of renewable electricity via Power Purchase Agreements (PPAs) is a major component of net zero strategies, they are becoming scarcer and more expensive, especially in the period to 2030.
- Whilst leadership teams are making net zero commitments, they aren’t being met with sufficient engagement across all levels of the business. There is a lack of planning for how these commitments will be operationalised within each business unit.
A well-executed Energy Management System can overcome these challenges
A structured EnMS establishes an ongoing process for tracking and responding to energy consumption in an organisation. The key outcomes of an EnMS are:
- the establishment of a continuous improvement framework that enables a business to set and track performance against targets
- support for strategic planning to reduce energy usage
- clear allocation of responsibility and accountability to business functions to drive execution
- introduction of mechanisms to overcome barriers to improving performance.
ISO50001, the voluntary international energy management standard, provides a complete description of the all the components of an EnMS as well as guidance on how to establish one. The standard covers different categories of management activities including leadership, planning, support, operation, and performance evaluation. Typically, development and implementation of an EnMS includes making improvements in multiple areas of a business, such as:
- developing an energy policy
- assigning roles and responsibilities
- setting targets
- implementing action plans to address risks and opportunities
- training of staff and creating awareness activities
- meeting applicable legal requirements.
Establishing an EnMS is not a short-term venture, it is a culture change activity which can take some time to implement and embed. For most businesses there is a journey to best practice from their existing level of maturity that will involve targeted improvements in different business units, with hold points to evaluate their effectiveness, and then an imperative to make further refinements.
Energetics can help
Energetics can partner with you to create a tailored, structured EnMS that aligns to the different EnMS categories, with actions mapped against short, medium and long term horizons.
Part of our process is to undertake targeted stakeholder engagements with senior management and executives to understand the business context and key drivers, (e.g. reducing energy costs and gaining market advantage), to align on the scope and purpose of EnMS activities, and map and assign responsibilities for energy management.
From Energetics nearly 40 years’ experience, we have seen that a well implemented EnMS can achieve cost savings of 10-20% through a range of emissions reduction projects, improved operation and maintenance practices, and efficient allocation of capital. An EnMS is not just a means of ensuring energy efficiency initiatives are implemented, but it is a management system framework that ensures continuous improvement in emissions reduction and ensuring a business’ net zero targets are met.