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Some of the Middle East’s biggest industrial firms facing up to massive increases in energy costs in the wake of subsidy reforms are being advised to reduce their carbon footprint to make multi-million dollar savings.
The problem of rising energy spend has been highlighted by Saudi Arabian dairy firm Almarai which says that utility price increases combined with new crop-growing restrictions will increase its costs by 500 million riyals (AED489 million) this year.
Immediately following its recent statement in response to the reduction of government subsidies, the company’s shares fell by 8%, but PA Consulting Group says companies like Almarai can make huge savings through investment in low emission technologies.
“The exploding cost of energy drives up the cost base of manufacturers significantly, and the energy subsidies issue in this region has increased the burden,” said Philip Rice, energy and utilities expert at PA’s regional headquarters in Abu Dhabi.
“In the past ten years the global manufacturing industry has been investing in optimizing its carbon footprint, and reduction targets of 50% less emission and 35% less energy consumption are common.
“Working with PA, one of the world’s largest aerospace and defence companies delivered massively reduced energy consumption cost, identified reduction potentials of 200,000 tons of CO2 emissions and optimised investment of more than €450 million across 25 sites in several countries”.
Added Rice: “Investing in low emission technologies and implementing new behaviours to reduce consumption is no longer a cost position only, but can offer other major business opportunities. But only a few companies are aware of how to exploit this.”
Rice says PA helps big industrial firms save millions of dollars by sending in teams of experts to develop a customised energy efficiency roadmap. “Solar and photovoltaic systems, combined heat and power plants, wind power and heat recovery can all reduce carbon footprint significantly and cut costs by millions of dollars, but there is no single solution,” he points out.
“Companies need to understand that to succeed in going green, many local factors have to be taken into account, such as sunshine hours, wind intensity and availability of subsidies. But a detailed analysis of each manufacturer’s operations and local conditions will produce a customised energy roadmap that can make a massive difference in terms of cutting costs.”
A study1 among more than 500 marketing experts underlined why the significance of “going green” is increasing, and how it gives companies a competitive advantage.
70% saw an increase in the significance of sustainability for marketing efforts
60% believed going green increases trust in the brand
56% said green companies are seen as more innovative and future-oriented
50% saw green companies as positively differentiating themselves from their competitors
Almarai’s recent statement on rising energy costs was in response to a Saudi government announcement on reforms to energy subsidies as part of the kingdom’s annual budget, prompting many firms to announce the likely impact of these changes on their costs.
1 W&V Study, “How sustainability enhances the brand”