SC(3) CR-E1
Sustainability Committee
Inquiry into Carbon Reduction in Wales: Electricity Generation (including renewable energy)
Response from British Telecom
1. Introduction
BT welcomes the opportunity to provide written evidence to the Assembly’s Sustainability Inquiry into Carbon Reduction in Wales, and we are delighted to have been invited to give further oral evidence on 21st February.
BT has pledged to harness what we know best -Information and Communication Technology - to address climate change, and we have proved that telecommunications is a powerful and effective tool in the battle to reduce modern society’s consumption of carbon. BT consumes 0.7% of the UK’s electricity supply, making it one of the heaviest users of energy. We believe that this fact alone means that we have a moral duty to do all that we can to reduce our harmful effects on the environment.
BT is rising to the challenge of climate change, because we believe that the scientific evidence is irrefutable, and that reducing carbon emissions is absolutely the right thing to do. But aside from the moral argument, there is an inescapable commercial argument for reducing our energy consumption and our carbon emissions.
Over the last decade, BT has discovered some incredible truths through its attempts to tackle climate change. Our experience of reducing our carbon consumption has proved that not only can we can make significant savings from being more energy efficient; not only is there a significant market for the products and services that we sell to others to help them reduce their carbon emissions; but that we have also developed a more agile, efficient and productive workforce as a result.
Our business is changing rapidly. Technology and the information and communications technology (ICT) industry are playing a pivotal role in globalisation, bringing people closer together, producing ever-greater access to information and enabling businesses to operate in radically different ways. Commercial relationships, for example, are now conducted on an increasingly global scale where the significance of time and place is diminished.
The convergence of telecommunications, IT, the internet and television is transforming the way we communicate. BT is now a major provider of new wave communications services including broadband, mobility and networked IT services. Our products enable customers to communicate at home, at work, out and about.
2. BT’s record in dealing with climate change
BT is one of the first big corporates in the world to take the issue of climate change seriously. We published our first Environmental Report in 1992 and our carbon reduction strategy has meant that we have been able to reduce our C02 emissions by 60% since 1996. BT has been ranked the number 1 telecommunications company in the Dow Jones Sustainability Index for 7 consecutive years as well as achieving many other accolades for its Corporate Social Responsibility (CSR) programme. The breadth, depth and longevity of BT’s achievements illustrates that BT is truly committed to the sustainability agenda.
We believe that BT has an excellent record in reducing its carbon emissions, and that we have a lot of experience to share with other organisations and companies on how to successfully develop and implement a carbon reduction strategy. BT also recognises that there is much more for us to do, and that’s why we have set a challenging target of reducing our carbon emissions by a further 20% by 2016 (1).
This paper sets out what we believe is the compelling business case for acting in a sustainable way, focuses on BT’s journey towards becoming a more sustainable company and considers the further steps we think we need to take to tackle climate change
3. The Commercial Case
"Action on climate change will also create significant business opportunities, as new markets are created in low-carbon energy technologies and other low-carbon goods and services. These markets could grow to be worth hundreds of billions of dollars each year, and employment in these sectors will expand accordingly”.
The Stern Review 30th October 2006
Recently, the ecological impact of modern business has become an important issue for socially responsible corporations, governments and consumers. The positive and negative impact of an organisation on the environment can have a huge effect on stock price, public perception, tax burden and overall business performance. BT has recognised that many customers’ highest priority is to assess and reduce environmental impact.
BT is one of the world’s largest companies - ranked 162nd in the Fortune Global 500. We provide communications services for multinational companies throughout their global operations. Our business customers now include 40% of the top 50 Fortune 500 companies and 80% of the UK FTSE 100, 90% of UK headquartered financial institutions. We also serve public sector customers, primarily in the UK. The UK government is our single largest customer.
What’s more, as the US Institute of Policy Studies reported in 2000, of the world’s 100 largest economic entities that year, only 49 were countries. 51 were corporations.
Indeed corporations now account for over a quarter of economic activity around the globe and as a result, there is an increased focus on the role of business in society. Increasingly, stakeholders including customers, governments and employees want to know what companies are doing to tackle big global challenges such as climate change.
Like all businesses the ultimate goal of BT is profitable growth, which will become increasingly hard to achieve without addressing sustainability issues. Like all businesses, BT has to justify and rationalise all of its actions, and in the context of sustainability, the following considerations make up a compelling business case:
3.1 Rising energy costs: The cost of fossil fuels is set to rise, so companies have a lot to gain by using energy more efficiently. Those that are successful in driving down their consumption will have a big financial advantage as well as helping to reduce the effects of climate change - a real win/win. Carbon taxes are increasing and smart energy management can help companies to remain competitive.
3.2 Carbon footprint: The pressure is on to reduce energy consumption and the production of "greenhouse gases” such as CO2 that fuel climate change, with some industries feeling the heat earlier than others. Regulations requiring energy performance certificates to be produced when buildings are constructed, sold or rented out and to be displayed in certain business premises and on a growing array of products, from cars to dishwashers, will identify those who fail to act.
3.3 Legislation and regulation: As sustainability issues have come to the fore, legislators and regulators have started to act. Businesses now have to operate in accordance with increasing numbers of laws and regulations covering, for example, the use and disposal of hazardous substances, refrigerant gases used in air conditioning equipment, energy use, CO2 emissions, data protection and more. Those who fail to comply face stiff penalties and could see their reputations tarnished.
3.4 Supply chain: Companies don’t just have to put their own houses in order. Their reputations can be just as easily (and badly) damaged by sustainability "failures” in their supply chains. Therefore, companies need to act to monitor, assess and influence the activities of their suppliers.
3.5 Technical Advances: New challenges can spur innovation. Companies that act sooner and more positively are likely to gain a big advantage. As stated in the Stern review, their innovations will put them ahead of their competitors, increasing their performance and reducing their costs as well as creating opportunities to develop new products and services that will create new revenue streams.
3.6 Shareholder and customer satisfaction: Customers are becoming more aware of and concerned about green issues and are increasingly demanding sustainable products and services. Concern for sustainability is also rising among shareholders. Between January and May 2007, a total of 359 social and environmental shareholder resolutions were proposed at US companies, suggesting that 2007 would set a new record.
It’s increasingly clear to us that customers prefer to do business with a supplier that has a good sustainability record. Corporate and government clients asked for evidence of our social and environmental performance to be included in contract bids worth £1.8 billion pounds last year, for example.
BT - leading the corporate world on sustainability
In September 2007, BT was rated world’s leading telecommunications company in the Dow Jones Sustainability Index for the seventh year running.
BT CEO, Ben Verwaayen, chaired a Confederation of British Industry (CBI) task force on climate change, bringing together the heads of some of the UK’s largest companies.
BT won Business in the Community’s prestigious "Company of the Year Award” in July 2007. The award is given to the UK company judged to have conducted business in the most responsible way over the previous year.
BT was ranked the second greenest company in the UK and the ninth greenest in the world in a survey of 3,000 companies published by The Independent and EIRIS (Ethical Investment Research Services) in June 2007.
BT won the prestigious "Golden Peacock Global Award for Corporate Social Responsibility” for the second consecutive time in February 2007. BT beat a number of organisations to the coveted CSR award including the World Bank, British Council, RSPCA, Transparency International, World Savings Bank, CNN, BBC, Nestle, Shell, KPMG, Vodafone, Novartis, IBM and Telefonica.
BT was named the world’s leading corporate sustainability reporter in the 2006 Global Reporters rankings, a biannual benchmarking survey published by think tank Sustainability in association with the United Nations Environment Programme (UNEP) and Standard & Poor.
4. BT’s journey towards becoming more sustainable
BT developed a simple four-pronged strategy to tackle climate change, and has made a series of environmental pledges aimed at keeping the company at the front line of reducing carbon emissions. Our strategy aims to cut carbon by:
reducing our own emissions;
influencing our suppliers to produce lower carbon-emitting products;
influencing our customers by proposing lower carbon solutions to their needs; and
engaging with our workforce; both to reduce their personal carbon footprints and to empower them to influence action within their local communities.
Specifically, we have pledged to:
build on the 60% reduction in carbon emissions that we have achieved in the UK since 1996, by targeting an 80% reduction by 2016;
review our energy supply; including exploring investment in wind power; and
incorporating energy consumption and environmental factors into our procurement processes.
5. BT’s carbon reduction strategy in practice
5.1 Reducing our own carbon footprint
5.1.a Agile Working
Without a doubt, the cultural shift to agile working - started in the late 1990’s - has had an incredible impact, not least on our carbon footprint. Flexible and home working save BT more than £500 million per annum in real estate costs, including heat and power.
We now have around 15,000 full and part-time homeworkers and a further 70,000 workers are equipped to work flexibly, enabled by our own ICT products and services. This is supported by transformation of the workspace at main sites to maximize office-based resources. Research tells us that at any one time, up to 40% of our office space is unoccupied due to factors such as annual leave, out of office meetings, work patterns and sick absence. BT’s more flexible facilities maximize the use of office space and reduces office costs.
Agile working can be adopted even by staff who are out in the field and are not desk or office based. For example, our engineers are now equipped with laptops which means that they don’t have to report in at the local engineering depot to pick up their daily work schedules, nor do they have to return to submit reports. All of this work can now be done remotely.
The benefits of agile working are numerous, but from a carbon perspective, independent research has found that, together, our home workers cut their CO2 emissions by a total of more than 3,600 tonnes a year.
There have been other benefits too, such as:
Improved working conditions have improved employee retention and widened the recruitment pool to include people who may not be geographically central, as well as increasing the talent pool to include carers and those with disabilities.
Ninety-nine percent of women return to BT after maternity leave, compared with a workforce national average of 47%, saving BT approximately £5 million.
Since introducing agile working, employee absenteeism at BT has fallen to just over 3% compared to a workforce national average of over 8%.
Our staff who are agile are 21% more productive than those who aren’t.
An organisation that allows its staff to work in an agile way can keep operating, even during civil contingencies and other emergencies.
Agile working has been further complemented and enhanced using our transformational conferencing products and services. BT people can opt to hold meetings from their desks or from home by dialling into a conference call that can link several people into one meeting. Documents and powerpoint presentations can also be shared and presented live online. More than three quarters of meetings 'attended’ by BT staff are virtual meetings.
The use of conferencing by BT staff worldwide has reduced BT’s carbon footprint by at least 97,000 tonnes of CO2 and eliminated more than 860,000 face-to-face meetings, according to the findings of a survey by the University of Bradford and SustainIT announced in late May. In the last year, this equated to a saving of £238 million for BT in travel and subsistence costs, and employee time saved.
5.1.b Use of Green Energy
BT holds one of the world’s biggest Green Energy contracts under the terms of which energy companies npower and British Gas Business provide us with 1 terawatt hour (TWh) of renewable energy and 1.2 TWh of accredited combined heat and power (CHP) per year. The contract, which has been renewed to 2010, saves the equivalent amount of carbon as that resulting from the electricity consumption of over 300,000 households - roughly the population of Cardiff and Liverpool combined - each year.
Fifty per cent of this electricity comes from combined heat & power and 48 per cent from renewable sources - mostly wind, some biomass and wave generated) - and is used to power all BT buildings and the network. The remaining two per cent is brown, for back-up generators. We will be switching to "green” energy contracts in other countries in the future.
5.1.c Harnessing the potential of wind power
Late in 2007, BT announced plans to develop wind farms aimed at generating 25% of its existing UK electricity requirements by 2016. The windfarm scheme represents the UK’s biggest corporate wind power project outside of the energy sector.
The project, costing up to £250 million, is aimed at safeguarding future supplies of clean, green energy for BT as part of our strategy to cut carbon emissions. Subject to planning consent and suitable sites being secured, BT’s wind farms would have a total installed generating capacity of around 100MW by 2012, equivalent to around fifty wind turbines, with the remaining 150MW targeted by 2016.
Test masts are already planned for some sites in Scotland and England, and BT will look at sites in Wales should they be deemed suitable.
Jonathon Porritt, Co-Founder and Programme Director of Forum for the Future, said of BT’s plans: "This is an enormously significant decision for BT - and for every company that sees BT as a recognised leader on sustainability issues. It’s a substantial investment, guaranteeing very low carbon energy for BT for the foreseeable future, and precisely the kind of decisive, ambitious intervention that more and more companies are going to have to come forward with.”
5.1.d Data Centres
BT has completed a major audit of the energy consumption of its data centres and is implementing key recommendations. Data centres account for a high proportion of the company’s energy usage and require power for two main functions: cooling to stop the computers overheating and energy to drive the computers. The traditional formula for computer cooling is that for every 1 kilowatt used to actually run a computer, you need 1.2 kilowatts of power to cool it. BT also deploys DC power supply instead of AC power supply where appropriate which reduces energy consumption.
BT has already significantly reduced energy consumption in its data centres. We pioneered fresh air cooling which renders refrigeration unnecessary for a majority of the year, reducing refrigeration costs by approximately 85%. Fresh air cooling is utilised across our data centres and exchanges.
We have also reduced consumption in our data centres by changing the ways in which power is used to reduce the number of electrical conversions required and thus minimise energy loss in AC/DC conversion.
Some simple steps have been highly effective. For example, we have minimised "waste” through ill fitting floor tiles and air flow blockages, and ensured that plant and machinery is well maintained. We have ensured that there is sufficient separation between hot and cold isles and in some cases we are installing curtains to stop temperature mixing. These simple checks can increase cooling efficiency by a factor of 10-15%. They can also be done with little capital outlay.
We are utilising a new technology, virtualisation, which offers the ability to use an array of computing resources as though they were a single unit. This enables the computing power and storage capacity of our data centres to be used much more efficiently, so we can deliver more using fewer machines. For instance if 10 servers are running at 10 per cent of their capacity, virtualisation can focus usage onto a single server. Our main project in this area to date has reduced a 1500-server data centre down to just over 100 servers, saving £600,000 per year.
The recommended running temperature for modern computer equipment is 22C +/- 2 degrees however BT is running our systems and data centres at 2 degrees higher. This means that we do not have to run our cooling systems as hard which reduces cooling emissions further and reduces our energy bill.
5.2 Engaging our Customers
At BT we are delivering products and services that use less energy and help customers reduce CO2 emissions from their homes and businesses. For example, our phone and video conferencing products reduce the need to travel. We have also launched an innovative 'carbon assessment’ service that helps customers reduce the CO2 emissions caused by their IT systems.
BT’s carbon calculator www.btplc.com/climatechange allows individuals and small businesses to asses their own carbon footprint in a straightforward way.
BT has encouraged other companies to look at implementing car share schemes on the back of BT’s link up with car-sharing pioneer Liftshare. More than 1,240 BT people have signed up to share so far.
Last year, the number of customers who asked to receive a paperless electronic bill passed the one million mark, and half a million saplings have been purchased to date through an e-billing partnership with leading conservation charity The Woodland Trust. From April 1 we are increasing our discount for paper free billing from 50p to £1.25 a month as part of a range of changes to our terms and conditions.
One of the priorities for BT Business during Small Business Week 2007 was to help SMEs reduce their carbon footprint and understand how sustainable business practices can deliver benefits to the environment and their business. Moreover, as part of Small Business Week 2007’s Green Day, BT Business launched an "Understanding Green Business Practices” guide for SMEs: http://www.insight.bt.com/guides/Understanding-green-business-practices/
In January 2008 BT launched a new range of more energy efficient phones, heralding the start of a £2 million commitment to improve the energy efficiency of its entire home-phone range. By July this year more than 90 per cent of the range will be more energy efficient.
The new handsets boast power units designed specifically to consume around half the power of previous units. BT estimates that the replacement of its cordless and fixed-line phones with more energy-efficient equivalents will result in an overall reduction in CO2 emissions in excess of 195,000 tonnes over the next three years - the equivalent of taking 57,000 cars off the road for a year. Consumers are also set to save a total of more than £39m through reduced electricity bills.
BT has also reduced the amount of packaging required for each phone. This includes replacing the user guides with smaller 'quick-start’ leaflets, whilst making the fuller, detailed guides available online or on request via the phone.
5.2.a BT’s Carbon Impact Assessment
BT has developed the Carbon Impact Assessment (CIA) to systematically analyse energy usage and carbon emissions from 3 key areas: Buildings, People and Shared Services, in order to identify the daily practices and business processes that effect organisational efficiency. This Assessment can provide a clear view of organisations’ biggest challenges in reducing its carbon footprint and energy consumption and how IT can be used to address them.
BT sustainability consultants use the CIA to take a holistic view of carbon emissions, analysing not only a customer’s energy consumption from it’s buildings, equipments and any shared services for example its networks, but also how the organisation’s workforce contributes to CO2 emissions through their work travel pattern, for example. The CIA is vendor-neutral, meaning that the recommendations we make for reducing CO2 emissions are agnostic of the suppliers of any subsequent service.
BT has used the CIA to assess its own data centres providing real insight into carbon reduction options and comparing their efficiencies. We have also turned our attention to BT offices where alternative strategies for reducing carbon impact were identified.
5.3 Influencing our suppliers
BT has engaged with suppliers on how they manage their environmental impact since 2001 and now requires its suppliers to reduce the energy consumption of the products and services they sell to BT. This will help reduce our CO2 emissions and encourage suppliers to think more about the environment too.
In the last year we have introduced three BT Procurement Principles, impacting on how we engage with our suppliers on the climate change challenge.
1. We will harness the capability, diversity and innovation of our supply base to add value to our business and encourage suppliers to offer solutions which have a reduced environmental impact.
2. That the energy consumption and environmental impact of a product or service (from manufacture, through usage, to disposal) is a mandatory criterion in all tender adjudication.
3. That the energy consumption and environmental impact of any replacement product or service (from manufacture, through usage, to disposal) is less than its predecessor.
These principles were launched to our top 200 suppliers at a strategy event in June, and had a strong impact. It demonstrated our belief and commitment, and the serious level at which suppliers are expected to engage. Their response was extremely positive.
BT Procurement issues a questionnaire with invitations to tender which asks suppliers to outline their environmental activities. Responses form part of the adjudication process. To date more than 1800 suppliers have completed responses.
5.4 Involving our employees
We’re encouraging our employees to get involved and reduce the energy they use at home and at work. Even simple actions like turning off PCs during meetings can make a big difference. We are holding roadshows globally to tell employees what we’re up to and how they can get involved.
More than 65 carbon clubs have now been created by BT people and as a result of last autumn’s 'Living Lightly’ day BT people have made more than 9000 pledges to take personal action to reduce their carbon footprints to date. Other targeted campaigns include Think Before You Print and the Big Switch Off - the latter bringing the potential to save £0.5m per annum through small measures such y switching off PCs and lights and not leaving appliances on standby.
Finally, our 'Green Basket’ lists a number of employee discount incentives negotiated for BT staff on a range of products from green energy to recycled trainers, and discounts on cycling goods!
6. Electricity Labelling
In collaboration with a number of energy users, BT has been developing a customer-orientated solution to the carbon footprint problem: the labelling of all electricity with carbon content information. This proposal is similar to the carbon label recently proposed by Ofgem but will go further in two key ways:
It will apply to all electricity supplied in the UK; and
it will require the tracking of actual CO2information from point of generation through to point of supply.
In practice, this would mean that the carbon content of all electricity tariffs or products would be displayed in the form of a colour coded A-G label and in gCO2/kWh. This information would allow the accurate calculation of the carbon footprint of a company or household, while eliminating double counting and allowing for the creation of a single footprinting methodology. This same methodology could then be applied to all calculations of carbon footprint (including the proposed CRC league table and future requirements of the Climate Change Bill).
Furthermore, this proposal provides a mechanism to create a market price differential (and a potential tax differential) for different grades of electricity. Consumer demand for A-rated electricity could drive up the delivery of renewable and zero carbon electricity in the UK, and thus substantially support Government’s objective of reducing UK carbon emissions. Currently, the development of renewable capacity is constrained by the planning system. In the longer term, to achieve the UK renewable targets, it will be imperative to develop sufficient demand pull from the market to drive increased supply of renewable energy.
7. Wales should lead the way
BT is on a remarkable journey. We have a compelling story to tell, but are fully aware that we have a lot more to do, and much to learn.
The One Wales Document set a target for the Welsh Assembly Government to reduce carbon emissions in areas of devolved competence by 3% annually until 2011. BT believes that this is wholly realistic and achievable and welcomes the setting of such a target.
However, whilst the 3% target is realistic, it may not necessarily be achievable without some visionary leadership from the Assembly Government itself, and radical cultural changes to the way that people work in the public sector, over which the Assembly Government has some control.
Above, we have set out the example of Agile Working, and the transformation that this has allowed in BT, a company of 106,000 employees, both in terms of cost savings and productivity, as well as reducing our carbon footprint. We believe that Agile Working practices are easily translatable into much of the public sector, particularly the staff employed by the civil service and a huge number of those employed by local government in Wales. Indeed, Chwarae Teg has been working with some local authorities in Wales on agile working, and BT is keen to see this work continue.
Nonetheless, whilst the rewards are great, the challenges are many. Key to making Agile Working a success is management style. At BT, we have seen a significant increase in the productivity of staff who work in an agile fashion. Developing and measuring staff based on performance, rather than 'presenteeism’ has been absolutely key to this transformation. Our people are judged, remunerated and rewarded by what they do and what they achieve, as opposed to the number of hours they slavishly sit at a desk, staring at a computer screen.
We passionately believe that the Assembly Government should lead the way on Agile Working, as its practice fulfils so many of the Government’s ambitions, not least CO2 emissions reduction, but also enabling diversity in the workplace, addressing issues of work/life balance, increasing productivity and reducing sickness absence, as well as reducing costs substantially.
As part of its leadership role in Wales, BT further believes that the Government should actively encourage local authorities to implement Agile Working for their staff. At a time when the local government budget settlement has been the tightest for many years, and the debate on how to improve the delivery of public services is in full flow, it would seem like an eminently sensible solution to encourage local authorities to fully adopt agile working practices. However, we feel that local authorities are so preoccupied with budget management and delivering essential front-line services, that they find it difficult, at this moment in time, to envisage the carbon and cost benefits that the use of ICT and flexibility can bring. There are a small number of authorities who have expressed an interest but without an element of leadership from the Assembly Government we believe that the rewards of Agile Working will be unrealised by local government.
8. BT in Wales
BT is barely recognisable from the company it was five years ago, having transformed itself from a narrowband, fixed-line communications business, to a broadband company harnessing the power of modern digital communications. The company has diversified from the more traditional engineering/telecoms base and the majority of our people are now engaged in the service side of our business; software specialists and ICT project directors managing the business processes of global companies, as well as call centre operators and other support staff.
BT employs 3,800 people in Wales and with salaries of 30% above the Welsh average this makes a contribution of £237 million annually to the Welsh economy. BT is proud of the many multi-million pound investments it has made in Wales recently, including a £90 million Data Centre in Cardiff Bay, the £150 million Test Bed facility in Swansea, and the ongoing investment of £460 million in Wales on BT’s pioneering 21st Century Network, aimed at providing customers with faster, cheaper and more reliable communications networks.
BT has a major stake in the Welsh economy and the social fabric of Wales. Last year, BT spent £1 million on programmes in Wales to promote digital inclusion, such as our Community Connections scheme - computers, broadband and training for small organisations - and schemes encouraging citizens to use information communications technology in their every day lives.
13th February 2008
References:
(1) The target is for BT to reduce its carbon emissions by 80% from the 1996/97 level by 2016.
