From dwindling North Sea gas supplies to increasing demand in the developing world, energy costs are only going one way. Retailers’ bills are creeping up, and the need to do something about it is becoming more pressing.

For many, the motivation is two-pronged – it’s not just costs that are increasing, but environmental awareness as well. As Marks & Spencer head of energy management Mervyn Bowden says: “If you haven’t started with more energy-efficient measures, do so now. The longer you delay, the more money you will continue to spend on energy that could be used elsewhere.”

The good news is that most cost-cutting steps are fairly easy, especially for businesses that haven’t yet done anything in this area. For many retailers, the first major step is to start getting a handle on how much energy gets used across the business. Smart meters are making this easier, ensuring bills are more accurate, and organisations such as the Carbon Trust advise getting a proper understanding of what’s being used and what can be cut easily before embarking on projects that require capital investment.

Significant savings

Myles McCarthy, managing director of implementation services at the Carbon Trust, says retailers often save up to 10% of their energy costs by getting managers and staff to understand how they’re consuming electricity. “Significant savings are achievable through measures such as behavioural change and improving current use of existing equipment,” he says.

Refrigeration costs are often significant for food retailers, and another easy measure is to install night blinds which are pulled down over fridges at night. They keep the cold air inside the fridges, and cut energy consumption by around 40%, McCarthy says.

Suppliers agree – British Gas, for instance, says measuring energy consumption carefully highlights exactly where the potential savings are. The company has been working with retailers including convenience chain Costcutter on auditing energy use in-store, allowing each shop to see how much it uses and enabling managers to pinpoint the individual measures that will be most effective.

“Most organisations don’t actually look at the data to see what they’re using,” says British Gas head of energy consultancy Angela Needle. “Energy dashboards and smart meters can help businesses see how much they’re actually using.” The data can throw up some surprising statistics, she says – one in every two pounds is spent outside of trading hours, for instance, suggesting that simply remembering to turn out the lights in stores every night could ensure a saving.

Once a retailer has given its staff the initial push to think about energy saving and cost-cutting, McCarthy says, the cultural ramifications tend to generate further benefits.

“Once you’ve raised awareness by setting targets or introducing an element of competition between stores, it often has a knock-on effect in overall efficiency and behaviour,” he says.

“Managers tend to think of other things they can do around packaging or raw materials, for instance. It’s really about getting people to think more about how equipment is being used.”

Many bigger retailers, however, have already made significant in-roads into cutting their energy costs. M&S is perhaps one of the most renowned – the retailer plans to make its own operations carbon neutral by the end of this year and will improve fuel efficiency in deliveries by 35% by 2015. It also wants to cut energy use in stores, offices and warehouses by 35% by 2015, and use nothing but green energy by the end of this year. And since its green project Plan A was launched, it has cut its carbon dioxide emissions by 13%.

“There are clear benefits for retailers to be more sustainable,” says Bowden. “Since 2007, we’ve reduced our energy usage at our stores by over 23% by investing in improved controls to help better manage our lighting, heating and ventilation, as well as food refrigeration.” He adds that acting soon is a sensible option, with the business case becoming ever easier to make. “The return on investment for this energy efficient technology is very compelling.”

North East Convenience Stores

North East Convenience Stores has 18 shops across England. Owner Sanjeev Vadhera wanted to reduce energy consumption in one of his stores and worked with the Carbon Trust to discover the shop’s main sources of energy consumption. Lighting and refrigeration came top, so fridges and chillers were replaced with an energy-efficient remote refrigeration system, while traditional tube lights which had to be changed every month were replaced with long-life LED lighting.

A resulting 40% reduction in energy bills meant the store achieved a return on its investment within two and a half years. Vadhera said: “Not only are we using less electricity, but also we are using electricity in a more efficient manner, resulting in less maintenance and less wastage as we continue to install better-quality lighting and refrigeration.”

Spend to save

But while many cost-cutting measures are simple, others require investment. Lighting is a huge cost for the retail industry, McCarthy says, and retailers are starting to look into how to reduce it. One easy option is improving lighting control systems, investing in devices such as motion sensors which mean infrequently used areas aren’t constantly lit. Capital Shopping Centres, which runs 14 shopping centres, is investing in replacing its light bulbs with LED bulbs, which use less energy. The company has installed 15,000 bulbs so far and plans to roll them out across its estate. It is also running a trial of a voltage optimisation unit at its Glades shopping centre in Bromley and reports this is saving between 7% and 10% in its energy costs. The unit reduces the amount of voltage supplied to devices that don’t need the full 240 volts supplied by power points.

Commercial director Trevor Pereira says Capital Shopping Centres had been thinking about trying energy efficiency projects for a while, but that waiting for the right moment is important.

“It’s something we’ve had on our radar for quite some time,” he says. “But there’s no magic bullet with any of this.” Pereira warns that the procurement process for energy efficiency projects can be complex, because most companies won’t have done anything like this before. “The procurement exercise is fairly detailed, and you need to establish you are dealing with a reputable company,” he says. “You also need to get a supply chain established, but from that point on it becomes fairly straightforward.”

In a difficult trading market where margins are squeezed, now is a better time than ever to start looking at what energy-saving measures could do for a retail business. And as costs climb, the business case will get easier to make.

Cutting energy costs

  • The Carbon Trust estimated in 2009 that the retail sector is responsible for over 5 million tonnes of carbon dioxide emissions every year, and that energy savings of 20% – £300m across the sector – are possible
  • M&S head of energy management Mervyn Bowden says communication is key. “Never underestimate the importance of engaging with your employees on energy efficiency”
  • Simple measures can make a big difference. Improve settings on equipment – for instance, install motion sensors on lights in infrequently used areas to ensure they’re only on when they need to be. Staff behavioural changes and improved servicing schedules can also help.

 By Rebecca Thomson, Retail Week