March 22, 2023 | Procurement Strategy
Renewable energy procurement and carbon offsetting are increasingly gaining traction among global businesses. With the impact of climate change getting obvious and growing concern for the environment across the world, these two important concepts have come to fore. More global enterprises are looking at ways to reduce their carbon footprint and at the same time inch toward sustainability through various means available.
Renewable energy procurement is the process of purchasing renewable energy from naturally occurring sources such as wind, solar, hydro and geothermal power. The goal of using renewable energy is usually two-fold – reduce dependence on perishable energy sources and reducing the amount of greenhouse gas emissions. And in the business world, it usually done with the aim of reducing greenhouse emissions – Scope 1, Scope 2 or Scope 3 - that a business produces or is indirectly responsible.
Renewable energy is clean and without the burden of harmful emissions, and therefore it’s becoming increasingly popular as sustainable source of energy.
Businesses can procure renewable energy in ways more than one. The quicker and easier option is to purchase renewable energy directly from a supplier by means of a power purchase agreement (PPA). It’s a long-term contract that guarantees a certain amount of renewable energy at a fixed price and can be customized to meet the specific needs of a business, not to mention long-term cost savings.
The other option is to invest in renewable energy infrastructure. This is a means to become self-reliant and typically involves installing solar panels or wind turbines on premise. Although it requires significant upfront investment, it provides long-term savings on energy costs. And if a business produces excess energy, it can give that back to the grid and earn revenue.
Before a business can go all in on renewable energy procurement and carbon offsetting, a business would first need to set clear its emissions reduction goals and targets. This helps in determining the best approach to carbon reduction and ensuring all efforts are on track.
Second, a business needs to make sure it’s investing in trustworthy renewable energy and carbon offsetting projects. In short, it means that the suppliers need to have a proven track record and verifiable, certified projects.
Third, the financial implications of renewable energy procurement and carbon offsetting need to be considered so that the investment a business puts in is worthwhile. Because, although these initiatives provide long-term cost savings, the upfront costs in the infrastructure or purchasing carbon offsets could be considerable.
Carbon offsetting is a way in which businesses can balance out greenhouse gas emissions by investing in projects that reduce or remove emissions elsewhere. These projects could include renewable energy initiatives, energy efficiency projects, as well as reforestation efforts.
Carbon offsetting allows businesses to take immediate action to address their carbon footprint while they work toward reducing their emissions. This could prove immensely beneficial and viable for businesses that don’t have the resources to immediately switch to renewable energy or undertake significant changes in daily operations.
Carbon offsetting can provide businesses with a competitive edge. This is especially true as environmental impact is becoming obvious to consumers and they want to switch to businesses that demonstrate maturity by voluntarily committing to environmental causes and demonstrate their commitment to sustainability.
Renewable energy procurement and carbon offsetting are equally important initiatives – more so because they push businesses to reduce their carbon footprint and become more sustainable, which could turn out to be much more profitable than anticipated in the long run.
However, staying on track is a difficult task. Businesses therefore need to establish their own best approach achieve their target of carbon emissions reduction. Some businesses might still find it tough to keep up, at least through the initial stage where it involves investments. As such, the best way forward for such enterprises would be to start supporting carbon offsetting projects.
Demand for sustainable business practices will definitely continue to grow, ensuring that renewable energy procurement and carbon offsetting become critical for businesses looking to remain competitive and demonstrate their sustainability commitment to the current and future generations.