Funding options in the supply chain• ESCOs & Energy Performance Contracting• Utility Suppliers – Demand Reduction Initiatives, Energy Efficiency Obligation Schemes• Leveraging within your supply chain – supply chain energy management• Clustering 51
ESCOs & Energy Performance Contracting• Vendor Finance “ESCO” Procurement• Energy Performance Contract (EPC) Approach Guaranteed Savings Shared Savings Utility (e.g. power) Purchase Agreement (Chauffage) 52
Vendor Financing 53
Guaranteed Savings 54
EPC: Guaranteed Savings Contract 55
EPC: Shared Savings Contract 56
EPC: Shared Savings Contract 57
Utility Purchase Agreement 58
Utility Purchase Agreement 59
Utility Suppliers• Utility Companies can reduce the need for capital investment in new generation by reducing peak demand• Also reduces load on transmission and distribution system which can reduce losses and need for capital investment• Mandated in many countries to generate energy savings – 1.5% p.a.in EU• They often supply services and finance • Audits • Project Management • Contribution towards capital cost • On bill financing • Payment per kWh saved• Low risk – existing supplier – very experienced – can supply whole package 60
Supply Chain Energy Management• Energy Management at the facility level is likely to lead to a sub optimal result• Implementing Energy Management by looking at it from a system perspective is likely to lead to a better result• Carry out Value Stream Mapping across the supply chain – may lead to a change in specification of input or output materials to reduce energy consumption for the total supply chain• This could be a selling point to environmentally aware customers – competitive advantage from CSR and brand, also cost savings• This spreads the costs and risk• Planning can have a big effect on EE - Logistics and transport possibilities 61
Supply Chain Energy Management• Tesco’s Low Energy Lighting and LED Buying Club helps Tesco suppliers reduce investment costs in LED lighting• Marks and Spencer’s launched an initiative inviting community members of the M&S Energy Society to invest in solar panels on the rooftops of 9 of its stores. – investment from shareholders and the public• ¼ of carbon disclosure project companies are working with their supply chain to reduce environmental impact• Wemeanbusinesscoalition – double energy productivity by 2030, 100% renewable electricity by 2020 62
Clustering• Increase buying power• Common services on the same site• Attractive to NGO programmes due to scale 63
Customer led Supply Chain Initiatives• Mandatory performance requirements• Procurement scores• Regular reporting & monitoring• Subsidised Audits• Capacity building & implementation support• Supplier forums for sharing best practice 64
Other sources of finance• Development Banks • Funds for energy efficiency with enhanced borrowing conditions – typically >$2m • Islamic Development Bank, Asian Development Bank• International Financial Institutions • UNDP and UNEP - can tap in the resource of the Global Environment Fund (GEF) for grant. • World Bank, IFC (private sector oriented), EBRD• Bilateral Development Agencies • Funds for specific projects linked to sustainable development objectives • Canadian International Development Agency (CIDA) • Danish Int’l Development Agency (DANIDA – Denmark) • United States Agency for Int’l Development (USAID – USA) • GiZ (Germany), AFD (France) 65
Other sources of finance• Export Credit Agencies • Support exports and overseas business opportunities for domestic firms • Ex-Im banks (US, China, India) • Export Development Canada, Japan Bank for International Cooperation• Development and environmental funds • Global Environment Facility (GEF), Arab Fund for Economic and Social Development • European Energy Efficiency Fund (EEE-F)• Leasing Companies• Carbon traders • Purchase CERs - Provide cash flow to project once implemented 66
IFC/GEF CEEF Program• Financial products for various sectors/structures • Loans to end-users & ESCOs, Full & limited resource loans • District heating • Industrial including SMEs • Municipal/public sector, hospitals • Multi-family & single-family residential• Typical projects: • gas thermal & cogen plants, controls, heat distribution, lighting, industrial process• Range of transaction sizes • Single transaction guarantee maximum = $1.875 million • No minimum, portfolio approach for small deals 67
UNIDO PFAN Project• The Private Financial Advisory Network (PFAN) is a collaborative initiative of UNIDO and the REEP (Renewable Energy and Energy Efficiency Partnership)• Business plans for financing are invited by PFAN to encourage the adoption of RE and EE initiatives• Pakistan is eligible to participate in the 8th call for proposals starting 2017.• Provides guidelines for developing robust business plans for RE and EE, enabling them to market their projects for potential finance. Much work with sugar industry to date www.unido.org/environment/o591190/climate-policies-and- networks/private-financing-advisory-network.html 68
Discussion• What is happening in the supply chains of Pakistan industry? 69
Module 6Downstream marketing of EE&RE – Strategies and Case Study examples 70
Climate Change & EE/RE• Climate Change is one of the major – maybe THE major – issue for humanity• At current projections it will wipe out many species and habitats, and many people(s) – particularly in the developing world• Industry is responsible for c.25% of CO2 emissions• Industry leaders have a moral responsibility to act – to preserve the environment for future generations - as well as a responsibility to their brand• People are increasingly aware of the threats of climate change – particularly in the developing world where it’s effects are becoming more obvious 71
Customer demands• Nielsen (2014) found 2/3 of people in Asia willing to pay more for goods from companies that are committed to positive social & environmental impact.• A 2014 analysis showed an average annual sales increase of 2% for products with sustainability claims on their packaging and 5% for products that promoted sustainability actions through marketing programs. Brands without sustainability claims or marketing showed an increase of only 1%• Recent Unilever study found 88% of those surveyed in India are more likely to purchase a product if they believe it benefits society and the environment• This inclination is higher in emergency economies worldwide – thought to be because they have seen more evidence of the effects of climate change• The effect is more marked in younger consumers – whose influence will grow 72
Private Sector Initiatives• UN Global Compact (61 active members in Pakistan)• Carbon Disclosure Project• SBTi (Science Based Target Initiative)• Global Energy Efficiency Accelerator Platform• RE100• The Business End of Climate Change• The B – Team• These have engaged corporates and encouraged collaborative decarbonisation beyond the traditional top-down approach, driving progress towards a decarbonised world• Companies disclose their impacts & reduction commitments aligned with the Paris Accord 73
How to market your EE & RE intitatives• Cost control – EE & RE reduces: • Energy consumption and cost • Material consumption due to improved quality and reliability• Employee welfare • Improved H&S • Improved working conditions • Feel good factor for employees• Corporate Social Responsibility • Environmental responsibility • Employee Welfare• Compliance with international standards • Helps win international business• https://www.youtube.com/watch?v=E1e01CikuwA (Patagonia) 74
Unilever• Unilever are committed to being ‘carbon positive’ by 2030 with 100% RE• https://brightfuture.unilever.com/#stories-climate-action• Started looking at own business but realised this was not enough so now measuring impact of every stage of the supply chain• Ben & Jerry’s generating biogas from ice cream waste – so far enough to produce over 16 million pints of Ben & Jerry’s ice cream.• At the Paris climate summit, they delivered a petition calling on global leaders to transition to 100% clean energy by 2050• https://www.youtube.com/watch?v=80NLPNHpm0k• Marmite use their waste in an anaerobic digester to generate 50% of gas usage• All electricity used on site also comes from RE 75
Marks & Spencer Plan Ahttps://www.youtube.com/watch?v=w2EGIkIO7Sw plan Ahttps://www.youtube.com/watch?v=HxTRVfXdrQs plan A• Marks and Spencer launched an initiative inviting community members of the M&S Energy Society to invest in solar panels on the rooftops of 9 of its stores. – investment from shareholders and the public• By 2030 they aim to reduce greenhouse gas emissions from M&S operations worldwide by 80% compared to 2006/07, and a 90% reduction by 2035. 76
IKEA• https://www.youtube.com/watch?v=WezoRFO3fsA&list=PLgu0fwHIWaTxsRD xZyDkv8XVgrrTJniGS&index=16• IKEA has worked with WWF since 2007 on it’s Developing Climate Positive Opportunities for Suppliers project• Hongmei glass (China) supplies IKEA with glassware• Supported by IKEA and WWF, along with local government support, they changed furnace from coal to natural gas• 65% fuel efficiency improvement• 17% reduction in overall product costs due to higher quality, 77% reduction in solid waste, 81% reduction in CO2 and 100% reduction in SO2• Furnace surface temperature reduced from 200 to 80C – resulting in better working conditions and improved H&S 77
General Electric• GE has been involved in multiple partnerships to build capacity in Chinese factories to achieve carbon reductions in industrial facilities• Worked with peer companies, including Walmart, Adidas, Honeywell, Citibank to fund the establishment of an Environmental, Health & Safety (EHS) Academy in China’s Guangdong province• GE also delivered supplier training in China on how to achieve energy and greenhouse gas reductions• GE shares its experiences of its in-house Energy Treasure Hunts with suppliers, including its strategies for how it reduced GHG emissions• https://www.youtube.com/watch?v=RJbun1RDt4I 78
Case Study: Rajby Industries - Energy Audit,Management System & Corporate Responsibility• Rajby Industries • Vertically integrated garment manufacturing organization • Monthly production capacity of 3 million meters of fabrics and 1.5 million of jeans garments • Exports to North America and EU• Energy audit • 26 energy conservation measures were identified with an annual energy saving potential of 10.393 Million PKR• Outcome • Implemented 16 measures within 6 months yielding annual energy savings of 3.9 Million PKR with investment of 0.76 Million PKR - 2.3 month payback 79
Case Study: Rajby Industries - Energy Audit,Management System & Corporate Responsibility• Corporate leadership on sustainability led to partnerships with • UNDP • WWF Pakistan• Solar Energy Use • Rajby has installed solar panels in its factories• Benchmarking of energy and sustainable practices • Modern tools of sustainability to gauge performance through international platforms known as HIGG index – Sustainable Apparel coalition (SAC) and Business Environmental Performance Initiatives (BEPI) where customers can become part of network and review our social and environmental performance. 80
Conclusion 81
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