Sustainability isn’t just for the big end of town anymore. You will have noticed that even amid the pandemic, large businesses are aggressively pursuing sustainability agendas.
In an environment where every dollar counts, they are not doing this for purely environmental reasons.
The reason that businesses are advancing sustainability, even as they seek to cut costs to preserve profitability, is that they know consumers care deeply enough about sustainability to make purchasing decisions on the basis of it.
With the economy impacted by COVID-19 and consumers more discerning than ever, maintaining a competitive advantage in the mind of consumers is a problem that everyone is facing.
Smaller businesses and startups have a natural advantage here – while they may not have the economies of scale that multinationals enjoy, they are well-positioned to capture rising “buy local” sentiment as people seek to support their communities through the pandemic.
Burnishing sustainability credentials is one way that large businesses seek to neutralise this advantage.
Everyone from supermarket chains to Chevron and Amazon is investing in their own renewable assets – solar farms, batteries and wind operations – as they respond to consumer demand for green powered products.
And if you’re Amazon or Chevron, sinking half a billion dollars into new PV solar farms and giant batteries is definitely the way to go. But not everyone is in a position to do this.
A solar panel on the roof and an inverter in the basement can help, but it doesn’t grow with you, and feed-in tariffs for selling your energy back to the grid are woefully low.
What solution is available for small businesses?
Small businesses can solve this problem at the same time as reducing cost by embracing recent technological advances in the way energy is sold.
Traditionally, very large power users spending $2 million or more per year on energy have struck deals directly with energy generators.
These deals, called Power Purchase Agreements (PPAs), are traditionally lengthy, complex agreements orchestrated by consultants over a long period of time, made between only two parties – a buyer and a generator.
They are highly illiquid, meaning that once power is purchased in this way, it cannot be on-sold. But recent applications of blockchain technology to power purchase agreements has changed this.
By using a distributed ledger to track and verify exchanges between parties and standardised contract architecture to simplify settlement, this technology has made PPAs available to customers using far less energy.
Businesses paying more than $100,000 a year for power can purchase partial PPAs that link their power procurement to an energy project.
This means that a small or medium sized business can fill their power needs directly with an energy generator and be confident that they are purchasing 100 percent renewable energy, without the need to put money into opaque offset schemes.
Standardised contract architecture means that where traditional PPAs are complex affairs that require specialist consultants and take years to close, a fractional PPA can be closed in weeks with in-house capabilities even if there are multiple counterparties.
This can save some business customers up to 30 percent on their energy costs compared to buying directly through a retailer, in addition to allowing them to make a verifiable claim to 100 percent clean energy purchasing.
If businesses find that their energy needs fluctuate over time, they can sell down any unused portion of their purchase to another buyer through a secondary marketplace.
This introduction in liquidity is useful for smaller business owners who are often in the growth phase, and do not have the internal forecasting capability that enterprise level businesses possess.
The ability to purchase power from a specific renewables project is also eminently useful for smaller and mid-market businesses in their customer communications, marketing and branding.
In addition to matching the sustainability credentials of the big end of town, small businesses can use a relationship with a popular, local job-creating clean energy project to deepen their relationships with customers and emphasise their connection to the community.
As this kind of technology for direct power purchasing for businesses becomes more widespread, we can expect to see a growing number of small and medium-sized businesses taking advantage of it.
It’s already an increasingly popular option in the data centre, steel production, oil and gas and local government sectors.
The ability to take advantage of an initiative that advances sustainability and marketing agendas while also providing cost savings and neutralising an advantage held by your largest competitors is a compelling proposition for business owners.
Those who gain the greatest advantage will be those who move first – and tell their customers where their power is coming from and why.