There are three main paths to energy efficiency. At the most basic level, energy efficiency starts with teaching your staff to turn off computers and lights overnight. The second step is to find a way to increase your mix of renewable energy sources.

The third is more complex, but could deliver the most significant results; re-evaluating your relationship with your energy providers, seeing them not only as power suppliers, but as low-carbon partners.

Last autumn energy prices started to soar, with a barrel of oil breaching $100 – more than four times its cost in 2001. Equally concerning to western society is that we are increasingly likely to be reliant on unstable or unfriendly regimes for future oil supplies.

At the same time, with an apparent consensus on climate change having been achieved, the focus on limiting greenhouse gases (in Europe, at least) has moved on from bulk emitters, such as utilities and heavy industry, to business at large.

A number of factors are conspiring to make this happen. Firstly, the UK Government estimates that businesses are responsible for 40% of all carbon emissions and is thus driving a raft of legislation aimed at making business more efficient. Companies operating in sectors such as retail and leisure are going to be subject to a Carbon Reduction Commitment, which will introduce a cap and trade systemfor these businesses.

Secondly, consumers and employees are becoming more aware of the environment and demanding more of companies in terms of their environmental performance. Investors, too, increasingly equate strong performance on environmental matters as a proxy for good management.

Business is also putting itself under pressure by adopting a green sheen in its operations – if you want to earn the ‘green’ pound, it’s not enough to sell environmentally-friendly products; your operations have to be as sustainable as possible, too.

Ross Courtney, of energy consultants Ego Consulting, says companies could expect to save at least 20% of their energy bills in the medium term. Lighting, he advises, is a good place to start.

As well as lighting, where inefficient bulbs are being phased out throughout the EU, improvements in electrical and electronic equipment are being driven by energy performance labels, which have spread from white goods to computers and even buildings, where systems such as BREEAM (Building Research Establishment Environmental Assessment Methodology) in the UK encourage the creation of sustainable buildings. Energy labelling creates a virtuous circle – no-one wants to be seen buying the least efficient option, which boosts sales of highly rated products and so increases the incentive for manufacturers to make efficient products.

Property developers are finding that many clients will only rent premises that are top rated. David Battiscombe, of law firm Berwin Leighton Paisner, says: “Companies such as M&S will not take a building unless it is A or B-rated. If a customer has environmental credentials, but are found to be in an inefficient building, they will look stupid. It is a question of reputation.”

Green buildings such as 30 St Mary Axe (‘the Gherkin’) in the City of London, are able to charge a premium because of their environmental credentials, with higher rents being offset by lower energy bills.

Though it is easier to make a new building environmentally friendly than an existing one, new builds only make up about 3% of the total UK building stock. The good news is that focusing on improving existing premises does not have to bleed the bottom line and can actually be profitable.

A recent US study found that a simple programme of energy upgrades had a payback time of two and a half years. The biggest use of energy in buildings (about 35%) comes from heating or cooling, says Alice Tyne of New Energy Finance, and there are a number of technologies that promise significant energy savings here.

The low-carbon mix

Of course, companies rarely look at energy efficiency in isolation – once they have done all they can to their premises, they will look to suppliers for further improvements. Many companies have plans to source electricity from renewable sources, while energy providers have ‘green tariffs’ of varying degrees of quality, with offers ranging from energy purchased from a portfolio of renewable energy assets to tree-planting programmes. But while they may sound good on paper, green tariffs have their fair share of critics.

“Many existing ‘green’ tariffs are unlikely to provide any additional environmental benefit and have the potential to mislead consumers,” observes Hugh Jones of the Carbon Trust Rather than buying green energy from a supplier, some companies prefer instead to finance renewable energy projects themselves – indeed often, buying renewable energy is not an option.

Juliet Davenport, chief executive of Good Energy, says that when British Telecom first committed to buying renewable energy, it used the standard one-year energy contract and found that the next year, the energy was not available. Many companies are still operating on that basis and Good Energy, the only UK energy group to offer 100% renewable energy, turns down business from some big companies. “Some of the contracts we are being offered are not that attractive and we say ‘no thanks’. It is a big risk for us to take on a big contract for a year at a time because they might turn round and change their minds,” says Davenport.

“If you are serious about procuring a reasonable amount of green power, it is quite hard work and you need to make a five-to-ten-year commitment,” she adds.

While the directors of many large companies have decided they want to be green, they can find it very difficult to find renewable energy, partly because many projects, wind power in particular, are stuck in the planning process.

Changing relationships

One option is to offset your energy use, but this is an area that is fraught with reputational difficulties. Many environmental campaigners say offsetting allows companies to duck their responsibilities – a group of protesters from the summer’s aviation protest at Heathrow illustrated this point by invading the offices of offsetting companies dressed as red herrings.

Even supporters of offsetting recognise that there is confusion over standards within the industry, and are taking steps to address this. Business demand for energy with a lower carbon footprint is starting to change the way energy companies do business – no longer do they just see their role as selling as much energy as possible. As well as having to produce a certain amount of their electricity using renewable technologies, UK energy groups also have a requirement, from 2005-2008, to introduce energy efficiency measures that will save 130,000 gigawatt hours of energy, equivalent to the output of 12 power stations.

Though it may seem like a big leap for utilities to become companies offering energy services rather than energy, there is an impeccable precedent, according to Tony White, head of advisory at investment bank Climate Change Capital. “Thomas Edison did not sell lightbulbs – he sold a whole systemof illumination. I don’t know why we don’t have companies that sell heat, light and warmth, rather than electricity or gas. Then they would have an incentive to come up with innovative ways to cut consumption. It is a totally different business model – but it is only a lack of imagination that is the problem.”