By Keith Moen
Saskatchewan is known for passionate businesspeople who are not afraid to stand up for what they believe in. This passion works both ways: business-friendly policies are met with wholehearted support while less-encouraging policies have been known to motivate business owners to take to the streets with picket signs.
Traditionally, policies that are seen as business-friendly have some key characteristics: they save businesses money, drive economic growth, and allow companies to compete globally. The NSBA often uses these principles, in addition to feedback from its membership, when deciding which government proposals to support or oppose.
When we look at what the Low Emissions Community Plan ultimately asks of businesses, and at the market conditions in which it exists, the grounds for optimism become clear.
So it may surprise you that these same principles are why the NSBA sees potential in the City of Saskatoon’s Low Emissions Community Plan, provided that it’s implemented in a business-friendly way. The plan outlines a framework that will help drive economic growth in our province and country while helping your business save money and position itself to compete globally in an environment that increasingly demands that businesses demonstrate credentials beyond the bottom line.
We can understand if you’re perhaps shaking your head at that statement. But when we look at what the Low Emissions Community Plan ultimately asks of businesses, and at the market conditions in which it exists, the grounds for optimism become clear.
Take, for instance, a rather mundane capital improvement such as upgrading your facility’s lighting from compact fluorescent bulbs to LED bulbs. As with any capital investment, this change represents a relatively large up-front cost with a long-term return on investment. Ensuring that there is, in fact, a return on investment is the key to deciding whether this improvement goes ahead.
The fact is, right now a business case for this specific change is easy to make because the return on investment time can be as short as three years. The same business case can be made for improvements that increase insulation or reduce a building’s permeability. Even taking the environmental benefits out of the equation, these improvements are good business strategies, particularly as the cost of power generation – and consequently power bills – rises provincially and nationally.
The Low Emissions Community Plan calls for businesses to implement these improvements, as well as to eventually implement their own power generation infrastructure and efficient heating mechanisms (in line with the National Building Code). With the right tools made available to the businesses and residents of Saskatoon, these money-saving improvements can also drive growth in our economy.
One such tool, successfully implemented in 20 US states and in Alberta, is Property Assessed Clean Energy (PACE) financing, which the Low Emissions Community Plan calls for the City of Saskatoon and the Province of Saskatchewan to implement. This tool gives businesses and residents incentives to make improvements that have been demonstrated to save energy and money by providing an up-front loan for the cost of the project. This loan is repaid over the lifespan of the infrastructure through the resulting energy savings. And the loan is attached to the property, not the property owner.
For example, a business that uses PACE financing to install solar panels on its building will have no installation costs of its own for the project. If the solar installation then saves the company $200 per month on its power bill, that $200 is used to pay back the cost of installation. And because the loan is attached to the property (“Property Assessed”), if the owner of that business sells the building, the new owner continues to pay off the loan through their continued energy savings.
This financing structure removes the initial hurdle of saving enough money over time to afford the relatively large up-front costs, making these energy efficient improvements extremely attractive to businesses and residents alike. This removal of obstacles has, to date, resulted in $5 billion in economic activity in the US states where PACE has been implemented. And, unlike many industries that require direct government subsidies to companies to incentivise growth, economic activity resulting from PACE is driven entirely by a rise in demand for energy-efficient improvements.
Demand for energy efficiency and sustainability is increasing globally across many different industries. Banks, governments, and large multinational businesses are increasingly looking for borrowers and businesses participating in procurement or entering supply chains to demonstrate what measures they are taking to reduce their carbon footprint and become more sustainable. Insurance companies are also pricing the effects of climate change (such as flooding and wildfires) into their policies as these events become more common.
The world is changing such that “going green,” or at least being mindful of the effects your business has on the environment, is a good business strategy if you are looking to compete on anything other than a local scale. Banks, governments, and international companies are looking first at who they are doing business with and not just how much it will cost them. They are looking for partners that match their corporate values, which often reflect the general moral temperature of our society. In 2019, that means being inclusive, socially conscious, and environmentally sustainable. These factors have also become part of government procurement locally: the City of Saskatoon’s new procurement policy includes environmental sustainability as part of its definition of best value.
So taking steps in your business to become more sustainable and energy efficient can raise your business’s competitiveness on two fronts. Not only will your company realize savings on your input costs – allowing you to become more cost efficient – but you will also position your company as a good corporate citizen that matches well with the values of potential customers, suppliers, and lenders.
With any other government policy, if the plan could provide cost savings to businesses, increase economic growth, and increase competitiveness, the business community would ask where to sign up. Despite its packaging as an environmental policy, the Low Emissions Community Plan has the potential to provide all of these things, so it makes sense for businesses to understand how it can benefit them. If businesses also have less of a negative impact on the environment by realizing a return on their investment in line with the plan, that’s just the icing on the cake.
First published in the December 2019 edition of The Business Advisor.