4 minutes read   05 Apr 2022

The Escalating Cost of Net-Zero

By Mark Ruck

Why necessity is the mother of invention when it comes to the escalating cost of sustainability.

Companies in the quarrying and aggregates sector are currently walking a fine line between achieving profitability and answering to stakeholders, while ensuring they also reach the Government’s ambitious net zero targets by 2050. Here, Mark Ruck, Chief Financial Officer at Chepstow Plant International, provides his thoughts on the escalating cost of sustainability and what businesses should consider on the road towards net zero.

We all have a part to play in kerbing climate change, but there are multiple global challenges facing us at present. This includes rising inflation, fuelled partially by significant pressures on global energy and oil prices and infrastructures. Businesses are also facing increased labour costs and skill shortages. Add into the mix a pent up demand in manufacturing, and it’s little wonder that companies in the quarrying and aggregates sector might be feeling the pinch when prioritising net zero at present.

On top of this, data from Kearney [1] has shown that green products tend to be between 75 to 85 per cent more expensive than conventional ones. Kearney’s study also highlights that the costs of sustainability – and specifically the areas where you can have the biggest impact on sustainability – are in the first steps of the value chain. This includes raw materials, costs and labour. Given that the raw materials extracted in the quarrying and aggregates sector will often be used for essential infrastructure and construction projects, plus so much more beyond, our industry has a meaningful role to play in driving net zero forward.

From a financial perspective, going green will always come at a heightened cost but there is a glimmer of hope. As the cost of conventional products increase in price, this could ironically reduce the gap between the price of normal and sustainable products – leading to more of a levelling up at some stage.

For now however, companies need to flip the narrative and look beyond the traditional finance model when it comes to talking about payback and day one costs. Decision-making should not be focused on an initial outlay and the payback; it’s essential for procurement to consider sustainable and environmental factors too, such as fuel efficiency and fuel burn savings, through to wider benefits. Companies should also consider investing in alternative fuels, such as hydro-treated vegetable oil (HVO) which is proven to reduce net CO2 emissions by up to 98% across the whole WTW cycle.

Short-termism isn’t the answer when it comes to investing in a green future, but there’s currently a lot of uncertainty in the world which means that it’s clearly hard to plan for unknowns in the coming months and years to come.

What we do know is that at present, any cost driving initiatives that help reduce consumption and increase efficiency are probably more important than ever. Projects that have previously been put on the back burner which couldn’t get the payback or be justified initially may need to reviewed and potentially be fast tracked. That’s not only from a payback perspective but also in cost avoidance terms where something could quadruple in price if not done, given the uncertainty that we’re facing.

At Chepstow Plant International, we’re leading by example by constantly digging deeper (in terms of investment) to make our industry greener and provide customers with a range of solutions to enable them to get on board with net zero.

This includes continual investment in modern and efficient fleets of vehicles, operator efficiency training and ensuring optimal machine pairings. For example, EvoFleet, is a tangible service for customers to lower their costs, reduce and meet environmental production targets whilst boosting production. We’re also constantly implementing a range of trials and initiatives to minimise our own impact on the environment.

There are some relatively quick wins that companies should take advantage of, such as rewarding employees for reducing idling time or investing in automation alongside the workforce to optimise fleet uptime and provide better yield for customers. Other wins include moving from diesel to electric, looking at renewable energy sources and even collecting rainwater.

Better still, if you can highlight your net zero initiatives to customers and employees, then surely it’s a win-win in the virtuous circle of bringing everyone on the journey with you.

It’s long been said that necessity is the mother of invention, and it’s true. It’s those brave companies who are open to embracing and adopting new ways of working now that are likely to achieve a better cost base for the future and reap the rewards over time. We’re making the leap – how about you?

[1] https://www.nl.kearney.com/consumer-retail/article/?/a/why-todays-pricing-is-sabotaging-sustainability

By Mark Ruck

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