Low carbon equals low cost? The Case of Kenya and Cambodia
It is often said that enterprises that cut down greenhouse gas (GHG) emissions or their resource use reap long-term competitive benefits. That’s the theory. In reality, however, this may not be what motivates them: instead, they reduce their use of natural resources such as energy, water and raw materials to reduce their own production costs. In effect, the additional benefit of reduced carbon emissions is merely a positive spin-off.
Mitigating climate change may not be their primary intention, but does it really matter if the end result is the same?
If we zoom in on companies in Kenya, we see that lower carbon emissions do not drive climate compatible growth strategies (not that most companies would even classify their strategies as such), but rather they are a desirable by-product. A number of case studies confirm this.
The first is Mumias Sugar, one of the most successful sugar manufacturers in the country, which has decided to reduce its energy bills by producing its own electricity in response to Kenya’s high energy prices. It does so by using its own bagasse (a natural waste product of the sugar-making process) to produce biogas, which in turn powers their electricity generators. Mumias has enough bagasse to produce up to about 30 MW of power. It uses only one-third of the electricity it produces, and sells the rest to the national grid. So, here we have an example of a company that produces and distributes renewable energy. It is reducing carbon emissions, certainly, but with the main aim of reducing its own costs.
Another example is that of the tea producers that belong to the Kenya Tea Development Authority (KTDA). The KTDA has persuaded its tea-processing factories to produce their own energy by investing in small scale hydroelectricity projects, again with the impetus of reducing energy costs.
Similarly, a number of other companies have invested in low carbon technologies to bring their production costs down. The Oserian Flower company, for example has invested in a geothermal electricity plant to provide all the power for its processes (saving between $3 million and $4 million each year in energy costs) whilst P. J. Dave (another flower company) has one of the largest solar panel fields in the country.
The Kenya National Cleaner Production Center and the Kenya Association of Manufacturers have both demonstrated tangible cost savings in their procedures through their energy efficiency audits. Many of their member companies have already carried out energy efficiency surveys and implemented a number of energy saving measures; i.e. British American Tobacco showed that it reduced energy use by 25%, whilst Spin Knit (apparel producer) saved 26% on energy use and achieved a cumulative return on investment of about $50,000.
In Cambodia, a number of manufacturing companies are now using energy efficiency measures. However, they are being spurred on by UNIDO rather than spontaneously carrying out such efficiency investments. UNIDO in Cambodia has stated that the key differentiating issues are a lack of knowledge (i.e. Kenyan firms are, presently, much more energy efficiency savvy than Cambodian firms) as well as issues of scale where only larger firms can co-finance (with UNIDO & Global Environment Facility support) these investments. As shown in the table below, the case study demonstrates that most companies that have participated in the Cambodia Industrial Energy Efficiency programme have had greater savings than their initial investment in energy efficiency measures, as well as significant reductions in GHG emissions. Even where investments have, to date, outweighed savings, the companies still expect to recover and surpass all costs in the medium term.
Selected case study companies in the UNIDO Industrial Energy Efficiency Cambodia Programme
Investment Cost ($)
Savings to Date ($)
GHG Reductions (tonnes per year)
Ly Ly Food Industry Co.
Sky High Garment Company
Vinh Cheang Rice Mill
Punleu Preah Atith Brick Company
Peng Kimheng Ice Factory
Then there are companies that mix environmental goals with resource efficiency measures. Take the Kenyan cement companies that are combining corporate social responsibility (CSR) work with resource efficiency, i.e. Bamburi Cement’s activities include the rehabilitation of previously mined areas (a wholly CSR-oriented project) to increase biodiversity (and potentially tourism), mixed with more pragmatic measures such as sustainable reforestation processes to produce firewood for its own energy production). Meanwhile, the East African Portland Cement company has implemented a partial klinker replacement programme that aims to reduce CO2 emissions by using waste tyres, which produces less emissions than the production of traditional klinker.
These examples show hidden and obvious carbon reducing opportunities for enterprises – opportunities that address their most pressing commercial needs, such as reducing costs while introducing sustainable energy practices, bolstering long-term competitiveness gains and safeguarding access to scarce resources in some cases.
This leads me to think that one obvious way to get businesses engaged in the carbon mitigation process, especially where their operational costs are high as a result of their energy use, would be to highlight these commercial advantages, rather than asking them to reduce GHG emissions for its own sake.
For more on this topic, join us on Monday, 18 March for the ODI public event Low carbon logic: how southern businesses are saving money by going green.
This post features the author's personal view and does not represent the view of ODI.