How to compare energy suppliers on cost, carbon and transparency

It's crucial to identify key evaluation criteria beyond price alone: good comparisons will also verify green claims and reporting accuracy, and inform choices that align with corporate Environmental, Social and Governance (ESG) frameworks.

Building transparent, data-driven supplier comparisons helps inform the decisions made by those participating in the energy market. Procurement teams, sustainability officers and finance directors may all find it helpful to compare energy suppliers to clarify costs, sustainability and transparency. Energy supplier comparisons can empower buyers to make transparent, defensible procurement. We take a look at best practices and the challenges energy managers may face when selecting the most suitable suppliers for their business.

The new criteria for supplier evaluation

Before agreeing with an energy supplier for power, it's essential to understand their financial, environmental, and governance status. 

Cost competitiveness, carbon intensity, and governance

The first is to assess how competitive an energy supplier is compared to its market competitors, as well as its financial stability, since cheaper doesn't always correlate with better service. Secondly, the supplier's carbon footprint should be analysed: is it unacceptably large, and are they taking steps to reduce it? Finally, it's essential to understand how a potential supplier adheres to both voluntary and mandatory governance standards.

Weighting criteria for tenders

Energy efficiency and sustainability are two key metrics that underpin comparisons of energy suppliers. Commitment to net-zero targets, as well as the integration of sustainable technologies, will include supplier comparisons, energy efficiency of the technologies used, and their operational performance. These metrics will also consider factors such as whole-life cost, which accounts for the costs and effort involved in maintaining and operating a facility after construction. The last key consideration is social value, which tends to carry a lower weighting, but still feeds into a company's ESG goals.

Price vs. sustainability: what to prioritise

While both factors are key in determining an energy supplier, sustainability and price must be balanced in a successful supplier comparison. 

Balancing short-term savings with long-term targets

Short-term savings involve opting for cheaper, utility-led green tariffs, which guarantee a certain amount of green energy is produced to match an energy buyer's consumption. Long-term targets, on the other hand, examine how an energy supplier is approaching broader sustainability goals, with effects felt in the future, such as climate change-led goals and tangible energy security. These longer-term goals may not see substantial cost savings initially, however. 

Quantifying risk of reputational cost

While the gap in competitiveness between fossil fuels and renewable energy is closing, fossil fuels remain the cheaper option. However, procuring fossil fuels may damage a business’s reputation. Companies must decide whether opting for the more affordable, but non-sustainable, choice is worth risking their reputation, or whether investing in clean energy is financially worth the boost to brand image.

Data and disclosures to request

When ranking energy suppliers, it's key to use concrete data to build an accurate picture of the energy sources and operational impacts the supplier might have on your business’s carbon footprint.  

Fuel mix, REGOs/GOs breakdown, intensity factors

A breakdown of the supplier's fuel mix and the percentage of green sources should be requested as part of supplier comparisons, with a breakdown of specific renewable sources. If a supplier utilises Guarantees of Origin (GoOs) or Renewable Energy Guarantees of Origin (REGOs), ask for evidence of these certificates and an overview of how many are held for which type of renewable energy source. You can also request proof that these certificates haven't been double-counted. From a carbon intensity perspective, request information on the energy supplier's environmental impact and carbon footprint. 

Supply chain ethics and corporate reporting

Corporate reporting can rank energy suppliers based on their supply chain ethics and the steps they are taking towards both mandatory and voluntary carbon reporting goals. The previous Carbon Disclosure Project (CDP) comprised data on environmental impacts, including biodiversity, water security, and climate change. ESG goals remain a highly relevant marker of ethical contribution. Still, it's worth bearing in mind that the supplier itself usually sets these. It will usually feed into its specific ethical priorities, so make sure its priorities align with your own ESG goals.

Evaluating suppliers' carbon claims and governance

To avoid greenwashing, it's important to verify an energy supplier's carbon claims through independent third-party certifications. Certifications relevant to energy supplies include ISO 14001 for environmental management systems or B Corp certification for social and environmental performance. Red flags in marketing language that might signal greenwashing include vagueness around specific carbon-reduction actions, for example, branding efforts as 'green' or 'eco-friendly' with a general lack of data to back up the claims. 

Building long-term partnerships

The benefits of multi-year relationships can include stability and impact, as well as cost savings when paired with a fixed-term agreement such as a Power Purchase Agreement (PPA). This will fix energy prices from a potential supplier over a specific period, for example, 10 years. You must explore collaborative innovation with any future energy supplier, with flexibility built into agreements and a strong focus on data sharing and carbon reporting to ensure total clarity for both parties. This is why it's essential to remember that the cheapest kWh isn't always the best choice, transparency is now also a key part of value.