| 11/22/2007 - Benefits of Energy Management |
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By Laura Gibson Energy management is taking off in a big way. Effective energy efficiency strategies are the best way of tackling the concurrent problems of spiralling energy prices and climate change that threaten the future sustainability of businesses. By reducing energy consumption with energy management programs, businesses will enjoy some security against rising energy prices. Equally, using less energy will reduce a company’s fossil fuel related greenhouse gas ('GHG') emissions, which is not only good for the wider environment, but also in mitigating the financial impact that emissions legislation, such as cap-and-trade, and public concern over climate change is sure to have on any business. As Michael Porter, Bishop William Lawrence University Professor at Harvard Business School suggests, businesses shouldn’t simply try to neutralize these challenges. Instead, they should perceive growing concerns over energy use and climate change as a “source of opportunity, innovation and competitive advantage”.1 The benefits offered by energy management make this possible… How Energy Management benefits business: The environmental benefits of Energy Management in terms of reducing emissions are quite obvious: using less energy means fewer harmful emissions and a less damaging impact on the environment. Mitigating the wider impacts of climate change that include shifting weather and temperature patterns, if successful, will have a positive generic benefit for businesses in the long term, particularly those operating in the more vulnerable regions. And a healthy society and environment creates expanding demand for business as more human needs are met and aspirations grow.2 However, Energy Management has more direct benefits in terms of a company’s financial sustainability and it is worth looking at these since they are not always so immediately obvious… Straight off, energy efficient businesses are more productive at what they do. Using less energy means that companies are spending less money to run their businesses and the savings from decreased operating costs can be reinvested into other sectors of the businesses where profit can be gained. Or, the savings can be used to fund further energy efficiency projects that will lead to further energy savings and further available funds. Once a company has sufficiently proved its commitment to going green, it is more likely to attract the attention of investors. There has recently been a dramatic increase in the level of institutional investor concern and intervention with climate change issues and their investee companies.3 The Carbon Disclosure Project, a coalition of 300 institutional investors with combined assets of $41 trillion, is one such example.4 Since concerns over climate change aren’t likely to be alleviated anytime soon, it is most likely that more and more investors will follow this example. Acquiring capital on favourable terms from similar investors is only going to be possible for businesses that can prove their sustainability. As emissions legislation takes foot in the various states and provinces across North America, those companies who already have good energy management strategies in place will have far less to worry about in terms of litigation risks. Such companies will also benefit from decreased insurance costs, which will be another money saving area. In the Mountain Equipment Co-op keynote address speech, Peter Robinson drew attention to how even the venerable Lloyd’s of London has said that the insurance industry is in danger of disappearing completely in a few decades, because it has historically miscalculated the risk of climate change. Certainly, if the insurance industry falls apart, much of the way we now do business goes too.5 On a more positive note, companies who do make energy savings will be well placed to take advantage of the expanding carbon trading and offset markets that provide additional opportunities for generating funds. Most proposed legislation provides opportunities for early adopters to profit from their emissions management initiatives. Providing ‘green’ working environments for company employees has not only proven to promote creativity, but also to enhance employee productivity, which clearly benefits the company as a whole. Employee productivity in green workspaces is boosted approximately 15%, partly because alternative building materials are used in these workspaces and these don’t emit toxins such as formaldehyde, which are often present in standard buildings.6 Equally, green companies often incorporate several green feature designs into their offices, including natural lighting, individual climate controls and outdoor views, all of which raise employee morale and satisfaction and, in turn, productivity rates. Lower rates of employee absenteeism have also been noted in green companies. Genzyme Corporation Cambridge, MA
Finally, green companies enjoy improved brand loyalty as they attract customers with longer life cycles and greater brand affinity. This has certainly been the case in the financial sector. Banks have found that consumers are acting on their concerns about climate change and opting for financial institutions such as Citigroup, which offers an energy efficient mortgage, and Barclay’s, which offers the Breathe credit card.7 Some industries will clearly benefit over others as the opportunities for going green vary. Real Estate companies can, for example, benefit by imposing higher premiums on green properties to generate higher revenue. Below, the USAA Real Estate figures for California, provided by Energy Star, are an example of possible average savings for this sector. USAA Real Estate
Initial Steps: So, once an organization has decided to move towards energy efficiency and its consequent business benefits, what first steps should be taken? Energy Star and several other recognized bodies outline a step-by-step process so that organizations can achieve these benefits:
The Energy Advantage Total Energy Management process, summarized in the diagram below, works upon these principles so that customers can enjoy the long-term benefits of a good energy management program. Taking these initial steps towards a good energy management policy can be the start of enjoying the many benefits that follow successful programs. Some financial benefits will be felt fairly immediately as energy consumption decreases, but, more significantly energy efficient businesses will experience long-term competitive advantage as they move towards future environmental and financial sustainability.
1http://webuser.bus.umich.edu/ajhoff/2007%20HBR.pdf |
