Companies today face multiple energy and sustainability challenges that significantly impact risk exposure, financial performance and reputation. This combined with price volatility, looming carbon management regulations and an array of renewable energy alternatives has created a complex set of challenges to manage.

In concert with the growing corporate focus on the overall sustainability agenda, companies are now integrating energy and environmental matters in the core of their business operations. Bracing this change organizationally is not only complex but unknowing, especially if your company has not considered energy or environmental initiatives before.

So where do you begin? You could implement one off energy efficiency projects, however the impact on your company’s bottom line will be minimal. The most effective solution is to implement a total program dedicated specifically to energy and environmental projects. This program must be aligned with corporate goals and objectives and must have executive backing.

I’ve outlined five steps to consider when developing an energy and environmental program. Each step details tasks that should be completed prior to moving on to the next one.

Step 1 – Orientation
The orientation phase is all about planning. During this phase it’s important to set goals and objectives, develop a committee along with its mandate to support resourcing, outline timelines and set program tactics. You should also identify key performance indicators (KPIs) to measure and report performance against. Typical KPIs include energy use, cost, or emissions measured against; per unit area, per dollar revenue, per unit of production, etc. The main objective of this phase is to provide the proper context to discuss energy and environmental initiatives so that the information gathered and analyzed in later phases is customized to your organization’s needs.

Step 2 – Initial Assessment
The next step is to complete an initial assessment of selected facilities. The number of facilities selected depends on the number of locations your company operates and the similarity between them. Completing an initial assessment will provide a baseline for the program to measure its future success against. This step includes completing an energy and environmental baseline, on-site reviews and a review of corporate policies and practices.

Energy and Environmental Baseline: The baseline analysis establishes the starting point for your energy sustainability program. Like starting a new business, it’s essential to have an opening inventory, which is the basis upon which the success of the program will be measured. The baseline analysis will provide an overview of the current state of your energy and environmental performance and acts as a baseline to set quantifiable targets against.

Screening Audits: A screening audit is the simplest and quickest way to become familiar with a building’s operations and identify obvious opportunities for energy savings measures. During this step you should assess the performance of equipment, processes, and systems to help identify further opportunities for improvement.

Review of Policies & Practices: This consists of executive interviews, internal surveys, and documentation reviews that are designed to provide insight into the organizational dynamics and decision-making processes within the business. It also includes policy reviews, data management review, financial evaluation, communication analysis and a risk tolerance analysis.

Step 3 – Identifying and Quantifying Energy and Environmental Opportunities
Opportunities identified in the initial assessment, baseline and screening audits should be compiled into a master opportunity list. The opportunities can be organized into three types:

• Organization and behavior opportunities – policy improvements, awareness programs, communication initiatives.
• Operational and non-capital opportunities – data management, energy procurement, operational practices and maintenance and re-commissioning.
• Capital improvement opportunities – Infrastructure improvements, green technologies and incentive management.

Estimates of energy reductions, cost savings, implemented costs and emission reductions should be included for each measure. At this stage, the intent is to include all the indentified measures for discussion purposes. This list can then be reviewed with the committee to discuss the feasibility of inclusion in the energy and environmental program.

Step 4 – Development and Review of Program
The next step is to review identified opportunities from step 3 and determine which opportunities to pursue. Chosen opportunities will depend on program goals and objectives and financial feasibility.

At this stage your company will have the following:

• A completed review of goals, mission and objectives;
• Baseline analysis of selected facility energy consumption and energy related greenhouse gas emissions;
• A completed review of policies and practices;
• Screening audit results for selected facilities; and
• A detailed program-based list of behavioral, operational, and capital improvement opportunities.

The energy and environmental program then combines these deliverables into a single strategy document that serves as the mandate for future energy and environmental management objectives.

Step 5 – Implementation of the Energy and Environmental Program
Once the development of the program is completed it’s now time to implement it. Your organization probably has set rules and policies concerning the implementation of operational programs and capital budgets, be sure to follow the approval process thoroughly. It’s important to consistently monitor the performance of the program by implementing measures such as commissioning and monitoring and verification programs.

In today’s difficult market environment business decisions are being weighed more carefully than ever. Typical project valuation indicators such as ROI and simple payback times are no longer good enough. Savings from energy efficiency projects can be lost in the fog of obfuscating external factors. The focus is now on reducing carbon footprints and, by direct relationship, energy consumption. Too many high level executives can’t rationalize what 100,000 kilowatt hours of savings means to them and their business. In this context, it has become extremely useful to model energy consumption in terms of each firm’s unique key performance indicators.

If you are a restaurant it may be the number of meals you serve, if you are a retirement home it may be the number beds you have occupied, if you are an industrial manufacturer it is the number of widgets you make; establishing an energy cost-per-output is the first step in the process and is unique to every business model. Typically organizations expend vast resources to measure the cost of their inputs per unit of output yet ignore energy, a fundamental input into any business process output unless you’re output is giving advice such as a psychologist, even then, giving advice in the dark is disturbing, you’ve got to keep the lights on.

Defining your energy costs of production is an essential step to understanding how energy affects your productivity and profit margin. The most important action is to generate a baseline of energy cost-per-KPI. Once you know that you are using 40 kWh of electricity per widget you can effectively compare your energy efficiency across time in a way that is meaningful to every member of the organization. Too often energy expenditure is considered by a select few operational employees. Expressing energy in a metric everyone can understand aligns the interests of the entire organization and can act as a measuring stick for different business units. Doing this allows you to track the effect each business unit is having on the company-wide energy cost-per-KPI and reward performance accordingly. Eventually, once most business are measuring energy cost and consumption as a function of production levels these key metrics will provide important benchmarking applications to measure comparative performance among competitors as well. This, of course, depends upon impending energy and environment disclosure requirements.

A considerable benefit of expressing energy consumption in terms of KPI’s is the identification of major energy cost drivers. Developing an energy management plan is not overly useful if you don’t know what is driving your energy costs and what level of impact they have on your final output. By finding out which of your business processes have the highest cost per KPI you can then focus on improving the energy efficiency of those processes. In many cases the processes that can have the most impact are often the last to be considered if the cost-per-KPI data has not pointed you in the right direction.

Any business that wants to stay profitable must grow. Forecasting the costs associated with growth has long been a terribly inconsistent and difficult task to perform. In respect to energy costs this can be especially complex if costs-per-KPI have not been evaluated. With an energy cost-per-KPI metric the forecasting of future energy costs becomes a simpler exercise. The cost-per-KPI function can easily be reversed to determine what energy costs would be for varying levels of output. Production levels can then be forecasted and a sensitivity analysis can be performed to estimate the future cost of energy with various production levels. Similarly, a consumption-per-KPI calculation can be reversed to determine energy consumption requirements for certain levels of production; this will come in handy when planning energy infrastructure during facility expansion. At this point it helps to classify which energy costs are variable and which are fixed. It may be helpful to go so far as to determine variable-cost-per-KPI and fixed-cost-per-KPI functions separately. This information will also aid your organization while developing hedging strategies to reduce exposure. The forecasts can be used to determine how much energy will be required and, as a result, how large purchasing deals must be to guarantee adequate energy at a reliable price point in the future.

The evaluation of energy efficiency projects can also be made clearer through the use of cost-per-KPI metrics. ROI’s and simple paybacks do not tell the whole story. It can often be beneficial to examine how each measure may impact the cost-per-KPI metric. In this way the business impact of energy reduction projects can be evaluated next to labour-related and financing measures which are typically measured against your key performance indicators already. Measuring against KPI’s can also clarify the interrelationship between projects implemented concurrently. Typically, deriving the impact that a single project has on costs or consumption is impossible when multiple projects have been implemented at the same time. Measuring against KPI’s and drilling these values down to business units or cost centers help to clarify the impact each measure has on the company’s overall performance.

All companies may see value in diffusing energy related information in terms the entire organization can understand, however implementing this process requires a great deal of focus on gathering and maintaining effective and up to date datasets. Measurements against KPI’s are only as good as the data that is being used. Developing and implementing a comprehensive data plan focusing on accuracy is fundamental to effective measurement. The best KPI’s are leading indicators; keeping this information up to date is essential and crucial for effective reporting.

Using a cost-per-KPI metric will increase the clarity and effectiveness of communications throughout the business units of your company. When everyone can see the impact energy costs have on their business process they align themselves to manage the impact their individual business unit has on the company as a whole. The use of consumption-per-KPI metrics are invaluable when forecasting future energy requirements and developing hedging strategies. Cost-per-KPI metrics can be used as performance indicators themselves and can be used to compare the viability of energy projects as well as the performance of business units.

The old adage says “you can’t manage what you don’t measure”. Expressing energy as a per-KPI metric ensures that a firm is not only measuring the impact energy has on its operations, but that it is being measured in a meaningful way to all the firm’s stakeholders and decision makers.

“Focusing and goal setting are key to winning”
Jon Montgomery, Canadian Skeleton Gold Medal winner, auctioneer and media darling at the 2010 Vancouver Winter Olympics

Being a self –acknowledged sports enthusiast, I absolutely reveled in the wonderful seventeen day Winter Olympic feast hosted by Vancouver this year. It was riveting to watch the “The Thrill of Victory … the Agony of Defeat … the Human Drama of Athletic Competition” – to steal a catch-phrase and vision from ABC’s Wide World of Sports intro in the 1970’s.

Canada came under much international criticism during the two week event starting when one of the huge mechanical torches failed to rise to the occasion during the opening ceremonies; the unfortunate training run accident that killed the young Georgian luger, Nodar Kumaritashvili; and the spring-like weather conditions creating havoc at Cypress Mountain.

The Own the Podium (OTP) Program was originally launched in 2005. The goals of the program regarding Olympic podium performance are listed on the OTP website (www.ownthepodium2010.com), as follows:

• Place first in the total medal count at the 2010 Olympic Winter Games; and
• Place in the top 12 nations in medal count at the 2012 Olympic Summer Games.

$117 million in funding over the past five years was provided to over 200 elite class athletes – about $80 million came from the federal, provincial and municipal governments and the remainder from private sponsors such as (McDonalds, HBC , Air Canada, Royal Bank ). Medal winners would be awarded $20,000, $15,000 or $10,000 for gold, silver or bronze, respectively, including multiple awards for multiple medal winners.

After the first week at Vancouver, Canada was the butt of jokes when our athletes failed to medal as predicted and Canadians anxiously awaited our first gold medal on our own soil. Own the Podium became a punch line, replaced by “Blown the Podium”, “Loan the Podium”, and “Bemoan the Podium” to name a few. A US gold medal winner said that it was OK for Canada to Own the Podium, as the US just wanted to rent it for awhile. Canadian Olympic Committee CEO Chris Rudge acknowledged “We are going to be short of our goal. We will eviscerate this program to see what happened.”

With a dramatic rally during the final week, Canada ended up with 26 medals, well behind the US (37) and Germany (30) but included fourteen Canadian gold medals, the most ever by any nation in the winter Olympics.

The Own the Podium Program is an interesting case study in several areas applicable to business, including:

• Goal Setting;
• Key Performance Indicators;
• Marketing and Branding; and
• Financial Incentive Programs.

I will concentrate on the first of these, Goal Setting.

Goal Setting

Well-formed Goal Setting is sometimes characterized by the S.M.A.R.T. acronym, which has a few variants, but generally looks like this:

• Specific – a specific goal has a better chance of being accomplished than a general goal; will better align members of the organization; and makes it easier to measure success;
• Measurable – there has to be a definitive yardstick to measure progress with;
• Achievable – the goal needs to be challenging but practical and achievable;
• Relevant – the goal should focus on the greatest impact of the organization; and
• Time-Sensitive – the goal should have a definite deadline.

Goal Setting is a complex exercise requiring clear communication and a balanced approach across all of these factors. In this case, the goal of winning the most medals of any Country was specific, measurable, time-sensitive and relevant, but, ultimately, not attained. It is questionable whether this aggressive goal was practical and achievable to begin with, as the highest results obtained previously was a tie for 4th place at Salt Lake City in 2002, followed by 5th place in 2006 at Torino, Italy. Interestingly, the goal for the Summer Olympics (a top 12 finish) is not nearly as specific or brash. Perhaps the Vancouver stretch goal was driven by political pressure to put on an unprecedented performance in front of a hyped up home crowd.

All in all the Olympics were an impressive performance for Canada. To most Canadians, Vancouver was a huge success and it comes as no surprise that the recent Federal Budget increased funding for the Own the Podium Program. And it doesn’t hurt to say that businesses could also learn a few things from the success of the Own the Podium Program.