DOE Webcast - From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency

The Pew Center on Global Climate Change published their report on Best Practices in Energy Efficiency on March 31. Andre de Fontaine, a Markets and Business Strategy Fellow at the Pew Center, provided summary findings in the Webcast.

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Background:
The report is a result of the Pew Center's Corporate Energy Efficiency project which was started about three years ago and funded by a grant from Toyota. The report incorporates findings from workshops held with their Business Environmental Leadership Council (BELC) and an online survey answered by about 50 companies that have a demonstrated commitment to energy efficiency / climate issues.

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BELC members include several electric utilities, chemical companies, and manufacturers.

Summary Findings:

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The concept of corporate energy efficiency is not new, but there is a renewed commitment to pursue energy efficiency strategies to slow greenhouse gas (GHG) emissions and realize economic benefits.

To understand the key motivating factors, its useful to see participants' views on energy prices (using the price of oil as a proxy) and on expectation of climate legislation.
1. By 2014, 95% of participants expect the price of oil to be greater than $75 / barrel, and about 50% expect it to be greater than $100 / barrel.
2. 57% expect U.S. Climate Change Legislation within 2 years, the remainder within 4 years.

As a result, companies are modifying their behavior to deal with their expectations, and these factors are among the leading motivations per the survey:

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The focus on energy efficiency is made more clear by the McKinsey report which showed that efficiency is the largest GHG reduction opportunity, and is among the lowest cost of available options, often producing a net economic benefit over its lifetime:

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From the McKinsey Unlocking Energy Efficiency in the U.S. Economy study in 2009, the efficiency opportunities are highlighted in blue.

Given the potential economic impact of implementing energy efficiency strategies, it is not surprising to see senior management involved in most cases:

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Companies often look beyond themselves into their supply chain to determine their environmental impact over a product's lifecycle.  The findings from the below chart are typical, but does not apply to all companies.  The chart demonstrates that over the lifecycle, the company's ability to mitigate their impact is inversely related to the magnitude of the impact, meaning the bulk of the impact comes from the supply chain suppliers and end-use customer behavior:

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Focusing on the products & service produced, increasing efficiency is pursued as part of a strategy to improve perception.  Some leading motivations include:

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While not always the primary motivation, other benefits emerged as a result of the implementation of energy efficiency strategies, including:

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Survey participants also listed their greatest challenges to implementation of strategies, primarily attributed to the upfront investment of resources:

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Thoughts & Analysis:
The report summarized the key core practices and principals of a corporate energy efficiency strategy:

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*SMART (specific, measurable, accountable, realistic, and time-bound)

 The survey sample was drawn from major companies with a demonstrated commitment to climate and energy issues, as determine by their participation in a partnership program with a NGO on climate change or sustainability. It would also be interesting to note other large, established company views on energy efficiency. It maybe that they pursue strategies but are not involved in reporting or partnerships with NGOs, in which case they do not get the benefits one derives from reporting. It may also be that they are not focused on energy efficiency, in which case one may argue that they are not being run effectively. In this latter case, a new owner or management maybe able to generate significant improvements in operations and value, often a premise of private equity firms and part of the idea of the recent EDF/Carlyle EcoValuScreen initiative.

While C-level championing of energy efficiency strategies is desired, effective implementation requires buy-in from all levels and at best becomes part of the corporate culture.  In this way, energy efficiency is not an individual's role, but becomes part of an employee's responsibilities.  Since these strategies are multi-disciplinary and involve various components of an organization, a shared culture results in improved implementation and communication among existing employees. 

The corporate culture of energy efficiency then can extend more easily to the supply chain to influence changes at suppliers and customers.  The Supply Chain Map from Mars, Inc. shown above should not be seen as a deterrent to act, but as a challenge to improve beyond the organization.  However, credibility among suppliers and customers and ability to effect change maybe greatly improved by the corporation's own example of effective and economically beneficial incorporation of energy efficiency strategies.

Effectively measuring and tracking results from energy efficiency strategies can be highly useful in encouraging corporate culture adoption of these policies, and can be used as an effective tool to motivate.  Examples in the report about teams setting up virtual races to measure one's impact on energy reduction I believe will be most effective in influencing employee behavior, but the ability to measure and track results is key.  Using games to influence behavior has been widely studied and can be seen in simple examples like frequent flyer miles.  Incorporating games as a tool to encourage policies within organizations, or among consumers, to encourage energy efficient behavior could be very effective.