Profit
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Factoring energy management into a strategic business plan is an effective way to increase revenues, improve cash flow, and increase productivity. Business strategist Amory Lovins projects that a business can increase productivity as much as 16% by using better energy strategy. "Many CEOs," says Lovins, "confuse their top and bottom lines."
Energy, in terms of strategy, has traditionally been limited to consumption and conservation measures--if it has been considered at all--but this is quickly changing in today's corporate environment. Business leaders are finding many effective ways to manage energy as an investment. Managing expenses related to water, electricity, gas and oil (WEGO) is more than an accounting function, it is an investment that can be measured quickly against past performance.
"Companies are often hesitant to take on energy efficiency projects because of the up-front costs. As an executive, I think this approach can be short-sighted," says Mike Mills, president and COO of Sain Engineering Associates (SEA) in Birmingham. "It is important to think of energy efficiency as an investment, not just an expense."
Lovins, a popular speaker on business topic and founder of the Rocky Mountain Institute, maintains that energy management is not about an environmental cause but, rather, is a profitable strategy that will increase business along with saving money and energy. Still, there are factors that ultimately determine whether an executive says "yes" or "no."
Why they say no
Presentations are too technical. When employees, or consultants, pitch energy management tools to business leaders, they lose focus of the bottom line. Technical terms like smart meters, big data, or smart sensors combined with new software applications sound expensive and difficult to learn. A simple focus on the return on investment (ROI) can be more convincing. Leave the jargon for later.
Time is money. Small business owners tend to be more involved in the daily operations of their companies, often performing multiple functions that might be divided among several employees in a bigger business. A smaller business owner can be so focused on sales, personnel, inventory or other factors that they don't want to take the time to learn about energy management. They may consider energy as a static cost rather than a source of investment dollars.
Cash flow competition. Like time, cash flow is a factor that impacts business decisions concerning energy. Companies are willing to absorb energy costs as expenses and focus on investments in other areas such as new products, expansion, research, hiring or other areas.
Why they should say yes
Fast paybacks and high ROI. Companies with cash flow competition can realize enough savings in a short time-frame to fund many moderate, or some significant, investment projects. Building commissioning, for example, can result in a payback of under 2 years. There may also be a number of low cost/no cost solutions that improve energy efficiency and save money. Ambitious investors with high energy costs may want to consider going carbon-neutral.
Urgency. Energy prices are not static. As prices rise, finding ways to save money can help a company stay ahead of future demands created by weak infrastructure and federal mandates.
Help is available. Energy consultants, like SEA, can explain the benefits, design a strategy and implement the upgrades with the client's best interests at the forefront.
Awareness remains one of the biggest barriers to cost-saving energy management but this can be overcome the through effective communication, according to a report from the School for International and Public Affairs (SIPA) at Columbia University. As corporate executive officers increasingly look past energy as an expense and turn to it as a source of revenue and a competitive advantage, management of WEGO expenses will increasingly become a major part of business strategy.