What can you do to accelerate your energy agenda and get the business on board? Here are three steps that will get you on the right track.
Nearly three quarters of companies have an energy strategy, but less than half of them are formalized and followed consistently.
Figure 16: Does your organization currently have an energy strategy? [Base: 997]
There is a clear link between how advanced a company is as an energy leader and having a formalized energy strategy. Three quarters of businesses in the most advanced band of the Energy Leadership Model have one. The same is true for just one in ten of the least advanced.
Almost three quarters (73%) of companies have an energy strategy, but over half (56%) of those say it’s not formalized and implemented consistently. The corresponding figures for the most advanced companies are 97% and just 23%.
The C-suite can sometimes overstate the progress their organization has made in achieving energy efficiency. Well over half (56%) of these executives believe their company is now more energy efficient. That compares to half (50%) of energy managers and just over one third (36%) of finance and procurement respondents.
For your strategy to be a success, you need to forge strong relationships across the business. Everyone needs to understand the value of having an energy strategy and have a clear view of the current state of play.
Each company’s energy strategy will be different, reflecting its operations, current energy use and the level of its ambitions. However, there are four important components that we think should always appear.
Any energy strategy needs to include definitive backing from the organization’s senior leadership. Without strong C-level support, an energy strategy has less chance of achieving its objectives. Visible support from leadership is key to convincing cynical stakeholders—employees, shareholders and others—of the importance of energy strategy in achieving the company’s goals.
Many companies still rely on very rudimentary ways of tracking energy use, like looking at quarterly bills. Building more sophisticated ways of measuring energy use and identifying areas for improvement is key to increasing energy efficiency and demonstrating results. Targets are also important to demonstrate commitment and progress. These targets must allow for flexibility as measurement improves and understanding of the organization’s energy use changes.
Start by completing a thorough audit of working practices and behaviors of both frontline staff and executive management. Consider investing in smarter measurement, using Internet of Things devices and an energy management application.
An energy strategy shouldn’t just be about the technologies and targets. Communicating why the company is changing how it considers energy is vital to achieving stakeholder engagement. Present the potential benefits, and show how companies with energy strategies rank themselves as outperforming their rivals on a number of metrics, including innovation, sustainability, customer centricity and attracting and retaining the best people.
Different stakeholders—investors, partners, customers and employees—will have different objectives and the energy strategy should show how it will benefit all the groups that are important to you.
Some solutions, like CHP and onsite renewables, will depend upon practical considerations. Many, like energy-efficient lighting and building management systems, will be relevant to most companies. When looking at all the solutions that are relevant to your business, you’ll want to consider how easy it is to implement each and how quickly it can deliver ROI. Many companies start with easily achievable projects like energy efficient lighting and HVAC optimization, and use the savings to invest—or justify the investment—in more complex, longer-term projects. More visible projects, like LED lighting, can also help build awareness and change behavior throughout the company.
Businesses want to improve their energy usage, but many lack the ability to put this ambition into practice. Finding the right partners can help.
Figure 17: What types of information and support are you looking for from partners in the future regarding the implementation of an energy strategy for your organization? [open ended]
Overall, awareness of the commercial opportunities that energy investments present is high (94%). Over three quarters of organizations are considering adopting at least one demand-side advanced energy solution.
There’s a gap between companies’ aspirations and their ability to take advantage of all the energy options available to them. To close this gap, organizations will need to increase their level of energy expertise. They can do this either through recruitment or, more likely, by working more closely with suppliers.
Businesses aren’t just looking to suppliers to help them implement and run their energy solutions, they want help across the board. They’re looking to providers to help them put together a strong initial business case—to give them guidance on how they can achieve the best ROI and how they can use energy more efficiently. They’re looking for help in selecting the right solutions for their business—solutions that will meet their business needs both now and in the future. Beyond design and implementation, they want reliable and honest suppliers they can work with as partners. These providers should be able to help them assess their energy use and identify possible improvements.
With increasing choice of energy solutions comes complexity. There is a need for companies to take advantage of external expertise to simplify and standardize; and to keep on top of new technologies.
Just 6% of organizations currently see their current supplier as a “true energy partner”.
Businesses regard energy suppliers as the most natural fit for helping them to define and implement their energy strategy. That said, only one in four organizations is currently working with them to implement energy management measures.
Some energy leaders are working with their suppliers to reduce waste across the supply chain. For example, some major retailers offer their suppliers tools to help them reduce their energy consumption and environmental impact. As well as reducing the retailer’s carbon footprint, it can also help to identify savings that can be passed on to the customer in the form of lower prices.
No supplier has a magic bullet. There often needs to be a cultural shift within the organization. That’s difficult when, according to half of the respondents to our survey, employees are not encouraged to suggest energy improvement methods. These businesses are missing a massive opportunity, both in terms of savings and employee engagement. Those “closer to the ground” in terms of energy usage can provide valuable insight into opportunities to improve efficiency and performance. And engaging employees is crucial to realizing the anticipated benefits of many energy efficiency initiatives.
Many organizations still think about energy in terms of a procurement exercise. That can mean they set very narrow scopes for projects, which don’t take into account all the possibilities. You can benefit by involving potential partners earlier. By inviting them to co-create the scope of your project, you’ll gain an additional expert perspective. You’re more likely to benefit from their experience and identify innovative approaches. And, ultimately, you could save time in a procurement exercise and avoid a suboptimal solution.
How can you convince the C-level that energy management should be on the agenda? Here are some ideas for building a successful business case.
The impetus for investing in advanced energy solutions will be different for different organizations. Whatever your motivation, the key to building a strong business case is to demonstrate how it supports the overall business strategy. While lots of companies are still primarily focused on managing costs, for many resilience is a growing priority and some want to demonstrate their CSR credentials.
Your business case also needs to be based on a thorough understanding of business plans. Without this, it can prove difficult to estimate the size of a project accurately. We’ve seen businesses invest in solutions for sites that subsequently close and, conversely, introduce solutions that can’t scale when a site’s capacity grows. This can also be due to a lack of good information on existing energy use.
Some businesses are concerned that the ROI of investing in energy is too uncertain. Like many other investments, the payback can take time, but the benefits can be substantial and long-lasting—and can extend far beyond things you can easily put a figure on. Your energy investments can help you be more flexible, support growth and protect you from market volatility.
You can strengthen your business case by translating your savings into meaningful metrics that resonate with decision-makers— for a hospital, the energy savings from installing a CHP system could enable it to employ many more nurses. You could also demonstrate how ROI could be used to fund other parts of your energy strategy—for example, a reduction in energy costs could fund LED lighting.
There is growing uncertainty and risk around energy supply, especially now that half the energy bill comprises non commodity costs. Having a strong procurement team can only go so far in protecting you from increasing energy prices. Moving away from a centralized model provides greater resilience to changes in the future price of energy—as well as to outages and equipment failure.
There are other risks too. Many large organizations are now bound by regulation and industry standards. Those that fail to comply with these could face financial penalties and damage their CSR credentials.
In the UK, for example, the Energy Savings Opportunity Scheme (ESOS) requires that qualifying companies carry out an audit of energy use by their buildings, industrial processes and transport every four years, and identify cost-effective energy saving measures. The compliance period for phase 2 of ESOS is already underway— the deadline is December 5, 2019. This presents a real opportunity for businesses to make the case for change.
Business leaders like to be presented with options— for example, options that provide a different balance between emissions and financial targets. This demonstrates to them that your business case has been thoroughly evaluated and helps to show why you’ve made certain recommendations.
You should also address the different funding options available. As our research shows, advanced energy solutions are still often self funded. Now, however, there are many other options available.
The best place to start when devising your business case, and energy strategy, is at the end. It helps to have a clear picture of your desired end goal, and then work back from there. Energy solution providers can help you with this—after all, they’re the ones with the technical expertise and experience in supporting other organizations. By presenting them with a problem you want to solve, instead of asking for a cost for a specific solution, you’re more likely to benefit from their creativity and innovation. We’ve seen some companies engage a number of trusted suppliers to support them in co-creating a strategy.
What your future vision looks like will depend on the nature of your business. It should, however, encompass your whole business. A mature coherent strategy builds in repeatable best practice and standardized solutions that can be implemented business-wide.
When you’re setting out on a new energy project, you need to think beyond the initial design of your proposed solution. On many occasions we’ve been brought in when a company has encountered difficulties moving from implementation to ongoing service and maintenance.
You should take a collaborative approach and develop an end-to-end strategy. That extends to how you choose and manage your suppliers. Having a single supplier that takes you through design and implementation and also manages your solution can provide the greatest continuity. You may, however, feel more comfortable working with a number of trusted providers—perhaps including legacy suppliers. In this case, it’s important to select suppliers with a track record of managing successful partnerships.
You can add weight to your business case by including a rigorous process for selecting and managing suppliers. You should be clear about what value suppliers can add, and make sure that any promised savings are written into your contract.
