Company energy management programs are becoming a bottom-line necessity for corporations’ financial viability, social responsibility and environmental sustainability, according to the research and consulting firm Aberdeen Group.
And sustainability as an essential element in return on investment is increasingly on the minds of the suits sitting in the executive suite, but there’s still a ways to go on that score.
Energy management as a concept began as a cost-saving initiative, “but is now starting to become a strategic part of the company’s larger corporate social responsibility program,” says Aberdeen in a recent report, Energy Management, Driving Value in Industrial Environments.
A benchmark study of 230 executives conducted by Aberdeen research analysts Mehul Shah and Matthew Littlefield found that companies that are considered “best-in-class” must do three things effectively:
- Include energy management in corporate-wide sustainability initiatives;
- Provide real-time as well as historical energy data to the appropriate employees that they can use as “actionable intelligence;”
- Invest in automating energy management as much as possible to gain visibility into the energy data while integrating it with existing technology investments.
By implementing those actions, the top-rank companies can achieve a 15 percent or more reduction in energy consumption, an overall equipment effectiveness level of 90 percent and an impressive 14 percent increase in operating margins relative to corporate goals.
Aberdeen found that 80 percent of the companies that responded to its survey are now focusing on energy management to realize savings. That’s good, but there is a downside: Only 20 percent of those surveyed focus on sustainability and social responsibility as drivers for energy management, “an indicator that many in the marketplace still don’t associate energy management with the organization’s higher sustainability goals.”
Companies constantly search for ways to reduce the costs of their manufacturing operation. Cost-reduction approaches they generally take include reducing unscheduled downtime, improving yield, increasing quality, or reducing inventory, among other options.
Those are critical areas for cutting costs, the report continues, but plant managers “often underestimate the ability to reduce costs through an effective energy management strategy. This is especially critical in an energy intensive plant where energy cost is a large percentage, often upwards of 25 percent, of the total operational costs of the plant.”
Thus cutting even a small percentage of total energy consumption can translate into major savings.
Obviously the volatile price of energy has put increasing pressure on executives in energy-intensive industries. Shah and Littlefield write: “It is now more important than ever to understand a plant’s energy’s needs and cut out wasteful energy consumption wherever possible so that companies can improve predictability into energy usage.”
Strategic actions around an energy management program would include redesigning and optimizing processes to be more energy efficient and improving – or in some cases creating – energy visibility across the enterprise and creating or improving collaboration across all functional units.
There’s only so much “passing-on” of energy cost increases to customer and supplier bases that is reasonable or possible: firms “need to look within to reduce cost and consumption,” the Aberdeen report says.
They definitely should. In another report Aberdeen research underscores the business case for using sustainability to bring about a positive return on investment.
“Far from being a philanthropic “nice to have,” top performing organizations view sustainability as a “must have” strategy for long-term business viability and success,” say Aberdeen research analysts Jhana Senxian and Cindy Jutras in The ROI of Sustainability: Making the Business Case.
That’s because sustainability “brings together strategies to ensure optimal performance related to the business, the environment and society.” Aberdeen found that nearly 60 percent of those responding to a benchmark survey now say sustainability “does or soon will guide major parts or the entirety of their corporate strategy.”
For top-performing companies, getting serious about sustainable strategies can translate into a 9 percent reduction in carbon footprint, a 6 percent reduction in energy costs, a 7 percent reduction in facilities costs, a 10 percent reduction in paper costs, a 7 percent reduction in transportation/logistics costs and a 16 percent increase in customer retention.
It’s past time to create an energy-aware culture across plants and supply chains. It’s also time to fully accept that matching environmental and social stewardship to clear, actionable and measurable improvements to a company’s bottom line will ensure the sustainability of a business’s ecosystem.
Our parilous economy and trade situation is creating a new economic age – that “new normal” everyone wants to talk about but can’t quite define – that of necessity require comprehensive re-thinking about energy, investment and sustainability.
It might even be happening.