The many roads to real sustainability
A number of factors are moving energy and climate change from the sidelines to center stage in the business world. Everyone remembers how Hurricane Katrina disrupted oil refining on the Gulf Coast, the California energy crisis, and the Northeast power outage. In response to natural disasters, geopolitical turmoil, changes in regulation, surging energy demand from emerging economies and changing...
A number of factors are moving energy and climate change from the sidelines to center stage in the business world. Everyone remembers how Hurricane Katrina disrupted oil refining on the Gulf Coast, the California energy crisis, and the Northeast power outage. In response to natural disasters, geopolitical turmoil, changes in regulation, surging energy demand from emerging economies and changing consumer attitudes, business leaders are increasingly viewing energy management as a form of risk management.
Recently a group of senior corporate executives from a variety of manufacturing and commercial companies worked with Global Business Network and the U.S. Environmental Protection Agency’s ENERGY STAR program to evaluate how the world energy scene might impact their businesses through 2020. The group identified a number of trends that could significantly change the U.S. energy environment over the next 20 years.
The two most uncertain and critical trends focused on future shifts in U.S. politics and regulation regarding carbon and changes in global economic patterns with respect to developing countries. In response to each of the four possible combinations of outcomes, the group framed plausible roads ahead, each posing a specific challenge to corporate leaders.
The Same Road —where the world continues in much the same direction it appears to be going now regarding energy and environmental concerns about climate change
The Long Road —where the world undergoes a significant shift in economic, geopolitical and energy centers of gravity
The Broken Road —where the world continues much in the direction of today, but is then hit by a severe event that overturns established systems and rules
The Fast Road —where reasoned decisions and investments about energy and climate risk are made early enough to make a difference.
The widespread conclusion was that there are several steps that all businesses can take now to ensure energy success regardless of the future. These steps resonate with me and CEE members, who administer energy-efficiency programs throughout the United States and Canada.
Master the fundamentals of energy efficiency . Increasing energy-efficiency within business operations is the first step toward reducing energy-related risks. Indeed, the best hedge against future energy price or availability risks is simply not to need as much in the first place. Further, companies that use energy efficiently are less exposed to volatility and price increases.
Take both a longer and broader view of investments and strategic decisions about energy . Valuing energy in terms of corporate productivity, including tracking the company’s energy productivity index (the amount of energy used to create a product or service), enables an organization to place energy on equal footing with labor, material, capital and other operational expenses.
Search out business transformation opportunities in the way the company manages, procures, and uses energy. Look beyond the energy needed for production and consider all the energy impacts on the business. Concepts such as “embedded energy” and “energy productivity” can be used to explore and evaluate business opportunities and strategic decisions. Companies such as PPG make fundamental business decisions in light of the fact that the energy future is uncertain.
Prepare contingent strategies . With the robust approaches above, companies will be better positioned to successfully and flexibly maneuver through any number of possible futures, including the four described above.
There are also, of course, strategies that work particularly well for facing specific energy disruptions, such as substantial and sustained swings in energy prices and supply, severe weather events, and penalties or incentives around energy use and greenhouse gas emissions. Download Energy Strategies for the Road Ahead at www.energystar.gov/energystrategy .
Take personal action . In order to survive and even thrive in the future, senior executives will need to invest time and attention to understand the energy and climate vulnerabilities and opportunities of their business. Look for opportunities to manage energy strategically within your business; bring strategic energy management to corporate boards, and influence your industry to become more strategically energy aware.
Any of these actions will make energy management more strategic within your company. One thing you can be sure of, energy will be more challenging and more important in the future. Will you, and your business, be ready?
Marc Hoffman is executive director of the Consortium for Energy Efficiency, based in Boston. Its Website is