Focus on the basics for a sustainability strategy

A recent Los Angeles Times article about the 99 Cents Only Store contained the following quotation from its CEO: “There’s no question we’re going to need to do something. When you are part of a family that comes up with a concept, sometimes you’re the last to admit that it needs to be changed.

10/15/2008


A recent Los Angeles Times article about the 99 Cents Only Store contained the following quotation from its CEO:

“There’s no question we’re going to need to do something. When you are part of a family that comes up with a concept, sometimes you’re the last to admit that it needs to be changed.”

As many of you know (or could probably guess), the 99 Cents Only Store never sells anything for more than 99 cents. The discount chain, though, for the first time in its 26 year history, is considering raising prices beyond that 99 cent threshold. Why? Inflation and rising food prices %%MDASSML%% both linked to rising energy costs.

While you may question the wisdom of binding your business strategy to a fixed product price, you should ask yourself two questions. First, what is the impact of energy prices on my company’s ability to implement strategic objectives? And, second, what can we do about it?

The answer to the first question depends on many factors (location, supply chain and product mix to name a few) but I can give you a hint on answering the second one. Invest in energy efficiency. Using less energy per unit of output insulates your operation from the vagaries of the energy markets.

The effective management of energy inputs places your company in a stronger competitive position. Maybe you heard about Southwest Airlines and its successful hedging strategy for rising oil prices? According to the New York Times, during the first nine months of 2007, Southwest spent $42 million on financial instruments to reduce their exposure to rising fuel costs. Maybe your company has the resources and the exposure to pursue a similar strategy. If not, may I again suggest investments in energy efficiency?

Many electric utilities, recognizing the strategic value of energy management to their customers, now offer interval energy data, a more comprehensive tracking of energy consumption that records energy use at regular daily intervals, sometimes as often as every fifteen minutes. These data allow for the establishment of baseline performance metrics and an accurate means to measure the effect of energy efficiency efforts. Analysis of detailed energy consumption patterns often reveals no-cost or low-cost opportunities to reduce energy use that can’t be found on your monthly bill.

In addition to enhanced data feeds, a growing number of energy utilities, states and public entities throughout the United States and Canada provide assistance to corporations interested in effective energy management strategies. Wisconsin’s Focus on Energy program, for example, offers Practical Energy Management (PEM), a template for establishing and implementing an energy management program within an organization. PEM provides, among other tools, spreadsheets for estimating energy cost savings and guidance on mustering management support for investment in energy saving opportunities. Since 2003, Focus on Energy has worked with more than 400 organizations through educational seminars on implementing PEM. A survey of seminar participants indicated that 30% had completed one or more energy saving projects.

Other examples of progressive support for energy management crop up across North America. The New York State Energy Research and Development Authority (NYSERDA), through its FlexTech and Technical Assistance programs, cost-shares the expense of employing energy consultants to provide technical assistance services, including development of long term capital budget strategies for the upgrade or replacement of energy-consuming equipment. Puget Sound Energy assists customers in the hiring and training of a dedicated resource conservation manager to evaluate facility energy use and reduce the use and subsequent costs of electricity, natural gas, water, sewage and solid waste.

When you ask people who work in energy efficiency the key to a successfully implemented project at a customer site, more often than not they will tell you that a person or small group of people internal to that customer made the difference. Many projects with favorable economics and short payback periods have languished for lack of a champion with the foresight to support energy saving initiatives and management resources to adequately respond to the opportunity. The organizations mentioned above, along with many others, help customers recognize the strategic %%MDASSML%% not to mention environmental %%MDASSML%% benefits of energy management. I encourage you to evaluate how energy impacts your business and to champion change that improves your organization’s ability to pursue strategic objectives in a world where uncertainty rules the energy markets. Contact your energy utility for information on interval data and other resources they may offer to help you evaluate and manage your energy consumption.





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