As energy prices continue to swing and the prospects for carbon constraints grow, it’s no wonder more and more companies are focusing their efforts on energy efficiency. But while most firms recognize the benefits of energy efficiency, many lack the information and resources required to take their efficiency programs to the next level.
To help provide these resources, we have launched a web portal with tools and information to help companies develop stronger energy efficiency strategies. The key feature of the portal is a searchable database of the energy efficiency activities undertaken by the 45 companies in the Center’s Business Environmental Leadership Council (BELC).
Also included on the web portal are results of our recent survey distributed to 95 major corporations that offer key insights for those exploring best practices in corporate energy efficiency. These include:
- Firms recognize the energy paradigm is changing rapidly.
- Companies are responding by establishing corporate-wide energy efficiency targets.
- Senior management support is critical in the development and implementation of energy efficiency programs.
- The most common challenge companies face in pursuing efficiency gains are resource constraints, especially limits on capital.
- Employee engagement is an effective, but possibly underutilized strategy for improving energy efficiency.
- Energy efficiency can be a gateway to wider business innovation.
The portal and survey are part of a larger research project that seeks to document and communicate best practices in corporate energy efficiency strategies across the following categories: internal operations, the supply chain, products and services, and cross-cutting issues. The next step of the project is the release of a comprehensive report summarizing our findings at a major conference in Chicago, April 6-7, 2010. The project is funded by a three-year, $1.4 million grant from Toyota.
While Congress continues to debate health care, the business community this week continued to lead on climate change. On Tuesday, we joined 6 other NGOs and 22 companies to launch a new full-page ad supporting comprehensive clean energy and climate change legislation. Fourteen members of our Business Environmental Leadership Council (BELC) signed on to the ad, which ran in The Washington Post, The NY Times and USA Today. For several of these companies, this was the first time they have stood up so publicly to support capping carbon. Other ads from similar coalitions are running in papers all across the country.
I also want to give props to Honeywell for joining the U.S. Climate Action Partnership (USCAP). Honeywell is a $28 billion manufacturer of all types of goods from aerospace to home heating and cooling. By joining USCAP, they further demonstrate the diversity of industries that are committed to tackling climate change through the Blueprint for Legislative Action.
By Andre de Fontaine
September 29, 2009
This article first appeared in GreenBiz.com.
With unprecedented energy price volatility and looming climate regulations, businesses face a new and complex energy paradigm that few are fully prepared to manage. While individual approaches will vary by sector and company, new research from the Pew Center on Global Climate Change shows a growing number of companies recognize that energy efficiency must form the backbone of any corporate strategy to address the new energy frontier.
Properly executed, a robust corporate energy efficiency strategy can reduce costs, manage risks, ease environmental compliance, boost employee morale, and open doors to greater innovation and productivity. Most of these benefits have been well understood for some time, yet energy efficiency performance continues to be highly uneven throughout the corporate community. In short, some companies clearly outclass others when it comes to energy management.
Over the last 14 months, the Pew Center has closely studied leading companies to try to identify key attributes that separate the most efficient companies from the rest of the pack. The research effort aims to document best practices in internal operations, the supply chain, products and services, and cross-cutting issues that can be emulated by other companies seeking to develop new and stronger efficiency strategies. A final report will be published in March 2010, but this week Pew launched a web portal that highlights preliminary findings, and provides links to a host of additional corporate energy efficiency resources. The portal also features a comprehensive, searchable database of energy efficiency measures undertaken by the companies in the Pew Center’s Business Environmental Leadership Council.
This is not the first, nor will it be the last, project calling for a greater emphasis on energy efficiency. Earlier this year, McKinsey & Co. released a detailed analysis making the case that an aggressive national energy efficiency campaign could shave 23 percent off of 2020’s projected energy demand, with the added benefit of creating hundreds of billions of dollars of net savings. Groups such as the American Council for an Energy Efficiency Economy have for many years illustrated the wide societal benefits of improving energy efficiency. And the U.S. Environmental Protection Agency’s Energy Star program has developed a set of energy management guidelines that are particularly useful for firms seeking to develop energy efficiency strategies.
The Pew Center study builds on this and other work, but takes a different approach by drawing directly from company experiences in an attempt to tell the story -- in as much detail as possible -- of how leading companies achieved significant gains in energy efficiency. To do this, Pew distributed a 65-question survey to 95 major corporations, held four workshops where over two dozen company representatives and efficiency experts shared insights, developed six, in-depth case studies of particularly unique and effective company programs, and assembled an 11-member expert advisory committee to help guide the process. (Workshop presentations, survey results, and advisory committee member names and bios are available on Pew’s efficiency web portal). The Pew Center enlisted William R. Prindle, a Vice President at ICF International, to serve as the principal investigator and lead author of the report. The project is being funded by a three-year, $1.4 million grant from Toyota.
While analysis of the information generated by these various streams continues, some preliminary insights, drawn primarily from the survey, include:
Firms recognize the energy paradigm is changing rapidly. Over 50 percent of the survey respondents expect energy prices will exceed the equivalent of $100 per barrel of oil by 2014. Additionally, almost all respondents project that Congress will soon pass national climate legislation that mandates carbon reductions; 57 percent believe such legislation will pass before 2010.
Companies are responding by establishing corporate-wide energy efficiency targets. Voluntary goals have proliferated over the last decade, and while different companies use different metrics and timelines, the average target among our sample was an annual 2.2 percent improvement in energy intensity. Primary motivations for pursuing efficiency strategies were somewhat split between environmental concerns and cost control reasons, although many companies cited both drivers.
Senior management support is critical in the development and implementation of energy efficiency programs. The CEO and senior management team were most frequently identified as the key champions of corporate efficiency programs, ranking higher than facility managers, and environmental health and safety staff.
The most common challenge companies face in pursuing efficiency gains are resource constraints, especially limits on capital. Companies have overcome this hurdle by focusing on low-cost operational improvements, and in some cases, giving privileged status to energy efficiency investments. Examples include setting aside special pools of capital, relaxing payback requirements for projects that accomplish sustainability goals, and factoring in some of the less tangible co-benefits of energy efficiency investments, such as enhanced corporate reputation, improved employee morale, and higher worker productivity.
Employee engagement is an effective, but possibly underutilized strategy for improving energy efficiency. Energy is pervasive within a corporation; almost every employee has the ability to make an impact to reduce its use. Recognizing this, many companies have launched programs to educate and engage employees in energy saving programs. Some have established innovative programs that reward employees for energy savings, and others have made progress toward efficiency goals a standard component of their employee review process. Still, while our survey respondents noted that these programs often yield surprisingly positive responses, they also reported that employee engagement receives the least financial and staff resources relative to other efficiency program elements.
Energy efficiency can be a gateway to wider business innovation. Ambitious energy efficiency goals can drive change within organizations by challenging employees to reexamine existing processes and systems. This reexamination can lead to business improvements that, while unrelated to energy efficiency, would have never materialized were it not for the initial focus on energy.
Case Studies of Efficient, and Successful, Green Leaders
The broad trends identified through the survey will be augmented in the final report by more detailed descriptions of six unique company programs, three of which examine integrated approaches to achieving superior corporation-wide energy performance and another three that look at specific initiatives targeting products and services, the supply chain, and internal operations.
Built through a combination of site visits, phone interviews, and email data requests, these in-depth case studies will offer fuller explanations of how the six companies developed and implemented outstanding energy efficiency strategies. The case study subjects are:
The Dow Chemical Company (integrated approaches): One of the world’s leading chemical manufacturers, Dow uses approximately the same amount of energy on an annual basis as Australia. Having felt deeply the effects of rising energy prices, Dow views energy efficiency as an important risk management strategy.
IBM (integrated approaches): A high technology company, IBM developed a robust energy efficiency strategy that has allowed it to exceed its 3.5 percent annual energy conservation target. IBM has also been able to parlay its internal efficiency expertise into a profitable client offering, including in the area of data center efficiency.
United Technologies Corporation (integrated approaches): UTC is a highly decentralized company that uses a sophisticated data management system to keep its disparate business units pulling in the same direction on energy efficiency. UTC’s efficiency strategy stems from its former CEO’s commitment to root out waste in all forms throughout the company.
Best Buy (products and services): A consumer facing company, Best Buy works hard with its sales staff and external partners to promote energy-efficient products. Best Buy estimates that in 2007 its sales of EPA Energy Star labeled products saved its customers over $100 million in electric utility bills.
PepsiCo (supply chain): PepsiCo has made great strides in helping its suppliers become more energy efficient. It has conducted comprehensive analyses of its products’ full life cycle carbon footprint, and shares energy savings resources, tools and goals with its suppliers. PepsiCo is also at the leading edge of a growing number of companies that are beginning to link energy efficiency and water efficiency strategies.
Toyota (internal operations): Toyota’s commitment to continuous improvement has allowed it to become one of the most energy efficient car companies in the world. Its “treasure hunt” process, in which teams of employees and sometimes senior executives comb through a plant searching for energy efficiency opportunities has been emulated by dozens of leading manufacturers.
Through this research, we have learned that most companies understand that the energy paradigm is changing. Price volatility and climate change legislation will likely make the business environment more challenging for almost all companies. Energy efficiency should be the foundation of any corporate strategy designed to navigate this new business reality. By highlighting the successes, challenges, and lessons learned from companies that have developed effective corporate energy efficiency strategies, we hope to provide insights to other companies seeking to travel further down this road. Please continue to check our website at www.c2es.org/energy-efficiency for updates and new information about this project.
Andre de Fontaine is a Markets and Business Strategy Fellow with the Pew Center on Global Climate Change.
Over the past two weeks, three utilities – PG&E, PNM Resources, and Exelon – made public decisions not to renew their membership in the U.S. Chamber of Commerce. These three companies are members of both our Business Environmental Leadership Council (BELC), as well as the U.S. Climate Action Partnership (USCAP), of which we are a founding member. We have been asked a lot recently to comment on the significance of these moves, and whether other companies will follow suit.
The decision by these companies to exit the chamber is another clear indication that the political dynamic surrounding climate change legislation has changed dramatically in the last several years. No longer can businesses be counted on to march in lockstep opposition to mandatory greenhouse gas legislation. In fact, today the companies involved in USCAP and other progressive business coalitions have emerged as some of the biggest and most effective supporters of comprehensive climate change legislation. Business support was critical in moving climate change to the top of the Congressional agenda, and will likely be the deciding factor in steering legislation to enactment.
While we do not comment on the internal decision-making of the companies with which we partner, in the case of PG&E, PNM Resources, and Exelon, the time had obviously come when the differences between their strong commitment to Congressional action on climate change was irreconcilably at odds with that of the Chamber. In his letter to Tom Donahue, CEO of the Chamber, PG&E CEO Peter Darbee wrote:
“A case in point is the Chamber’s recent much-publicized call to put climate change science ‘on trial.’ We find it dismaying that the Chamber neglects the indisputable fact that a decisive majority of experts have said the data on global warming are compelling and point to a threat that cannot be ignored … To the extent … the Chamber earnestly believes these questions should be heard in a courtroom, let’s recall that the U.S. Supreme Court opined on the threat of climate in a 2007 decision. ‘The harms associated with climate change are serious and well recognized,’ the Court wrote.”
-On the occasion of EPA’s announcement that it finalized the rule for a federal greenhouse gas registry.-
Statement of Eileen Claussen
President, Pew Center on Global Climate Change
September 22, 2009
Today’s action by EPA provides a major building block to any future program to limit greenhouse gas emissions. Accurate data are critical to designing cost-effective programs that respond to the threat of climate change. The key lesson from the European greenhouse gas emissions trading program is that we must get the data right. This greenhouse gas reporting requirement, along with the recently proposed rule to limit vehicle emissions, are two much needed steps as we await further action by the Senate on climate change.
Pew Center Contact: Tom Steinfeldt, 703-516-4146
By Truman Semans and Andre de Fontaine
This case study on DuPont and BP’s partnership on advanced biofuels aims to provide insights into how industry alliances can deliver innovation and new technologies in an accelerated fashion.
In June of 2006, DuPont and BP announced a partnership to develop and market advanced biofuels designed to overcome many of the environmental and economic limitations associated with biofuels currently on the market. The first product scheduled for commercialization is biobutanol, which can be made from the same plant materials as ethanol, the currently dominant biofuel. Biobutanol, however, has several advantages over ethanol, including potentially lower lifecycle greenhouse gas (GHG) emissions, higher energy content, and better supply and distribution dynamics. These advantages stem in part from the novel method DuPont developed to convert plant sugars and starches into a combustible liquid, using an advanced biocatalyst instead of traditional yeast.
Focusing particularly on DuPont’s perspective, this paper describes important elements of the corporate strategy process that resulted in this effort to capture a new business opportunity for climate-friendly technology. It is part of the Pew Center’s ongoing research into best practices for corporate strategies that address climate change. The paper is not an endorsement of biobutanol or any specific fuel DuPont and BP may develop in the future. Rather, the goal of this paper is to highlight the strategy and process DuPont undertook in partnering with BP to develop the fuel, in hopes of identifying lessons that other firms can apply in advancing climate-related technologies as changes in public policy dramatically transform markets worldwide. The Pew Center also aims to help policymakers understand how to shape policies and programs in a way that unleashes the innovation and investment capabilities of the private sector in addressing climate change.
Welcome to our new blog. This blog presents ideas and insights from the Center and its experts on topics critical to the climate conversation. These topics include domestic and international policy, climate science, low-carbon technology, economics, corporate strategies to address climate change, and communicating these issues to policymakers and the public. Our bloggers include policy analysts, scientists, economists, and communication specialists – all of whom are working to advance solutions to our climate and energy challenge.
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Tom Steinfeldt is Communications Manager