Tuesday, May 20, 2008

Green Business: Who's Agenda, and Why?

We read daily about the many organizations that rush to establish their green credentials-- that is, to prove the minimal environmental impact of their products and operations. Some of those many companies actually understand that energy use and waste are key components of green performance. Accordingly, these companies are proactively trying to manage their energy use to save money, demonstrate their "greenness," or both.

As practical matter, green is as green does.

For better or worse, "green" is an amorphous, maleable concept that can be readily adapted to a number of very different agendas. There is an altruistic dimension, to be sure, but there are also extremely practical consequences-- such as improved cost performance and risk abatement as the result of waste reduction. The corporate adoption of green principles does not happen unless it contributes to someone's agenda. But here's where it gets interesting... corporations don't have agendas, people do. The "green" vision pursued by any corporation is highly personalized per an individual champion's interpretation of what "green" is and what it provides to some larger agenda. The agenda of a VP of marketing can be very different from that of an operations, finance, or investor relations leader-- and therefore the "look and feel" of a green initiative can be equally varied.

Corporations are usually careful in spin-doctoring their outward-facing communications. Any survey of corporate "green" aspirations must weed answers that merely "greenwash" from those that reveal the true agendas that are driving efforts.


Thursday, May 15, 2008

Another Snapshot of Energy Management Potential

Xcel Energy of Minnesota hosted an Industrial Energy Efficiency Forum in St. Paul on May 6. About 100 attendees were there to find out what Xcel could help them do to reduce energy expenses. Of all the attendees, about 41% work with organizations that spend over $1,000,000 per year on energy. Thanks to Chandan Rao of Graphet Inc., we got the results of a live survey that measured the attendees’ interest and preparedness for actually managing their energy use. Here are some facts from the survey and my interpretation of their meaning:

• Just under half (48%) claim to have executive leadership for energy issues
• 75% have at least one person responsible for energy at each facility
• Only 37% have a team of energy decision-makers
• Only 22% of facilities hold end-users accountable for their energy use
This suggests that energy is perceived more often as tactical as opposed to strategic; in other words, it’s more likely to be championed at middle management than by upper management levels. Note also that beyond an assigned energy champion, other staff tend to have little accountability for their energy-related decisions.

• 70% claim to have an energy plan at least in progress for this year
• 45% have energy conservations goals defined
• 42% review energy performance on a monthly basis, 11% do so annually
• Only 24% have defined energy performance metrics
• Only 11% claim to have written guidelines for addressing variances when energy performance strays from targets
While most organizations claim an intention to improve their energy performance, less than half have the means to measure and monitor their progress. Even fewer have a protocol for reacting to lapses in expected energy performance. Translation: few facilities are prepared to “walk the talk.”

• 58% have established financial return on investment criteria for energy
• Energy investments were evaluated on ROI (39%), payback (26%), life-cycle costs (17%), first cost (13%), and the rest to other criteria.
• Only 30% apply energy performance criteria in their selection of new capital assets
• 38% have a strategic energy plan that coordinates with business objectives.

A sizeable proportion of organizations fail to perceive energy as a form of wealth that is worthy of analysis like any other cash flow. Although people know they will spend money on energy, they tend to ignore the role of energy costs when investing in plant and equipment. Most fail to establish a clear linkage between energy and business performance.


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