The major disruption of the global COVID-19 pandemic means it’s critical for businesses to control and reduce costs. Energy is often a significant overhead, so it’s a good place to focus. Your CFO is almost certainly scrutinising your energy costs and asking you to make efficiencies. Is there more to it than simply squeezing your energy provider harder and harder?
But your energy strategy cannot solely focus on cost. Organisations are also under pressure to reduce their carbon emissions, and your energy strategy must help you progress towards net zero. In fact, 89% of business leaders agree that having a low carbon footprint will be essential to their brand by 20251.
Businesses need to find the ideal balance between their financial and environmental responsibilities. Organisations that get this right are truly sustainable businesses – and they’re typically more profitable and better prepared for long term success than their less sustainable competitors. Our research found that 35% of sustainable businesses expect to achieve more than 10% annual revenue growth over the next five years. Just a quarter of less sustainable businesses feel confident about growing at this pace1.
The most successful sustainable business leaders are the ones that show how their energy strategy can support both the financial and environmental goals of the organisation. This elevates energy from an operational cost to a strategic asset.
To achieve this, there are four key areas that you need to address:
But what does that look like in practice?
Data is the starting point for becoming a sustainable business leader and ensuring your energy strategy helps your business meet its commercial and environmental objectives. Without knowing how energy is being used today, it would be impossible to make improvements that support the organisation’s wider goals.
Smart energy solutions, such as wireless sensors and analytics, give your company the opportunity to improve energy efficiency. Our research found that 76% of sustainable businesses are utilising data collected from sensors and smart devices to improve decision making, compared to 56% of other businesses1.
By using these technologies, you gain end-to-end visibility of energy use — and the opportunity to identify potential efficiencies and savings. This will provide you with the insights you need to improve financial performance, whilst also working towards achieving your decarbonisation goals.
Once you have a clear understanding of how your business uses energy, the next step is to look for ways to reduce energy wastage. One of the first steps that many businesses take is to implement energy efficiency improvements to buildings, such as HVAC upgrades or LED lighting. These upgrades can make your building a more comfortable and productive place for your staff to work, while also reducing energy costs and carbon emissions.
Sustainable business leaders will take matters further however, adopting technologies that generate power too. Businesses with high thermal loads (e.g. hot water, steam, chilled water or hot air) and high electricity costs should consider distributed energy solutions such as the use of CHP. Others may find that on-site renewables like solar PV are a better fit for their site. Where renewables are identified as a potential additional energy solution, your business could investigate partnering with other organisations. This will allow you to share the cost of purchase and deployment, and to generate greater returns from selling excess energy back to the grid.
Power outages could have a significant impact on financial performance and customer loyalty. Energy security and resilience is viewed as a top four business risk. This means that your energy strategy must include ways to maintain energy supplies in the event of a serious interruption.
Sustainable business leaders approach this challenge in two ways. First, they balance their energy sources with additional onsite generation capabilities – such as solar PV. This can supplement grid supplies and provide a clean, renewable energy supply.
Second, they implement energy storage solutions to maintain energy supply, such as lithium ion battery technology. Not only can these provide consistent power in the event of a grid outage, but they can also assist when onsite generation assets can’t quite meet demand, reduce costs when grid prices are higher and reduce demand charges. Nonetheless, while sustainable business leaders know that integrating multiple energy technologies can unlock added value, it’s not without its challenges.
While an innovative approach to energy is important, it is not without risk. To stay ahead, it’s important to understand and manage these risks. After all, any interruptions to your supply chain, processes or systems can be extremely costly.
The most important differentiator between the most and least energy mature businesses is the way their energy strategy is framed. They have a comprehensive energy strategy that includes specific targets, actions and budgets. This helps them to build resilience into their energy strategy, while ensuring every improvement or efficiency will help the business achieve its wider objectives.
What’s more, sustainable business leaders can clearly communicate the link between energy, company values, brand image and end customers – and this helps to make their energy strategy relevant to the people in their business. An energy strategy cannot be owned and delivered by one individual. Answers, budgets and deliverables will often sit across multiple business areas, so that’s where ownership will need to sit too. Engaging the right people early in the strategy development process can help to reduce the chance of unforeseen issues.
Those four key steps that will enable you to become a sustainable business leader and create a strategy that delivers against your business goals are:
Businesses that follow this four step methodology typically end up outperforming competitors. Learn more about how executive teams can turn ambitious sustainability targets into action.
1. Centrica Business Solutions research - statistics based on a ten country survey of more than 1,500 energy decision-makers in large organisations.
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