It’s very interesting to watch how the decision to save energy is made in various business settings. Getting someone to make that decision, plus the challenges of implementation, are two key factors why 30% of the energy used in businesses is typically wasted!
This past week the Energy Alliance Group’s (EAG) CEO met with three separate companies and witnessed three very different decision making processes involving saving energy.
The first decision required flying the owner of the company in from Europe along with a translator. The owner wanted to review the financial benefits of saving energy for his very large company. His chief concern was the potential for any short term negative effect on the company’s cash flow. The numbers were so compelling that through his interpreter he announced the decision to move forward and explore all the ways money could be saved by reducing energy waste and incorporating advanced energy efficient technologies.
The second “decision” was simply a call from the owner of a chain of automobile dealerships who learned of EAGs use of Property Assessed Clean Energy (PACE Video) at another auto dealership’s efficiency project. The owner requested EAG begin outlining possible energy efficient upgrades on every one of his dealerships located in Michigan. The project will include geothermal, solar, compressed air, LED lighting and high speed doors. Exciting and extremely newsworthy for this environmentally conscious dealership!
The third “decision” was from a company that is about 50 years old and way overdue for energy efficiency upgrades. The company is owned by a family but managed by only one of the family members. The manager asked our CEO to get the rest of the family on board because they know nothing about the ins and outs of saving energy. The non-managing family members are wary of the company taking on debt and less worried about wasting money on energy. Scott Ringlein, EAG’s CEO, presented the unique PACE solution that would not burden the family with debt but would tie financing to the building itself. Repayment would be done through the county tax system and not show up on the company’s balance sheet – an important factor if the family decides to sell the company in the near future!
“If energy efficiency is not a organization wide philosophy, wasted energy is the natural outcome”
In many businesses the decision to save energy is an expectation of the maintenance department, a business manager or the sustainability specialist. The executive team is often more concerned with improving the bottom line through increased production or sales. If an investment in energy savings does not show a short term return, frequently no action is taken on energy saving initiatives.
Saving energy is typically marginal if the direction is from the bottom up in a company. Unless it is an organization-wide philosophy energy waste is often statistically the natural outcome. Lights and equipment get left on, HVAC systems become outdated and maintenance is not carefully scheduled.
When saving energy begins in the executive suite and is transmitted throughout an organization, energy savings result. When saving energy is a company-wide philosophy every person that shuts off an unused light, lowers the thermostat, or reduces waste is making the decision to be more energy efficient!
“Sometime ago I averaged the net margin of the ten largest Fortune companies. It was 6%. So if you’re trying to impact cash flow, it takes $17 of incremental sales to drive $1 to the bottom line and $1 of expense reduction to drive $1 do the bottom line. Seems pretty obvious.” Jim Smith, CEO, Enterprise Management Group
When the money from energy savings are used to fund energy efficiency projects the result is an increase in the bottom line. For those non-accountants among us that simply means a company becomes more profitable! As CEO Jim Smith noted above it’s far easier to add a dollar of profit by reducing expenses than adding a dollar from increased sales. When you can reduce expense by cutting out waste – there is no down side and it results in a significant return on investment.
To summarize, the decision to become an energy efficient business cannot be the responsibility of just one department or a specific manager in an organization. It must be a philosophy that permeates an organization in order to get the maximum results. Reducing wasted energy, at all levels of a business operation, can immediately improve a company’s profitability and improve cash flow.
Looking to upgrade your facilities but concerned about the expense, lack of capital and a lengthy return-on-investment?