Getting Commitment towards Saving Energy
Published on Friday, 3 January 2014 13:33:28 Written by Marc
At my past job, one of the responsibilities that were added to me a few years ago was finding ways to reduce costs. I was already in charge of procurement and real estate (among other things), but I was asked by the corporation to find savings everywhere I could. When I started to look at our expenses in detail, I found that we were paying many millions of dollars in energy each year (mostly for electricity and natural gas).
I also noticed that although energy represented a substantial amount for the company, there was no energy management program in place. Actually, nobody seemed to care or talk about energy savings. I decided to talk to some of the general managers of some of the largest manufacturing business units we had. They were the heavy users of energy, and I was shocked by their answers. I was hoping to get an easy commitment towards saving energy from them, but what I got was quite different. For the most part, they were over worked (I was not surprised at this) and they did not consider energy costs to be very high on their profit and loss report. Some joked that it was line 99 on their profit and loss report, a humorous way to tell me that they did not consider energy to be much of an issue. When I told them that if they started to commit to save some energy, that energy saving would go directly to their bottom line and therefore, a dollar in energy saved could represent about ten dollars in sales. They mostly replied that they would not know where to start and that energy saving projects could be risky. So much, I thought, for getting the commitment on saving energy that I was hoping for initially. After talking to most of the general managers, I quickly got a feeling of the multiple reasons why no energy saving program had ever been put in place, and why there was virtually no commitment towards trying to implement some energy saving measures. Lack of knowledge ranked high up in the list of reasons, and it was the single main reason because it drove all other reasons. Their lack of knowledge meant that they did not know how to start saving energy. In addition, they mostly viewed energy saving projects as risky. “What happens if we spend money for a project and the savings do not come?” was a popular question. They lacked knowledge and they did not reflect on the fact that while energy cost may not have ranked at the top of their list of the main expenses in a business unit, energy savings most often do go directly to the bottom line and hence, can influence a company more dollar for dollar than many other things. For example, if you make ten percent of profit on sales, you need ten dollars of sales to make one dollar of profit. However, with energy savings, if you save only one dollar, then generally you have one dollar of extra profit since energy savings go right to the bottom line. Of course, there are some exceptions, but in most cases, energy savings is a net plus in your pockets. Armed with this information and also with the fact that I had been doing numerous energy saving projects since the early 1990’s, I decided to create an energy management program in the company and provide knowledge to employees in order to get the ball rolling and start to create that commitment towards saving energy that the company needed so bad. My goal was to save a minimum of 15% of our total cost of energy within three years and it was a reasonable target, considering that we were highly decentralized. However, one of the main challenges was going to reach out to all our business units spread out across North America. The program started and we began to educate people on the benefits of energy savings, sources of energy savings, and method to track their energy saving progress. It was more of an awareness program initially, but I was hoping also for a chance to get funding in order to complete some interesting energy saving ideas we had found during some of our energy audits. However, even after months of significant progress, I felt that the company’s upper management was not fully convinced on spending substantial amounts of money to do major energy retrofits that could save energy. The lack of commitment towards energy savings made it difficult to get proper funds for larger energy saving projects, even though we knew they had great payback potential. Something made some of our executives freeze when it came time to seek money for the larger projects. This was early 2008. By the middle of 2008 and we were starting to get a feeling of what was happening in the economy and also knew that additional savings would be needed in times of economic turmoil. Then I got a chance to attend the Olympics in Beijing with one of the company’s top executive. I knew that I would have one week, out of the office environment to convince him about investing in energy projects, especially when times are tough. I managed to explain to him that people in our business units constantly seek capital for all kinds of new equipment and justify them by either promising the company an increase in sales (often coming from a new potential client) or by an increase in production efficiency (often from staff reduction). I asked him, of all the recent equipment we had purchased for new potential clients, how many new clients did we actually get and retain? We both knew what the answer to that question was, as most projects for which we had purchased new equipment did not see the increase in sales we had hoped. I then asked, of all the new equipment we purchased in order to reduce our costs by way of staff reduction, how many staff did we actually let go? He then remembered a few recent events where some business units had requested new equipment based on staff reduction but had proceeded to no layoffs. I concluded my argument by explaining to him that energy saving projects does not require additional sales or employee layoffs. They are relatively easy to calculate (with the proper tools), and will deliver the estimated savings with minimum variation or risk. Overall, energy saving projects is probably among the best investment from a conservative risk/reward perspective that the company can make. When we came back from the Olympics, and not only have I won a new believer, I found myself having by my side someone who would greatly help me push the company to dedicate funds towards energy saving projects. In the months that followed the company instituted a policy for dedicating a minimum percentage of total capital expenditure towards energy saving projects. Overall, it was a great success; the company and its key people only needed a little convincing to get the ball rolling in the right direction. Energy saving projects can not only help a company save energy, since most of the energy saving projects provide recurring savings, they can improve the bottom line of a company for many years.
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