How can companies use an energy strategy to unlock value for their organization? And why do so many fail to get started at all?
In their article “Energy Strategy for the C-Suite”, Andrew Winston, George Favoloro and Tim Healy look at how companies can create competitive advantage by influencing their cost structure through the choices they make about how they buy and use their energy.
Companies in sectors such as ICT, agriculture and the food industry are developing energy strategies and setting targets to cut energy and carbon in their supply chains.
Most of them, however, are doing this without an explicit framework or playbook.
The authors suggest that a systematic approach is needed.
The biggest obstacle to progress is not having a clear mandate in place. The CEO needs to lead on this.
Commitment from the top with the right resources allocated to a team is key to developing a strategy and guiding execution.
Once a team is in place, it needs to understand how the company uses energy, develop an energy and emissions reduction plan and set targets that are based on climate change science.
The team then needs to implement the plan, integrating it into operations and creating incentives for people in the company to work on energy reduction.
In particular, the people who buy energy need to work with the people who use energy to reduce risk and cost.
An important step is to record, monitor and analyse energy data. This needs to happen not just in the company’s own facilities also along the supply chain to see how it can work with suppliers and customers.
Companies need to understand their options when it comes to clean energy technology.
This includes working out which technology mix, whether generation or energy efficiency measures, will provide a least cost solution to the company, taking all costs into account.
In particular, companies need to understand how going green can increase the amount of business they do with other companies that have also committed to greening their supply chain.
A shift to local energy generation and consumption means that companies will need to engage much more with their local stakeholders and communities.
In addition, analysts are increasingly looking at how good and effective companies’ sustainability strategies are when they recommend them to investors.
Engaging employees is crucial to executing an energy strategy.
Inviting them to participate in searching for energy efficiency opportunities and communicating with them about how the company is going to meet its climate change commitments is going to cut costs and increase employee commitment to the organisation.
In summary, creating and implementing an energy strategy can unlock value for an organisation – but you have to do it the right way.