7 reasons why energy conservation is a smart business strategy
Energy conservation is often a highly politicised issue along with climate change, the current energy crisis and debate on the future direction of energy policy in Australia. Too much attention has been given to the supply side factors of the energy market that impact reliability, affordability and carbon emissions intensity – demand-side factors such as energy conservation through energy conservation measures (ECMs) are nowhere nearly covered enough in the national debate. Consequently, businesses have largely been left high and dry to face rising energy prices and utility costs alone; they’re also on the most part, painfully unaware of the significant upsides in investing in energy conservation projects.
This post will outline the reasons why energy conservation should be a strategic priority and form part of an overall business strategy, particularly large businesses with material exposure to high energy prices. But before we discuss the reasons why energy conservation is a smart business strategy, we first need to understand the several business challenges when it comes to energy and the underlying risks associated with inaction or the “business as usual” approach.
Business challenges regarding sustainability and energy conservation
- Increasingly rising and sustained high energy prices and utility bills (electricity and gas)
- Consistent demand to meet shareholders’ expectations regarding corporate performance, profitability, dividends and risk management
- Expectations from various stakeholders to commit to and report on sustainability practices
- Customer expectations for companies to maintain high levels of social and environmental responsibility
- Attracting and retaining investment from investors that engage in “socially responsible investing” i.e. those investors that only invest in companies with a strong profile in environmental, social and ethical business practices e.g. Australian Ethical Superannuation Fund.
- Political uncertainty regarding energy policy
- Lack of in-house engineering expertise and technical resources dedicated to energy conservation measures and project engineering
Corporate risks associated with not engaging in energy efficiency or energy conservation measures
- Degradation of financial performance increased cost base and lower margins
- Limited sustainability progress and inability to satisfy reporting requirements
- Poor customer perception of the company and/or brand
- Negative media resulting in brand distrust and reduced sales
- Elevated corporate risk profile – detracting current and potential investors
- Susceptible to volatile market conditions and policy inaction
- Risk of reacting to stakeholder demands by recruiting in-house technical resources to address fundamental energy efficiency issues (exasperating point 1)
- The decline in share market value resulting from above due to the increased corporate risk profile
The case for energy efficiency: seven reasons why energy conservation is good for business
- Achieves material reduction in energy consumption, therefore significant cost savings on utility bills
- Provides demonstrable evidence as input for sustainability reporting requirements
- Fosters positive public relations and investor relations regarding your company’s sustainability/energy conservation initiatives
- Elevates corporate profile regarding environmental, social and governance issues through substantial action and investment in energy conservation measures
- Creates value for shareholders through improved financial performance, profitability and higher dividends
- Attracts and retains investments by investors engaging in “Socially Responsible Investing” practices, including large managed funds that only invest in ethically, socially and environmentally responsible companies.
- Sustainability can be a source of competitive advantage or point of differentiation for your business which in turn can help to improve the value of your brand/products/services.
See how energy conservation projects can increase shareholder value and attract investors
Overall, the company is seen to be doing the “right thing” from an ethical, social and financial governance perspective. It also sends a strong signal to investors, employees and alliance partners (current and potential) that your company is guided by quality management and strong ethical and socially responsible practices, thereby creating value for a variety of stakeholders.
How to implement energy conservation solutions in your company – a low-risk strategy with guaranteed results
- Engage a Tier-1 Energy Services Company (ESCO) with end-to-end servicing and solution offerings – including energy advisory, energy efficiency and energy management. This is important to streamline costs and vendor management to a single point of contact provider.
- Get investment-grade energy assessments of all your facilities – the comprehensive engineering audit report should include identification of each energy conservation measure and robust financial modelling for investment scenarios including details on estimated project costs, expected savings and guidance on return on investment and payback periods.
- Work with your preferred ESCO to define the scope of works in terms of ECM priority to match capital budget allocation and return on investment criteria.
- Request a fixed-price implementation proposal that includes a savings guarantee.
- The implementation proposal should include all aspects of project design, project management plan and installation schedule; commissioning, measurement and verification plan, and actual savings reports.
- The ESCO should provide you post-implementation services and support including embedded energy analytics, continuous commissioning and fine-tuning by a dedicated team of engineers.
- Provision of regular energy management and sustainability reports
- Access to an asset maintenance and renewal program
Need help from a trusted Energy Services Company (established since 2002) specialising in end-to-end energy conservation solutions including guaranteed energy savings projects? Look no further than 3E Group! Call us or submit a request to book your FREE 30-minute phone consultation today!
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