Making the business case for energy management

3rd August 2016


Related Topics

Related tags

  • Mitigation ,
  • Generation ,
  • Renewable

Author

Sarah Smith

How climate and energy professionals can get buy-in for their programmes.

Eager to understand and reduce their company’s energy use and associated taxes as well as achieve standards such as ISO50001, environmental managers are increasingly looking to implement a comprehensive energy management programme. However, as with any new programme, buy-in from the senior leadership team is essential. So how can HSCE professionals make the business case for energy management? Here are three approaches:

Tie in company goals

When it comes to energy management, there are a number of business drivers as we identified in our recent energy strategy whitepaper. These include cost reduction, environmental compliance, supply chain pressures and energy security. Identifying which of these motivations most effectively address your company’s current goals will help you make the case to your business leaders.

For example, if your company wants to do business with another business that requires suppliers to adhere to certain environmental credentials, such as Marks and Spencer, then demonstrating you understand your energy use and have a strategy in place to make reductions is vital to procurement success.

Push back on the return on investment (ROI)

Speak the language of management by explaining the payback for any expenditures to show you understand and respect the business’ bottom line.

Often environmental upgrades are refused because of the initial cost they represent. However, when all benefits are included in the return on investment estimation, a rosier (or greener) picture is painted. For example, the benefit of replacing lighting with a more energy-efficient option (such as LEDs) isn’t just the reduced energy bill, but also the reduced maintenance time (and health and safety hazards) and costs associated with regularly replacing burned out lighting. Improved light quality could also provide payback on other important issues, such as employee wellbeing, safety and productivity.

For example, I recently worked with an injection moulding manufacturer who was able to successfully apply for an EU grant that pays for 45% of their new energy-efficient moulding machine and low-pressure vacuum dryer. The new equipment is predicted to reduce the company’s energy bills by around 35% a year simply because the dryer is 50% more energy efficient than its predecessor and only needs to be switched on for 30% of the time. Further savings came from replacing two older machines with one energy efficient machine, and reduced maintenance costs and downtime.

I helped the company select the proper upgrades, demonstrate the predicted payback (three years with grant support) and assemble the application and associated materials.

Sometimes selling an environmental solution up the ladder means re-examining outdated policies that require a simple two-year payback period to ensure valuable solutions aren’t dismissed offhand. Generally, environmental upgrades have a payback period of two to five years, so a more future-focused approach is sometimes needed.

Enlist independent advice and advocacy

Ensuring the accuracy of an ROI is a common challenge for environmental managers. In addition, convincing management that your recommendations are best practice and realistic can be a stumbling block. Bringing in an independent adviser to partner on implementing an energy management programme from proposal to project installations can be invaluable to ensure success.

Whatever partner is chosen should also be willing to help you present the recommended solution and progress reports to senior management in order to field questions and challenges.

Despite the effort needed to ‘sell’ energy management to your leadership team, it is a worthwhile endeavour. For example, I worked with a manufacturer on an energy management programme where one of the recommendations was to install a sensor on the top of their roller top bay door so that when the door was open, the heating in that area of the facility was switched off automatically. This was a simple solution that cost about £500, but the payback was under a month.

The bottom line is that you should not let senior management dictate the terms of return on investment. Go into any meeting armed with the best independent analysis of how your proposed strategies will have important and unexpected benefits.

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