Companies double down on energy productivity
Adapted from State of Green Business 2019, published by GreenBiz in partnership with Trucost, part of S&P Global.
It’s well established that using less energy doesn’t have to come at the expense of economic growth. But why settle for seeking the same results with less power — the hallmark of efficiency programs — when the real jackpot could be increased sales or higher levels of productivity by prioritizing low-carbon energy management?
That question is driving diverse businesses across many industries — ranging from iconic hospitality company Hilton to the massive Indian transportation and industrial conglomerate Mahindra to Japan’s largest telecommunications firm Nippon Telegraph and Telephone (NTT) — to bet bigger on energy productivity. Think of this concept as the science-based evolution of the more familiar energy-efficiency meme that has been part of the sustainable business toolkit for decades.
Yes, reducing power consumption is still the end game, along with the accompanying decrease in GHGs. We need that more than ever, as national governments waffle and flounder in their commitment to limit global temperature increases to the 1.5 degrees Celsius increase recommended by the Paris Agreement.
But growing new products, services and job opportunities also could be part of the payoff. So, energy productivity acolytes are translating power consumption data into a financial metric that’s far more familiar to executives than global temperatures or carbon emissions: It’s something akin to the number of watts per widget for a manufacturer or megawatt-hours per worker for a services or consulting firm, or whatever measure makes the most sense, given a company’s unique business model.
Japanese homebuilder Daiwa House, for example, is using net sales per gigajoule (GJ) of energy as its rubric for managing operations. (For context, 6 GJ is about the amount of power produced by combusting one barrel of crude oil.)
Certainly, incremental efficiency improvements still very much matter at the facility level, but the productivity lens puts a sharper, boardroom-level focus on energy as an input of growth. It helps CEOs and CFOs better understand the business benefits of addressing climate change, and it could help reduce the investments required for decarbonization by helping businesses save on operational costs while cutting GHG emissions by at least $2.8 trillion, according to one analysis by the We Mean Business Coalition.
Or, as one industry executive put it: “Energy productivity is the macro to energy efficiency’s micro.”
Hilton has embedded energy productivity into operational decisions for at least 10 years: Its entire portfolio of 5,400 hotels is triple-certified by the International Organization for Standardization for quality, environmental and energy management. Hilton, Mahindra and NTT are just three organizations moving more actively to disprove the conventional wisdom that cutting energy consumption somehow deters economic growth. Each company officially has committed to the EP100 campaign, a high-profile effort to champion energy productivity. Spearheaded by the Climate Group and the Alliance to Save Energy, the two-year-old EP100 represents companies reducing energy consumption while investing in cleantech innovation. Just three companies were on board at the launch, but participation accelerated last fall alongside the Global Climate Action Summit. By the end of 2018, 35 companies were on board.
For NTT, one of the newest pledgers, the quest for better energy productivity translates into a mission to generate twice the amount of data traffic for every unit of energy consumed by the 2025 timeframe, based on consumption in 2017. The folks behind EP100 figure that if 100 companies can achieve one of the most ambitious energy productivity commitments a company could make today — doubling economic output per every unit of energy consumed — the emissions reductions would be the equivalent of taking 37 million cars off the road for one year.
About half of the companies in the campaign are aiming that high. That includes German chemicals manufacturer Covestro, the first major European company to join; apparel company H&M, designing and opening stores that use 40 percent less energy than today; building controls and energy technology makers Johnson Controls and Schneider Electric (both of which also stand to benefit from the commitments of others); and Dalmia Cement and UltraTech, two of India’s biggest cement companies.
One of the most straightforward ways a company can improve its energy productivity is by investing in a global energy management system that tracks energy savings globally and reports on them at least annually alongside other operational metrics. That’s where South African chemicals maker Sasol and Taiwanese skincare company TRIDL are starting their energy productivity journeys.
The latter already has slashed electricity consumption 60 percent by switching to LED lighting, seen as instrumental for reaching productivity goals, along with occupancy sensors and artificial intelligence software that helps automate building functions based on workplace and weather conditions. Another company on this path is Hilton, developing mobile apps for guests to control temperature and lighting.
In addition, you’ll increasingly hear energy productivity linked with the net zero-carbon buildings movement — specifically with a pledge, managed by the World Green Building Council, for organizations to own, occupy or develop buildings that don’t emit carbon by 2030. Among those working toward that vision are software company Salesforce as well as a slew of real estate and construction concerns such as Integral Group; Australia’s AMP Capital, Fraser and GPT Group; Britain’s Berkeley Group and Landsec; Ireland’s John Sisk & Son; and United States-based Kilroy Realty.
The EP100 list features quite a few corporate partners from India. That’s in large part because the effort soft-launched in that fast-developing nation, but also because these companies view energy productivity as one way to leapfrog their domestic and international rivals, says Jenny Chu, head of energy productivity initiatives for the Climate Group. “This concept allows them to decouple business development objectives from environmental ones,” Chu says, adding that it makes it simpler for organizations to cast the latter in the language of the C-suite.
A quintessential example is consumer goods and agribusiness Godrej Industries, which has reduced energy consumption by 41 percent since 2001 by investing in heat pumps, deploying microturbines and adopting more-efficient chemical processes. During that time, one of its participating subsidiaries increased sales by 7 percent profitably for its latest fiscal year.
For that reason, you can anticipate more companies — especially fast-growing brands in India and China — to become empowered to embrace energy productivity.
Key players to watch
Alliance to Save Energy — a 41-year-old bipartisan nonprofit dedicated to championing energy productivity as a catalyst for “economic growth, a cleaner environment and greater energy security, affordability and reliability.”
EP100 — the Climate Group and the Alliance to Save Energy partnership encourages companies to commit to one of three productivity pathways: doubling the economic output from energy consumed, slashing energy waste in facilities through software, or adopting net-zero carbon buildings.
Hilton — is the first hotel brand to adopt a science-based target for reducing CO2 emissions: 61 percent by 2030 — and has committed to improving energy productivity 40 percent by the same year.
Mahindra Group — the Indian conglomerate across transportation, hospitality and manufacturing has made energy productivity central to its business strategy. It was the first EP100 signatory and its entire operation has committed to carbon neutrality by 2040.
World Green Building Council (WGBC) — is the principal organization behind the Net-Zero-Carbon Building Commitment, which challenges companies, cities, states and regions to reach net-zero operating emissions in their portfolios by 2030, and to advocate for all buildings to be net zero in operation by 2050.