Special Report

Comment: Energy efficiency is good business

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Special Report: Business energy efficiency

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Let’s play devil’s advocate and consider why all of this energy efficiency stuff is a distraction from the serious business of running a profitable enterprise.

Your electricity, gas and road fuel bills are, say, 3% of your total costs. If you gave some serious senior management attention to energy efficiency, and invested a little money in energy-saving technologies and salaries, then within a couple of years you might lop one third off your energy costs and bring that percentage down to 2%.

Why bother? If your increase in turnover and profits isn’t larger than that tiny saving, then you are going nowhere. You’re better off prioritising the business basics of making more money.

Here’s why it’s worth bothering. First, when it comes to growing a business and increasing profits, money saved is just as good as money earned. It all shows up in the bottom line.

Second, the cheap energy past is no guide to the future. Your energy costs, relative to your total costs, are very unlikely to fall in the next few years and decades. Instead, they are highly likely to increase.

Partly this is a matter of government intervention and carbon pricing – things such as the EU emissions trading scheme, the UK government’s Carbon Reduction Commitment Energy Efficiency Scheme, power bills driven upwards to pay for renewables, carbon capture and storage and so forth.

Partly it’s a matter of supply and demand. The world may still have huge quantities of coal and gas, but dwindling oil is bound to become more expensive as the globe’s energy demand keeps rising. Fossil fuels are not going to get any cheaper. The alternatives tend to be more expensive.

If your business grows, so will your energy bills – more staff and office space, more IT, more business travel. (If, on the other hand, your business shrinks, your relative energy costs are in danger of growing too – fewer staff, less sales, but still the same amount of office space to heat and light.)

So it makes sound business sense to make cost-effective energy savings (those which pay for the upfront costs within a few years) right now. And to keep searching for new energy efficiency opportunities. Year after year this effort reduces the risks of high energy prices, increases competitiveness and benefits the bottom line.

Third, there’s the issue of reputation and image. If you cut your energy bills, you cut your CO2 emissions. That will remain a fact of life for at least the next 20 years.

The prospects of a global climate deal are looking bleak. The climate change sceptics are getting noisier. But ask yourself this: are your customers, shareholders, regulators and your prospective and actual employees likely to lose interest in climate change in the coming years? Or is their concern going to keep on growing as temperatures keep on rising?

It would only be prudent to be able to demonstrate that your company is doing its bit to tackle climate change.

So those are sound reasons why every business should have a serious, high-level plan to save energy and make energy efficiency a key performance indicator.

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