Reflections from WEEC 2006

Oct. 10, 2006
The strategic importance of managing energy as both good business and the basis of a sustainable future seems to have made its way to many boardrooms, says Peter Garforth in his latest Energy Expert column. CEOs and energy managers are getting better at talking the talk.

At the recent World Energy Engineering Congress in Washington, D.C., I spent time with the energy managers from major corporations in glass, cement, pharmaceutical, automotive, steel and corn products industries.

As always, I was struck by the professionalism and dedication of these energy managers  at companies so important to the U.S. economy. These companies collectively represent quality employment for thousands of people. Many are under pressure to remain globally competitive, and the risks and costs surrounding energy are increasingly a major factor.

There seems to be an announcement every day by a CEO declaring new targets for major reductions in greenhouse gases, lower energy use, increased use of renewable energy and improved environmental management of products, materials and sourcing.

At last, the strategic importance of managing energy as both good business and the basis of a sustainable future seems to have made its way to many boardrooms. This is unquestionably a change from the past. But is that change being reflected in the daily practices at these companies? At meetings like the WEEC, indications from teams on the ground are that in many, if not most, cases, we still have some way to go to match the rhetoric.

It’s still a small minority of businesses that list energy productivity as a one of the top five criteria for the operational leadership of major facilities. Management only responds in areas with clear reward and recognition. If this isn’t the case, the energy manager ends up fighting a losing battle trying to get attention and priority.

The number of companies having clear energy productivity goals does seem to be increasing, but all too often they’re way too complicated for senior management to easily understand and track. It’s still a rarity to hear a senior manager express his company’s energy goals clearly and simply.

If energy is becoming such an important strategic issue, why are most corporate energy managers located so many layers down in their  organizational hierarchies, often with questionable authority? So many of them are prepared to rise to the strategic challenge, but they need the space and authority to deliver. i’m beginning to detect a change in this area, but with nothing like an intensity matching the rhetoric.

Probably the most frustrating conversations were about financial aspects. Energy productivity is one of the few areas in which the outcomes of investments are as close to risk-free as anything is in business. Most capital investments in well thought out energy projects yield risk-free returns of 20% to 40%. Combined with the productivity gains of associated leadership and continuous improvement programs, the effective returns are much higher. How would shareholders and employees react if they were made aware of the easy money being left on the table?

Then we come to the whole rhetoric around climate change. Major corporations and business organization such as the Business Round Table and the Conference Board are making welcome commitments to reduce greenhouse gas emissions. Many see this as a preemptive approach to any forthcoming legislation, others as a potential source of cash from emissions credits and yet others as the right environmental behavior. Whatever the motivation, prerequisites are an accurate baseline, independently verified and  documented, accompanied by clear management leadership and goals and a suitable measurement system. Companies having these in place are still a minority, as evidenced by the membership of organizations like the California Climate Action Registry and the Energy Star Industries program. The old truism still holds - companies manage what they target, measure and reward.

There’s no reason to doubt that the rhetoric from the Board Rooms represents the true goals of more companies. What’s equally clear is the message is getting diluted on the way down to the critical operations level. The prerequisites for a successful energy and climate change program are rarely deployed fully, and this has to change if the CEOs and their teams  don’t want to be seen as talking the talk, but failing to walk the walk.

At the same meetings I was privileged to share presenting the impressive progress made by Corning Inc. in establishing a fully integrated energy management program in less than two years, thanks in large part to senior management committed to make thing happen at every level. The panel was shared by representatives of Disney Corp., who discussed their long-term consistent approach to global energy management. Both programs demonstrate that high-quality energy management not only keeps costs and environmental disasters in check, but also enhances the competitiveness of the overall business. These two firms are by no means alone, and others should be recognized.

The management recipe to turn a CEO’s energy and climate rhetoric into results is well known and low-risk. What’s needed is the commitment of those same CEOs that their words be backed with appropriate actions.

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