Changing the conversation: bringing energy savings into the Boardroom

If you strip away the complexities of the energy market then, just like many other business transactions, prices can be summed up quite succinctly: consumption x unit price = cost. If you want to become more efficient you either negotiate a cheaper price or you consume fewer units.


By Martyn Sheridan, E.ON for Business

If you strip away the complexities of the energy market then, just like many other business transactions, prices can be summed up quite succinctly: consumption x unit price = cost. If you want to become more efficient you either negotiate a cheaper price or you consume fewer units.

Sure, if you’re a glass maker or a food manufacturer where heat or power is either number one or two on your list of costs, then of course you’ll have looked at your processes, your usage, and taken actions on how to become more efficient – some effectively and perhaps some not so.

For many businesses energy may not be a large cost or high on your list of priorities right now but it will climb that list year on year. Improving your purchasing strategy and hitting the market right might save some percentage points off your unit costs (but don’t forget the commodity costs are only around half the total bill) – so the alternative is to use less by investing in energy efficiency solutions. 

One of the frustrations I have is what happens after I speak to the person responsible for energy or energy efficiency –when sometimes it can seem like they’ve hit a brick wall in getting the green light for investing in such solutions.

This is not all the time I must stress! Sometimes I engage straight away with the FD of a FTSE 250 company and they buy into the concept and the process can move smoothly. Sometimes I engage with a Facilities Manager in a medium sized business who takes it to the board; sometimes they say yes and sometimes they ignore the request.

The other potential issue is that sometimes the message gets lost in translation between the energy manager and the financial decision-maker. Part of the problem is they speak different languages – CO2 vs ROI for example – so we must learn to speak the language of the other in order to make a compelling business case.

What we are talking about ultimately is competitiveness, future growth. Most companies think of energy efficiency only in terms of cost savings. But it can offer more: in the form of new business opportunities and increased competitiveness, business resilience and investor attractiveness.

So what does this new conversation look like?

  • Address concern around upfront cost / appetite for long-term payback periods:
    Many boardrooms have heard all this before; they’ve thrown some money at the problem but it’s not gone away. There has been no proof of success, no verification or measurement.
  • Challenge uncertainty around eventual return on investment:
    Involve the finance team early and outline the funding options – it’s always satisfying meeting a sceptic and then offering to not only fund the project but to share the savings until the investment has paid off. Or tell them we can take it off-balance or we’ll underwrite the projected savings. This approach not only gets FD buy-in but the board sees a no brainer.
  • Overcome lack of resources, from relative prioritisation (to explore & implement):
    Make recognition of the strategic nature of energy efficiency part of the culture – this is about board level leadership not short-term tactical wins.
  • Detail how the investment contributes to the strategic aims of your organisation- how does it add value? How does it reduce risks? How does it reduce costs?
    From my perspective it is assisting with people’s knowledge. I want to be the person who my customers go to for answers to their energy questions. And if I don’t know I have a massive business behind me where someone will definitely know the answer.

  • Identify and track the benefits as you go – financial savings or reduced regulatory risks can be more straightforward but are no more important than value benefits which are harder to measure – customer opinion, new business wins, staff pride.

And it can be done. Look at M&S and its ‘Plan A’ commitments. Plan A has not only reduced costs, it has improved brand perception, customer loyalty and staff pride – it doesn’t get much more strategic than that.

Coincidentally, E.ON’s Matrix business has so far helped deliver 36% energy savings across 600 stores as the energy efficiency partner of M&S going back eight years.

So does the Boardroom take energy savings seriously? I think they would if they were given the opportunity to look at it correctly: to understand the risk it has on their business, the real potential for improving the bottom line, that performance can be measured and that a lack of funding might not stop a project from happening. And finally that their wider team, the guys who have to deliver the projects, are supported by a strong, reputable business and that the energy savings are a real and tangible benefit to the business for the long term.

Martyn Sheridan is a Key Account Manager for Energy Solutions at E.ON. His role is to work with large and mid-sized businesses and identify key areas to reduce energy consumption, become more efficient and smart with their energy through to self-generation and tapping into capacity markets.

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