Energy for change
Sue Priest, managing director of Emissions Strategy Solutions, discusses her research into management attitudes to climate change mitigation
Those seeking to encourage businesses to reduce greenhouse gas emissions generally focus their attention on energy and environment managers. But are they preaching to the converted? And who is in the best position to identify and influence all company activities which contribute to these emissions?
Emissions Strategy Solutions was surprised by the result of research which showed the difference in attitudes between senior leaders – chairmen, CEOs and MDs – and the energy and environment managers who tend to own the initiatives. The results provide insights into how to increase the effectiveness and take-up of emissions reduction activities, and build a bigger lever to tackle climate change.
To measure knowledge of the business context for climate change and emissions reduction, there are a number of key indicators: knowledge of the legislation, awareness of
organisations such as the Carbon Trust, and associated processes and standards such as ISO 14001.
When rating their knowledge, energy/environment managers reported much higher awareness levels than senior leaders – without exception. Interestingly, senior leaders scored themselves highest on the EU emissions trading scheme, higher than for UK legislation.
We asked: “Do you personally believe climate change is happening?” with the following responses:
- 50% of senior leaders think there is indisputable evidence that climate change is already happening, but given that almost a third are still unsure, there may be much to be gained from increasing awareness for senior leaders.
- The overwhelming majority of energy/environment managers believe that climate change is happening now. This is consistent with views expressed at numerous meetings during the spring and early summer of 2004, where time and again, energy managers said peak energy bills have tipped from winter to summer.
Matching emissions projects to business drivers
New revenues emerged as the top critical business driver for senior leaders, with 80% citing it. Energy/environment managers agreed. It was surprising to see that nearly 60% believed that emissions reduction projects provided new revenues, compared with less than 10% of senior leaders. Why? If energy/environment managers are correct, shouldn’t senior leaders be investing more in such projects?
The most striking difference in views was on cost base reduction. 100% of energy/environment managers saw cost base reduction as critical, whereas only 12.5% of senior leaders agreed. Likewise, 100% of energy/environment managers believe emissions reduction projects bring cost base reduction, compared with 23% of senior leaders.
Clearly, they speak from different perspectives. If energy/environment managers are given objectives relating to cost base reduction, then it would make sense that they see it as a critical business priority. This idea is supported by the answers to questions regarding return on investment. Completely opposing views are given in the two groups. Energy/environment managers generally expect the same return on investment from emissions reduction projects, yet senior leaders generally do not. And why should they, if senior leaders don’t believe such projects provide cost savings, yet see them as critical to comply with legislation?
It’s all about conformance
This highlights an important point for senior leaders. If most emissions reduction projects are initiated, procured and run by energy or environment managers, and if they have local objectives for ROI, then surely some potential projects get rejected? If this is to the detriment of senior leaders’ more critical business goals, then surely something is amiss? Could senior leaders help to achieve their critical business goals if they were to change the project selection measures or objectives of energy/environment managers?
How, then, do senior leaders see emissions reduction projects? What critical business driver do they see as being most closely satisfied by emissions reduction projects?
The answer is that it’s all about conformance to legislation. A large proportion of both groups identified this as critical (all of the energy/environment managers, and over 60% of senior leaders), but this time, over 75% of senior leaders thought emissions reduction projects provided this benefit.
An interesting difference in views
When looking at views on new product/solution development, there is an interesting difference in views. Over half of senior leaders believe that new product and solution development is a critical business goal, compared with only a third of energy/environment managers. Yet 80% of environment and energy managers believe that emissions reduction projects provide the benefit of new product/solutions development, compared to only 38% of senior leaders. If energy managers are correct, then this is something in which senior leaders ought to be interested.
In the area of CSR, both groups believed this would increase in importance next year, and almost 80% of senior leaders saw emissions reduction projects as part of CSR.
Who should champion emissions projects?
Initiating a GHG emissions reduction strategy, seeing through projects and developing momentum implies change. Thoroughly assessing how an organisation can reduce its emissions should include areas such as business and operational processes, transport decisions as well as waste handling, recycling and the use of renewable technology. Many parts of the business are impacted.
To answer the question of who should champion projects, the survey asked for the views of the respondents, but also asked questions about behaviour. The most popular champion for emissions reduction projects was the CEO/managing director; over half of all respondents agreed. The next highest scorer was the leadership team.
Interestingly, energy/environment managers voted as highly for engineering/operations as for the leadership team – supporting the idea that many projects currently fall under the ownership of this area of the business.
A startling picture emerges when we turn to the answers to how organisations behave. Influencing factors such as company strategy and local buy-in were rated by both groups, with a strong view from senior leaders that leadership behaviour and enthusiasm is a critical factor.
This contrasts with senior leaders’ views on management commitment, company strategy and existing culture. Energy/environment managers thought management commitment much more important and 50% thought existing culture and company strategy were critical.
The fact that a large proportion of both groups cited leadership behaviour and enthusiasm as critical supports the notion that emissions reduction projects should be championed by the CEO/MDs/leadership team. But in how many organisations does this happen? That there is such a discrepancy between the ROI expectations and perceived benefits between the two groups suggests it does not.
Finding the bigger lever
The results of the survey have raised more questions. They suggest that there is a logical thread to the results:
- Emissions reduction projects are generally procured by the departments (such as engineering or operations) to which energy managers and environment managers belong.
- Emissions reductions projects are generally championed by these same departments.
- These departments have cost cutting objectives.
- Senior leaders do not see cost base as being of particular importance compared with generating new revenues.
- Energy/environment managers believe emissions reduction projects provide benefits which include new revenues and products/solutions, but senior leaders do not see this.
- Even though the main benefit seen by senior leaders is conformance to legislation, they don’t expect the same ROI from GHG reduction projects as from other projects.
Accepting this logic, there is a fundamental opportunity to make more impact on emissions reduction than is currently happening across most businesses. That is to:
- Increase the awareness at chairman/CEO/MD level;
- Ensure that these senior leaders are vocal champions of their company’s emissions reduction strategy and projects;
- Engage energy/environment managers in the creative generation of new product, solution and revenue generation opportunities; and
- Modify measurement objectives for energy/environment managers so that they match senior leaders’ priorities.
These recommendations will give any company an opportunity to engage in emissions management. They will unleash new levels of creativity from the knowledgeable managers that are aligned to the senior leaders’ critical business drivers. And – perhaps most importantly – more emissions reduction projects will be accepted, making a bigger lever for tackling climate change.