Innovation & Technology

5 Steps for Developing, Implementing a Renewable Procurement Strategy

How can companies get started developing a renewable procurement strategy? It requires taking a holistic approach to their overall energy-sourcing, combined with a practical application of that strategy. Here are five steps to begin.

By Shy Muralidharan and Brian Dooley | Published 5 years ago | About a 5 minute read

Image: Winterseitler/Pixabay

Studies show that companies actively pursuing a renewable energy strategy appear to be financially more profitable than their competitors. Companies that have a balanced and integrated approach to energy procurement will be better able to balance cost, risk and reliability while meeting their sustainability goals. To steer the effort, a renewable energy sourcing strategy is an integral component to any sustainability program. While most companies know they should have such a strategy in place, many may not know what goes into developing and implementing it. For instance, 48 percent of Fortune 500 companies have sustainability goals, but do they know what it takes to meet them?

Getting started

A simple, one-size-fits-all approach to sustainability will not work for all companies — an organization may have multiple sites in different locations that might not be suitable to sustainability efforts such as sourcing from a single solar or wind farm. Conditions at every site are unique, with different consumption patterns due to age, design, equipment, install and replacement strategies. Facility managers don’t apply the same strategy to each of their facilities for operational repairs or equipment replacement; and similarly, it wouldn’t be effective to take a blanket approach incorporating renewable energy options into their energy-management solutions.

So, how can companies get started developing their renewable procurement strategy? It requires taking a holistic approach to their overall energy-sourcing strategy, combined with a practical application of that strategy. It’s a balancing act to combine traditional procurement of fossil fuels-based energy, renewables and distributed generation based on their larger organizational goals. Companies should start with these five steps to begin developing their strategy:

1. Conduct an energy consumption analysis

First, companies should conduct an analysis of energy consumption at their sites. The analysis can confirm what their energy footprint looks like, what business operations contribute to energy consumption and where these activities occur. Companies can learn whether they control the usage processes impacting their energy footprint and can help influence their plans to change wasteful processes, business focus and facilities management.

2. Understand the key renewable energy factors

When companies begin to build their renewable energy procurement strategy, they need to understand their company’s energy footprint and current sustainability goals, and map to them about what’s important to their business such as marketability or credit rating. Companies typically look at 12 key factors when making renewable procurement decisions:

Additionality
Proximity
Sustainability impact
Marketability
Credit rating
Contract term flexibility
Lead time
Price risks
Volume risks
Budget certainty
Contract simplicity
Developer credit risk

Different renewable solutions will have different implications for each of these factors. When sustainability managers better understand the implications, they will improve their position to develop the right strategy for the near and long term.

3. Ask for help

Companies should look for help from outside experts. Renewable solutions in the market are varied, and new solutions are being launched all the time. This means sustainability managers need to navigate the market for solutions that can obtain executive support and still have manageable risk down the road. It might require working with experts who are knowledgeable across regulated and deregulated markets, as well as different technologies and how to contract for those solutions.

4. Listen to customers

In its 2019 Retail and Sustainability Survey, CGS — a global provider of business applications, enterprise learning and outsourcing services — found that more than two-thirds of respondents consider sustainability when making a purchase and are willing to pay more for sustainable products.

5. Ensure strategic alignment

It is important to have a renewables strategy and implementation aligned with the company structure and decision-making model. Companies with a centralized structure can closely track the sustainability impact across multiple sites but run the risk of having one rigid plan that might not work across different locations, or companies with a decentralized structure might execute one plan with a high-level of autonomy for individual locations. Both paths are valid if the larger organizational level metrics are defined and monitored closely.

5 processes to guide the strategy implementation

Once companies have their strategy and plan outlined, they can use the following processes to begin implementation:

Data — Reviewing internal consumption data can help sustainability managers get a clear picture of consumption at each site level across their portfolio.
Execute on strategy — Running an unbiased process of evaluating RFPs; developing external relationships that help vet partners who can further the company’s renewable strategy, pursue near-term wins that capture the higher value, higher visibility characteristics of the renewable strategy; and sharing with executives or strategy sponsors to try to align with resources to execute against the larger strategy goals.
Monitor and measure — Continually monitoring progress and measuring success allows companies to be nimble and adjust strategy midway through implementation.
Collaborate and learn — Sustainability managers will benefit from participating in industry or trade organizations that are also prioritizing renewable energy procurement to continue to learn and collaborate about procurement strategies.

Every company’s renewable energy strategy should focus on setting goals that best achieve the intention of the strategy. It is a rare company that only has one interest driving its strategy to source renewables — because price, term, volume, operational requirements and market availability of renewable solutions based on geography and capacity are all likely considerations of an effective procurement strategy. While the timing to move to procuring renewable energy may be right due to customer demand, potential government incentives and having the resources to help, companies should understand that it’s okay for companies to take the time they need and make small changes to their processes at a time to make a big impact.