How can companies implement longer-term efficiency projects that deliver meaningful energy cost savings, alongside material impact on their productivity, reliability and resiliency of their operations?
For a large part of our industrial history, businesses have treated energy as a fixed cost center and conservation measures as an expensive investment. This dynamic has encouraged the prioritization of short-term projects that often fall short of improving operational resilience, cost competitiveness and carbon footprint. But is there a way to implement longer-term efficiency projects that deliver meaningful energy cost savings, alongside other tangible outcomes such as consumer trust and brand value?
The answer is yes. However, to strategically use energy as a lever for profitability and growth, companies must reflect on their current business processes and identify the improvements that can be made to drive enterprise-wide transformation. Put another way, organizations must think globally and act locally to ensure the growing investments in energy and sustainability translate to long-term growth for the business.
Beyond the planning phase
Identifying necessary changes is entirely different from successfully implementing those changes. To fully capitalize on opportunities, corporate leadership must take a collaborative approach. Feedback and data gathered from those working at the site level can identify activities that will drive performance. Establishing a strategic plan based on a more holistic view will help companies to move beyond site-specific energy savings and allow them to leverage best practices across their entire enterprise — freeing up capital to reinvest in future-proofing overall performance.
But the approval process can be tricky. Global executives face an evolving energy and sustainability marketplace, complex and changing organizational structures, limited access to funding and a lack of experienced staff, which can delay or even defer any decision-making.
To overcome these common roadblocks to enterprise-wide efficiency, executives must:
Resolve disparities between local site plans and global corporate plans,
Overcome implementation paralysis resulting from traditional funding models, and
Implement a mindset of continuous improvement to obtain sustained results.
This article examines ways for businesses to overcome these implementation challenges and achieve material impact on their productivity, reliability and resiliency of their operations.
When site and corporate plans are not aligned
Plant facilities are largely focused on meeting production targets. This myopia can discourage sites from implementing enterprise-level initiatives such as efficiency and sustainability. To align global and local ambitions, organizations must combine a centralized approach to planning with a localized implementation strategy. But how can businesses get from planning to action faster?
To address misalignments between corporate and local sites, companies should establish a governance system that identifies key stakeholders from all levels of the business. These stakeholders can then build and validate an organization-wide implementation plan. Stakeholders should determine objectives, capital planning and key performance metrics that balance corporate goals with operational realities.
Stakeholders can also work collectively with individual site teams to execute and refine the implementation methodology during the initial stages of transformation. One common outcome from such an approach is the centralization of portfolio data on an enterprise-wide platform to better direct and prioritize ROI planning.
Traditional funding models limit progress
Another obstacle facing many organizations is lack of financial resources using traditional CapEx budgets. Our recent research report found that 57 percent of responding companies blame failed business cases for efficiency on a lack of capital. This situation becomes more pronounced when budgets are allocated at facility levels. When organizations evaluate each of their projects individually, it is difficult to see the ROI clearly. The process can waste resources and limit returns, making it difficult for companies to achieve and accelerate results for global energy programs.
It can also be challenging to persuade executive decision makers to change their funding models. To combat this status quo, many leaders implement smaller OpEx projects and use them to demonstrate results quickly, building credibility for funding approval on future capital-intensive projects. However, even when capital does become available, it can be difficult to gain support internally for energy efficiency projects over other competing business priorities. As a result, businesses end up with an endless cycle of smaller projects that fall substantially short of corporate cost savings and carbon-reduction goals.
With energy cost volatility — and increasing internal and external mandates to improve both efficiency and sustainability performance — companies need new business models to fund improvements over the long term. It is imperative to build a business case for a portfolio of options, combining long- and short-payback projects into an acceptable financial package that identifies opportunities for reinvestment. Businesses can also overcome funding constraints using alternative third-party funding models such as Energy Service Agreements and Power Purchase Agreements and employ a suitable funding model to boost performance and assure results.
“Once and done” mindset doesn’t deliver
Despite individual efficiency projects showing initial progress, it is easy to lose momentum over time. This can make it difficult to scale an efficiency program across the enterprise portfolio, especially if there is no evidence of sustained performance. Collaboration with local teams is key in these cases, to ensure that efficiency gains are maintained over time via active monitoring and engagement.
Evidence suggests that many companies have a “once and done” attitude towards efficiency initiatives that can cause local sites to generate inconsistent savings. Without oversight, it’s difficult to drive optimal performance and take advantage of the opportunities created through the energy program. This approach can even make the efficiency process costlier if incorrectly maintained.
Many programs also struggle with follow through on identified energy savings, which can result in loss of valuable time, resources and future credibility. It’s important to align stakeholders from the top floor to the shop floor, jointly defining the criteria for success and empowering everyone with the tools, skills and best practices needed to recurrently identify savings opportunities. This knowledge will allow sites to drive continuous optimization on their own and maintain operational and equipment efficiencies over the long term.
Change is good
Taking a more holistic and enterprise-level approach to planning, implementing and funding efficiency will ensure that transformation continues over time, providing a valuable lever to support low-carbon growth for future business success.
Learn more in our eBook, Capitalizing on Change: How Executives Can Use Efficiency to Future-proof Business.