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Companies That Don’t Manage Utilities Strategically Are Throwing Money Away

on March 23, 2016 | in conscious, fledglings

The U.S. Environmental Protection Agency (EPA) has reported that companies waste 30% of the energy they consume. For many businesses, this is equivalent to overspending on energy by that amount to achieve current production levels.

You’d think that increasingly sophisticated technology would help reduce this waste. However, overspending is often the result of decentralized and siloed decision making over the utility budget. For example, the finance department approves what to buy, facilities maintains equipment, HR tells employees how to conserve energy, and marketing manages the company’s corporate sustainability reporting.

Managing utilities has also become more complex as the energy landscape has evolved. There are all kinds of new energy providers (especially in U.S. states with deregulated power markets) and technologies (e.g., solar and home batteries) for businesses to consider. And as companies face increased public and regulatory scrutiny over environmental concerns, finding ways to manage utilities effectively has become more urgent; it will involve starting to manage energy as a strategic resource instead of as an expense.

Think about a baker who uses flour to make bread. He treats flour as a critical resource tied to the bottom line. He also uses energy to make bread. Why doesn’t he treat energy as a critical resource as well?

Currently, company management is not structured to do this and will therefore struggle to strategically handle these emerging challenges around energy. At best, it can manage costs. Yet the benefits of smarter utility consumption go beyond just a smaller bill. Eliminating the 30% of unnecessary consumption can improve profitability, reduce equipment downtime, become a competitive differentiator, and lower carbon emissions. The marginal effect on profit through reducing utility costs can be significant. Every dollar saved in utility costs becomes an additional dollar of net profit.

One solution is to appoint a Chief Utility Officer, who can centralize decision making around utilities and rethink its role to support strategic corporate goals. The role would focus on cutting costly inefficiencies, figuring out how to use energy to deliver business outcomes, and then implementing these approaches.

Read the rest on the Harvard Business Review, and watch Jimmy describe this idea on stage back at Demo Day4.

https://hbr.org/2016/03/companies-that-dont-manage-utilities-strategically-are-throwing-money-away

 
  • Alison Lueders

    So true! Companies, take note!