While around half of executives say energy efficiency initiatives have helped improve their organisation’s bottom line in the past three years, and four in five believe that energy efficiency will play a more important role in their business in the future, most are still grappling with how to implement enterprise-wide energy saving measures. This is among the findings of a new research report, Unlocking the benefits of energy efficiency: An executive dilemma, produced by the Economist Intelligence Unit and sponsored by Ingersoll Rand.
The research also suggests that C-suite and less senior executives don’t see eye to eye on the effectiveness of energy-saving efforts in their companies. Respondents beneath the C-suite are significantly more likely (61%) to say that their organisation does not do enough to integrate energy efficiency initiatives into business strategy (compared with 49% of C-level respondents). This disconnect is significant, as without senior-level support, energy-efficiency initiatives may not be adequately resourced. The data indicate that the C-suite may need to take another look at whether or not their company’s efforts are as successful as they perceive them to be.
The report’s other key findings include:
- Business leaders generally see regulation as a good thing. Large companies argue that legislation will create a level playing field, helping foster a market for energy-efficient systems. Half of surveyed executives see regulation as a benefit, compared with only 28% who deem it to be a burden. Only 27% of executives cite compliance with legislation as currently a prime spur to cutting energy consumption, with the vast majority (69%) citing cost savings as the chief motive. However, legislation is expected to play a bigger role in the future and become such a spur for many companies.
- The incentives for energy efficiency vary significantly by global region. Payback times and the price of electricity are key considerations determining the willingness to invest. In Europe the business case for saving energy is particularly clear, since taxes are applied to electricity sales. This is reflected in our survey, with more Europeans (almost 90%) than North Americans (77%) citing cost savings as the biggest benefit of energy efficiency.
- Companies seem to underestimate the value that their investors assign to energy efficiency. Only 16% of survey respondents felt energy efficiency was “very important” to their investors, and only 7% of survey respondents cite pressure from stakeholders such as investors as spurring energy efficiency initiatives. Yet in fact institutional investors and pension funds are pushing the firms they invest in to address their carbon footprint.
- Firms find it difficult to assess their energy use and make progress in reducing it. Only 26% of respondents say their organisation has conducted an energy audit;some 22% do no measurement at all. Although experts agree that the best efficiency strategies need to cut across functional lines, at present few companies outside the largest organisations have a chief energy officer co-ordinating such initiatives.
- Firms’ supply chain is too often overlooked when assessing energy efficiency initiatives. For many companies, particularly retailers and those who outsource their manufacturing, much of their total energy consumption occurs in their supply chain. Yet our survey shows that most firms tend to focus internally, with few looking outside their direct operations to their supply chain. Just 8% said energy efficiency was a priority for suppliers, and only 4% said they had worked with suppliers in this area.
- Unlocking the benefits of energy efficiency: An executive dilemma is available free of charge at: http://www.businessresearch.eiu.com/unlocking-benefits-energy-efficiency.html
About the survey
The global survey that underlies this report is based on responses from 278 senior executives, encompassing a range of industries, and evenly represented across North America and Asia Pacific, with a slightly lower representation from Western Europe, and small groups from the Middle East, Africa, Eastern Europe and Latin America. Organisations of all sizes were represented: 38% of respondents worked for firms with revenue of at least US$1bn, whereas 49% were from firms with revenue of US$500m or less. Thirty-two percent of respondents were CEOs, presidents or managing directors; 24% represented the C-suite or board; and all respondents were in management positions. The survey was conducted in October 2010.
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
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