Energy efficiency and corporate sustainability

Submitted by Bruno Santos Pimentel on Wed, 02/21/2018 - 19:24

How energy efficiency contributes directly to the sustainable development of companies.

Consider this diagram, with the words “Trees” and “Seeds” mutually connected, forming a circle.

energy efficiency and corporate sustainability

This simple drawing contains important concepts inherently associated with complex systems, whether industrial, biological, or corporate. The (positive) relationship between two variable is represented here, forming a cycle of positive reinforcement (reinforcing feedback loop) — something like "the more seeds are planted, the more trees will grow" and, consequently, "the more mature trees, the more seeds we'll have."

But the cycle can also be observed in the opposite direction: "the more trees we cut down, the fewer seeds we'll have" and, later, "the fewer seeds we plant, the fewer trees we'll have." All the complexity of ecological systems, of their life cycle, their structure and behavior, in a simple, objective, and above all quantifiable manner.

In practice, industrial and corporate systems are much more complex than the diagram of trees and seeds. There is a larger number of variables, the flows of information and resources depend on limited processing capacities, and the effects of interventions in certain parts of the system may not be immediate or can bring undesired or unexpected results.

This complexity is something that affects our reality. It is always worth the effort to try to understand it and reduce it to manageable levels, but fact is that the majority of projects, processes, and organizations have large amounts of technological and organizational complexity.

Energy management initiatives are no different. In fact, efforts of organizational transformation — focused on quality, innovation, sustainability, and energy efficiency, among others — require focus and persistence to analyze the current situation, establish goals of evolution, create implementation plans, execute them and evaluate their results, feeding the learning obtained in each iteration back into the process.

Historically, organizations that consistently invest in these areas reach performance levels significantly higher than those of their competitors. On the other hand, the ability of organizations to implement improvements properly is what really sets them apart.

Understanding the structures that govern the behavior of complex systems, such as industrial organizations, is essential to the success of transformation initiatives.

The cycle of positive reinforcement of energy efficiency

The goal of industrial organizations is the creation and capture of value for their shareholders, employees, and for the whole community in which they are involved, including the environment. This is the essential argument in favor of sustainable development, with energy efficiency as a highly relevant variable. With the increase of energy costs and the increase in societal and governmental pressure to reduce impacts on the environment caused by economic activity, investing in energy efficiency initiatives has become an issue of primary importance.

Of course, gains in energy efficiency make the organization more competitive; more competitiveness translates to better financial results; with more capital (when managed well) more investments can be targeted to expansion and capacity, productivity technologies, operational efficiency and energy efficiency; this improved efficiency ensures lower levels of emissions of greenhouse gases, reducing environmental impact in addition to improving the quality of work, both of which positively impact the community. Investments executed well create more value and more investment opportunities — the positive cycle gains strength.

As seen before, the cycle can be observed in the opposite direction. Lower levels of investment (or investments poorly executed) destroy value, increase the negative impact on the environment and the community, undermine competitiveness, and consequently reinforce the negative effect of that same cycle — lower levels of energy efficiency increase costs, lead to the emission of more greenhouse gases, and erode the institutional image.

In this context sustainability, more than the romanticized vision and apparently difficult-to-realize practice, should bee seen as a constant exploration, coherent and long-term, of the cycles of positive reinforcement that lead organizations towards continued growth.

Sustainability and energy efficiency

Transformation initiatives — the quest for energy efficiency, in particular — demand focus, persistence and good management. Recent data from EUROSTAT show that, paradoxically, investment in energy efficiency in industry is much lower than its potential, even if it brings better-than-average returns (some sources suggests costs of about €0.01 to save 1 kWh, compared to €0.12 to consume the same 1 kWh). This strange situation is due to factors such as:

  • Uncertainty regarding returns;
  • Uncertainty regarding future levels of demand and production;
  • Competition with "more strategic" investments such as production capacity, new products, or expansion of markets;
  • Lack of more competitive financial instruments to support projects.

The way to achieve sustainability of (or through) energy efficiency initiatives therefore depends on three important areas:

1. Sustaining the initiative

The results of investments in energy efficiency are not immediate. In fact, as in many other organizational transformation efforts, the early stages of projects can show worsening in the indicators — a natural consequence of the higher levels of attention, measurement, and visualization that the initiative brings, and that make more apparent any problems that already existed but were previously hidden. The eventual cost increase that accompanies, temporarily, the transformation may face short-term pressure on the basis of the returns expected in the medium and long term. Thus it is essential to sustain the efforts of the project beyond the initial results and towards greater opportunities for gains.

2. Sustaining the results

The gains in energy efficiency can come not only from interventions in processes and equipment, but also from best management practices. In both cases the sustaining of the results depends on the institutionalization of procedures, tools, and new technologies. More efficient processes promote the reduction of specific energy consumption, the reduction of equivalent emissions, as well as greater predictability of demand and costs of energy inputs to meet different levels of production. Tools for energy and utilities management contribute directly to the sustaining of results in the long term, balancing the natural degradation that equipment, processes, and the knowledge itself can show over time.

3. Sustaining the learning

Organizations, like people and teams, need to learn from experience and sustain the learning by means of processes and tools. Perhaps the greatest impact of initiatives of energy efficiency, beyond direct interventions in processes and equipment, is the transformation in the way of working, the culture, and engagement. Actions of knowledge management, of continuity of efforts, and of establishing a culture of efficiency are thus essential for sustaining organizational learning.

Sustainability and energy efficiency are closely connected, not only in the opportunity to have a positive impact on the environment, but also in the contribution that energy (and operational) efficiency make to the sustainability of the business in its environmental, social, and economic dimensions.

The Viridis platform for energy and utilities management provides capabilities to directly support energy efficiency initiatives of industrial organizations, covering functions including monitoring, planning, contracting, costing, simulation, and optimization of energy consumption. The monitoring functions permit the identification of opportunities for process improvement, stratifying energy consumption in terms of different dimensions, in addition to allowing the quantification of gains in terms of costs and greenhouse gas emissions. The integration of monitoring data with planning functions strengthens the efforts of the transformation initiatives, since it confers greater sophistication, consistency, and accuracy in the prediction of future consumption and, consequently, in planning of costs and the comparison with the actual values. Finally, the Viridis platform enables integrated management of projects of continuous improvement with a focus on energy efficiency, seeking strategic alignment from the conception, implementation, and evaluation of the investments carried out by the organization.

Product Manager, Viridis

Viridis Product Manager, with more than 20 years of leadership in innovation and technology programs in large industrial organizations. PhD and masters degree in computer science from UFMG, bachelor’s degree in mechanical engineering, innovation and sustainability fellow at Sloan School of Management, MIT. Extensive experience in project management and open innovation teams with industry, academia, and startups, applying digital technologies and analytics to challenges in productivity, strategy, and sustainable development.

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