The rise of energy risks are a major focus in the news today, following the political unrest in the Middle East and the twin tragedies of the earthquake and tsunami in Japan.
Following the almost unbelievable events of the past few months, you don’t need a vivid imagination to envision what ripple effects might result from a major earthquake occurring in California, which is roughly the same size as Japan and a major gateway of trade with the United States.
Given all of the current realities related to energy supply and cost, energy-related cost and risk will undoubtedly demand more attention from CEOs and CFOs in the coming months.
Breaking down barriers
In the early 1950s, the mythic “four-minute mile” was thought to be a natural limit to the speed of human runners. Roger Bannister shattered that barrier in 1954. Surprisingly, he held the record for only 46 days before a rival broke it again. Within the same year Bannister ran the “metric mile” (or 1500-meter race) in 3 minutes, 43.8 seconds.
Fast forward to 2008. U.S. runners could not even qualify for their own team at the Beijing Olympics unless they could run the metric mile in less than 3 minutes, 39 seconds.
What does the four-minute mile have to do with energy management? My point is that you may have grown accustomed to seeing energy cost as a relatively static percentage of your SG&A expenses — as if you’ve arrived at a natural barrier of sorts. It’s possible you’ve come to accept a false perception. This could lead you to miss opportunities to further reduce both energy cost and risk.
The 10-year experience of my company suggests that much bigger improvements are possible when you refuse to accept limits. We work with dozens of large, complex organizations that have achieved results far better than those of their peers, simply because they analyzed opportunities for improvement and pushed themselves further.
Seeing what’s possible
Through our work with foreign-owned companies operating in the United States and abroad, we have seen what global leaders are doing to conserve energy. Most of our work, admittedly, has been within narrow industry segments. It includes very large grocery retailers, retailers and manufacturers. These industries tend to have complex operations across many locations. They are intensive users of energy.
In all cases, their obsession with energy conservation and cutting costs starts at the very top of their company. It is driven primarily by hard-headed financial approaches and secondarily by concern for environmental sustainability.One company has gone so far as to mandate a 6 percent energy reduction across all its operations every year.
This company and other leaders in energy management have submetered their operations so they can see in real time or near-real time exactly where the energy flows within in each facility. They benchmark the performance of each location and business process. The benchmarking tells them which operations and processes consume the most energy, so they can focus their reduction efforts where they will produce the biggest rewards.
Fresh and Easy Neighborhood Market, a 160-store grocery chain in the southwestern United States, has used these and other measures to achieve energy efficiency that is 30 percent greater than that of its peers. It has done so despite using more refrigeration per square foot than their peers and operating in one of the hottest climate zones in the country.
Like the runners who competed against Roger Bannister in 1954, you can perform much better after a rival has shown you what’s possible. Why not be the one to show them?