Unlocking the benefits of energy efficiency: An executive dilemma

1. Unlocking the benefits of energy efficiency: An executive dilemma Chris Webber Senior Editor The Economist Intelligence Unit

2. Unlocking the benefits of energy efficiencyAn executive dilemma A report from the Economist Intelligence Unit Sponsored by Ingersoll Rand

3. UK energy consumption affected by downturn Source: DECC

4. UK fuel mix evolving Source: DECC

5. UK and European CO2 emissions falling slightly… Source: World Bank

6. …but increasing rapidly in US and China Source: World Bank

7. UK industry share of consumption declining Source: DECC

8. UK energy efficiency improving significantly Source: DECC

9. Energy still a rising share of costs for UK companies Source: DECC

10. The EIU survey In October 2010, the Economist Intelligence Unit conducted a global survey of business managers involved in their firms’ energy efficiency initiatives

11. Five years from now, will energy efficiency initiatives be more or less important to your company’s business strategy? Efficiency becoming more important 77% think it’s going to become more important over the next five years Only 19% think it’s going to become less important 84% of us think energy efficiency is strategically important 49% say action on energy efficiency has saved their company money in the last three years

12. Energy efficiency benefits • Cost savings • ‘Energy treasure hunts’ have saved GE $130m • Estimated £1.6bn per year still being wasted in UK alone • Brand value & market differentiation • “Cutting carbon is a great environmental story, so customers will reward you for having low carbon credentials” • Harry Morrison, Carbon Trust Standard Company • Carbon emissions • Cost effective way for firms to cut emissions • But not a solution for overall emissions reduction

13. ramme? Cost savings the main benefit Cost savings Enhanced brand reputation Market differentiation Increased revenue Enhanced ability to hire talented workers Enhanced ability to raise capital 68% 54% 43% 32% 12% 9% Question: What are the most important reasons for your organisation taking steps to improve energy efficiency?

14. Reported savings 42% 27% 16% 4% Question: how much of your company’s annual energy bill would you estimate has been saved by energy efficiency initiatives in the past three years?

15. Energy efficiency challenges • Scarce resources • Performance contracting • Green Deal • Lack of expertise • Audits from the public or private sectors • Hire specialist staff or consultants • Split incentives • Irresolvable disconnect between landlord and tenant interests?

16. Funding and ROI are the biggest concerns Proven return on investment Sufficient funding/resources Energy efficiency management External incentives Senior management support Government policies Internal incentives Employee consultation 46% 42% 40% 39% 38% 22% Question:In your opinion, what are the most important factors in helping to integrate energy efficiency initiatives into business strategy at your organisation? 21% 18%

17. More are focused on low-hanging fruit Improved lighting Government regulations Improved air conditioning Improved heating Buildings (e.g. insulation) IT department Plant and equipment 68% 53% 47% 45% 40% 35% 33% Question: What type(s) of tactical and strategic energy efficiency initiatives has your organisation undertaken to date?

18. Does your organisation do enough to integrate energy efficiency initiatives into business strategy? C-suite disconnect? C-suite Non c-suite Question: In your opinion, does your organisation do enough to integrate energy efficiency initiatives into business strategy?

19. Conclusion • Energy efficiency is a no brainer. Significant cost savings and potential brand benefit • Businesses already making progress, but clearly more money to save (est. £1.6bn in UK alone) • Environmental rationale questionable, but still a clear business case • Scale of government support (via Green Deal) still uncertain

20. Chris Webber Senior Editor Economist Intelligence Unit chris.webber@economist.com