x Abu Dhabi, UAEThursday 20 July 2017

Every company will move forward under its own power

As the UAE prepares to host the International Renewable Energy Agency (Irena) today and encourages its corporate sector to adopt stricter energy standards, executives are beginning to realise an inescapable truth: every company is an energy company. And if it isn't, it will be soon.

As the United Arab Emirates prepares to host the International Renewable Energy Agency (Irena) today and encourages its corporate sector to adopt stricter energy standards, executives are beginning to realise an inescapable truth: every company is an energy company. And if it isn't, it will be soon. A decade from now, a company without an energy and sustainability department might be as unusual as one without a human resources department. Or it might be out of business.

Energy consumes a significant portion of any enterprise's spending, accounting for 5 to 20 per cent of a typical company's costs. Yet many organisations have a poor understanding of their energy consumption - or how to reduce it.

There's no reason for companies to wait even a year to move towards an energy strategy. The sooner that companies begin to understand and manage their energy use and sources, including possible ways to produce their own energy, the faster they will see advantages including savings, greater customer loyalty, a competitive edge, lower business risks and a company-wide awareness of sustainability that can rein in waste.

Every company has a business strategy, a risk strategy, a strategy for growing markets, for managing human resources and so forth. But many companies do not yet have an energy strategy, let alone broader sustainability strategies to manage the use of water, land and other resources.

The idea of energy management is not new, but thinking of companies as energy producers is. Companies can analyse their potential to produce energy, from solar panels on rooftops, windmills, geothermal and microturbines, among other decentralised forms of production. The benefits of active energy production are not just financial, although the bottom line could motivate the management.

This is not about green-washing. Falling short may mean limiting profitability and could jeopardise the long-term health of the business.

The opportunities for sustainable energy strategies are everywhere, beginning with the design of buildings, to construction processes, insulation, lights, water, elevators, and heating and air conditioning.

Cost savings, customer loyalty and sustainability all argue strongly in favour of active corporate energy and sustainability strategies. But, the most crucial spur may be the risk that a company's operations could be disrupted by energy shortages, outages or an unplanned and unmanageable rise in energy prices.

The overextended energy infrastructure and slow development of renewable sources are partly to blame, but the fundamental strain on supply will be the burgeoning demand of a global population nearing nine billion over the next three decades.

Today, one and a half billion people have no access to electricity, and one billion more have limited access. As these people, and generations to come, strive for a more comfortable lifestyle, they will consume vast amounts of energy. While the world is not running out of hydrocarbons immediately, global energy demand is growing too fast to satisfy without serious price pressures and geopolitical tensions. This puts corporate and economic growth at risk.

In the absence of political resolve or a great leap forward in clean energy technology, our top priority is managing the energy that we do have. This holds especially true for corporations. Companies with energy and sustainability strategies will be at the forefront of job creation, which could help them gain political advantage at a time of high unemployment.

Individuals and companies are becoming increasingly aware of their own energy economies and carbon footprints. The use of energy is now a conscious act - and an act of conscience. It's not about being virtuous, it's about being profitable and, at no additional cost, virtue is achieved.

Businesses and governments should respond to this new reality by creating the products and services that will help consumers manage their energy consumption. Corporations, meanwhile, should realise that in addition to their core business, each and every one of them is an energy company too.

The drive to sustainability is a drive to creativity and innovation. May the cleanest, most energy efficient corporations win.

 

Nick Main is Deloitte's global managing director for sustainability and climate change services. Joseph Stanislaw is an independent senior adviser to Deloitte's energy and sustainability practice